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Africa |
DEVELOPMENT
The SADC region has definite investment opportunities.
But what is being done to develop these opportunities?The Southern Africa Development Community (SADC), is under pressure to find ways of attracting investment inflow in order to enhance the region’s economic growth. This follows Southern Africa’s dismal economic performance that has attracted an average investment rate of only 16.25% of the region’s Gross Domestic Product (GDP) — well below the recommended investment average of 25%-30% that would stimulate a growth rate of 5%-6% percent annually.
A report prepared by the SADC‘s Executive Secretary, Dr. Prega Ramsamy, highlights the advantages of the SADC region as an investment destination. The report, entitled: «SADC Trade, Industry and Investment Review 2003», shows that in general, Africa remains a marginal recipient of Foreign Direct Investment (FDI) compared to other parts of the world. Over a period of time, the continent has stagnated in terms of attracting investment inflow. Dr. Ramsamy says that on average, Africa’s share of global FDI inflow has remained between 0.5% and 2.5%, as against 80% in South-East Asia and between 10%-17% in Latin America.
In the SADC region, member states’ bid to attract long-term investment, has been uneven with some countries chalking up significant successes while others are struggling to achieve the same feat. SADC‘s economic powerhouse, South Africa, comes well to the fore in encouraging outside investment.
Is the SADC an investment destination?
While being rich in mineral resources, generally-speaking, Africa remains poor due to armed conflicts, corruption and HIV/AIDS. This leads to reduced investor confidence. The SADC region is not exempt from this situation.
Dr. Ramsamy, argues that the 14-member region is richly endowed with abundant agricultural, mineral and human resources, and has a population of around 208 million. Thus, there is a market for a would-be investor.
The report states that agriculture plays a major role in the SADC‘s economy, contributing 35% to its GDP. 70% of the population depend on agriculture for food, income and employment. It adds that agriculture contributes about 13% to total export earnings and about 66% of the total value of intra-region trade. Given this fact, there exists abundant investment opportunities in food processing, agribusiness and clothing and textile production and trade.
Also, the SADC region possess a vast and highly diversified mineral resource base, including precious and base metals, industrial minerals and precious stones. The SADC is «home» to major reservoirs of some of the world’s most valuable minerals, many of which, according to the report have not been exploited to their full potential — an encouragement to any investor!
Untapped opportunities include SADC countries as tourist destinations with fast growing industries — all ripe for further development.
What are African governments doing to enhance FDI
According to Dr. Ramsamy, the SADC region has a small market, smaller than that of Turkey and about one-fifth of the United States market. But, he says, in the African context, its total GDP, amounting to US $187.7 billion in 2000, is more than double that of the Economic Community of West African States (ECOWAS).
The region is now focusing on increasing its competitive advantages as a sub-Saharan Africa destination for FDI, through deepening cooperation among member countries. A number of trade protocols have been signed, aimed at focusing on key interventions in macro-economic stability, trade liberalization, infrastructure development and regional peace.
It is realised that individual member states’ economies are too small to support a large range of viable productive investments, so it has become essential to regard the SADC as a single enlarged domestic market. In this way, the «domestic» market is of a size, making investment and trade opportunities worthwhile.
Peace and stability
No investor would think of going to politically unstable countries. So in March 2001, the SADC Heads of State and Government, adopted a structure that promotes peace, security and stability. At the same time, the group took care to ensure that economic and political governance are addressed in a manner that will provide opportunities for all its people, on the basis of equity and mutual benefit. Such issues as consolidating democratic principles, the rule of law, accountability, human rights and participatory governance are all part of this endeavour.
The major constraint in the SADC dream of attracting massive FDI inflows are the poor infrastructures dogging most of the member states. Most of the countries are landlocked and this renders transport in the region costly. In order to address this situation, member states have embarked on massive privatization programs of state-owned transport and communications enterprises, with a view to increase the role of the private sector and attracting private investment in the sectors concerned.
Unfortunately, all this talk about developing the SADC, is still largely just talk. Far too many leaders are still bent on spending recklessly on non-priority areas (i.e. internal and external travel) at the expense of priority areas such as education and health.
- Frank Jomo, Malawi, September 2003 — © Reproduction authorised, with usual acknowledgment