A continuing combined impact of falling foreign direct investment (FDI) and sustained capital outflows poses a structural challenge for Africa and an existential one for parts of the Horn of Africa States region. There was a sharp decline in FDI to the continent of roughly 38 % in 2025, from an estimated about US$96 billion in 2024 to around US$56 billion in 2025 (Economi Confidential). This has coincided with continued and very large capital outflows through profit repatriation, illicit financial flows, and capital flight. The African Development Bank (AfDB) estimates that the continent loses about $587 billion annually due to capital flight and leakages, including illicit financial flows, profit shifting, and corruption, based on the latest comprehensive estimates available around 2024/2025 (Ecofin Agency). This divergence between dwindling new investment and persistent capital leakage is reshaping Africa’s economic prospects, with especially acute consequences for the Horn of Africa states, where structural vulnerabilities magnify the impact.

FDI has historically played a critical role in Africa by supplementing limited domestic savings, financing infrastructure, creating employment, and transferring technology and managerial skills. While unevenly distributed, FDI supported growth in sectors such as energy, telecommunications, manufacturing, and extractive industries. In 2024, Africa attracted a record US$96 billion in FDI, thanks in part to large projects in North Africa, but the figure fell back sharply in 2025 to levels closer to the early 2020s. The recent downturn in FDI, therefore, represents more than a statistical decline; it reflects a contraction in long-term productive investment. 

As global capital increasingly........

© Eurasia Review