Steady efforts made by African governments to develop transparent governance institutions, coupled with ongoing investments in plugging Africa’s infrastructure gaps, mean that Africa as a whole has become the most attractive investment destination for UK-based businesses, the consultancy firm Ernst & Young (EY) asserted in its latest report. In the firm's new Africa Attractiveness survey, Africa’s investment attractiveness ranking among UK businesses significantly improved from seventh place in 2011, to first place this year. The most attractive sectors for UK-based investors in the region were business services, financial services and telecommunications, according to the report.

“UK investors are leading the way in recognising Africa’s growth potential” said Michael Lalor, an EY Africa Business Centre leader, at the UK launch of the report. “Tullow oil, Unilever, Vodafone and Barclays are some of the UK firms leading the way. The UK has 104 projects in Africa worth $4.6bn and has overtaken the US which had 78 projects worth $2.6bn in 2013.”

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A steadily growing group of middle-class consumers, coupled with continued improvements in the governance and management of the region’s extractives industry led the continent to grow by 5%, despite global economic headwinds. In addition, The fDi Report, an annual review of greenfield FDI by fDi Intelligence, reports that while the coal, oil and gas sector attracted the highest level FDI into the Middle East and Africa region, ICT and business and financial services also emerged as attractive sectors for international businesses.

The EY Report, which is a survey that interviewed 503 UK business leaders with companies in 34 different African countries, revealed that there has been a swift paradigm shift of doing business in Africa. Although Mr Lalor maintained that negative and dated foreign investor perceptions on Africa mean the continent’s FDI performance continues to trail other regions, this perception is changing.

While companies already investing in Africa rank it as the most attractive place for doing business, companies not established on the continent ranked Africa as one of the least attractive region for doing business. More than 70% of respondents with companies established in Africa believed that Africa’s attractiveness has improved over the past year compared with 39% of companies not established on the content. “The perception gap can be closed if investors go to the continent and see the reality for themselves” said Ian Ferrao, managing director of Vodacom Lesotho, an African mobile communications company.

While the EY Report highlights a shift in FDI from UK businesses from extractive industries towards consumer related sectors, business leaders surveyed still consider the extractive industries of mining and metals as having the highest growth potential in Africa in the next two years. While South Africa remains the top destination for UK companies, with Johannesburg ranked as the most attractive African city for FDI by respondents, UK companies have significantly expanded their investments in eastern Africa, most notably in Kenya, which has seen 36 FDI projects between 2007 and 2013. In addition, Casablanca in Morocco was ranked as the second most attractive city for UK-based investors, and the most attractive city in the north Africa region.