Ernst and Young’s (EY) annual “Attractiveness Survey” examines the appeal of Africa as an investment destination by analysing the reality and perception of foreign direct investment (FDI) across the continent. Many of the report’s findings are as one would have expected, such as the fact that Foreign Direct Investment is mostly channelled to urban hubs. Others, however, are something of a revelation. Here are seven of the reports most surprising conclusions:

1) Although the total value and share of FDI has increased in Africa, the number of FDI projects and jobs has decreased

In 2013, the quantity of FDI projects in Africa and the total number of jobs created by FDI dropped by 3.1% and 9.1% respectively. Conversely, capital investment and Africa’s share of global FDI increased by a healthy 12.9% and 5.7% respectively. Investors are essentially targeting fewer but larger projects.

2) FDI in Sub-Saharan Africa (SSA) has continued to increase, whilst flows to North Africa remain stunted

The difference between FDI trends in North Africa and SSA is becoming more and more significant. In 2013, FDI projects in North Africa declined by a hefty 28.7%, which, according to EY, can be explained by the political turmoil North of the Sahara since the Arab Spring. SSA, in contrast, enjoyed a 4.7% increase in FDI projects in 2013, thus reversing the decline of 2012. In addition, SSA’s proportion of African FDI exceeded 80% for the first time in 2013.

3) New FDI hotspots are emerging

Although South Africa has maintained its place as the number one FDI destination in Africa, new hotspots are emerging; the most prominent examples being Ghana and Kenya, which have both achieved compound average growth rates of more than 40% since 2007. The number of FDI projects in Mozambique, Tanzania and Uganda has increased by 20% over the same period. Even from a low starting point, the growth rates experienced in these countries has been extraordinary, indicating that business opportunities will continue to improve in the future.

4) Intra-African investment momentum builds

The proportion of intra-regional investment in Africa is steadily growing. In 2013, the share of FDI projects funded by other African countries reached an all time high of 28.8%. In contrast, in 2003, intra-regional investment comprised just 4.4% of FDI projects. In 2013, only Western Europe had a higher share of FDI projects in Africa. Contrary to popular belief, China’s share of FDI in Africa remains relatively low, with just 3.1% of FDI projects between 2012 and 2013. The share of FDI projects coming from the United Kingdom, over the same period, stands at 13.3%, making it the largest single source of FDI for Africa.

5) There has been shift away from extractive sectors towards consumer-facing industries

As service and consumer related industries have increased in relative importance, the extractive sectors have become less prominent in Africa. The proportion of extractive industries in FDI projects reached a nadir in 2013, with mining and metals accounting for just 2.4% of projects, and coal, oil and natural gas accounting for just 3.5% of projects. Consumer-facing sectors – technology, media and telecommunications, retail and consumer products, and financial services – on the other hand, accounted for 47.7% of projects between 2007 and 2013, with financial services receiving the highest share at 17.5%.

6) Remarkable improvements in Africa’s perceived attractiveness as an investment destination

When EY’s first attractiveness survey was carried out in 2011, Africa ranked 8 out of 10 world regions – only Central America and the ex-Soviet States were less appealing to investors. In 2013, however, Africa moved into joint second position, alongside Asia. In addition, almost three out of four respondents believed that Africa would become a more appealing investment option over the next three years. This outstanding improvement in such a short space of time demonstrates the extent to which investor’s perceptions of Africa are beginning to change.

7) The perception gap remains wide

There exists a stark perception gap between the opinions of those already doing business in Africa and those who have yet to do so. Investors currently working on the continent are more positive than ever about its potential, identifying Africa as the most attractive investment destination in the world today. Those who have yet to do business in Africa are considerably less eager, ranking the region amongst the world’s least attractive investment destinations today. As EY acknowledge: “The gap could hardly be wider.” They argue that this perception gap keeps African FDI flows down and helps to explain why the improvement in overall investment perceptions has been accompanied by only a modest increase in real FDI value.

Download Ernst & Young’s Africa Attractiveness Survey 2014

Fergus Simpson is a University of Leeds graduate, currently working as a freelance journalist specializing in East and Central African affairs