Africa was among the fastest-growing parts of the world between 2001 and 2008, with average growth of 5.6 percent a year. While the commodity boom played a role, stable macroeconomic conditions coupled with structural reforms—including the privatization of state-owned enterprises and lowered barriers to competition—underpinned the impressive growth. It was accompanied by large amounts of foreign direct investment (which more than tripled during these years), including inflows from the Gulf countries and from emerging Asia (China and India).

Resource-rich countries such as Nigeria and South Africa received most of the foreign direct investment during the decade, but new patterns have emerged in the last three to four years. In eastern and northern Africa, for example, new investment has arrived in nonresource sectors such as tourism, manufacturing, financial services, telecommunications, and construction. Also, a second tier of smaller but high-performing countries, including Ghana, Namibia, and Zambia, has caught investors’ attention.

In sum, foreign investment has diversified in recent years as a number of African governments undertook structural reforms to make their economies more attractive. But to sustain foreign investment inflows, governments must pursue measures for strengthening governance and legal frameworks, building financial markets, investing in human capital, developing infrastructure, and deepening regional integration.