CONTENTS | ANB-BIA HOMEPAGE | WEEKLY NEWS
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Africa |
DEVELOPMENT
According to the 2003 World Investment Report,
Africa’s economic prospects look slightly better than in previous years
Even though some African countries have made giant steps in offering attractive opportunities for investors, for most of them, encouraging investors to their respective countries remains a herculean task. Their predicament is made worse by the background of falling global Foreign Direct Investment (FDI) which have not spared the continent.
Launching the World Investment Report 2003, in Geneva, early September, the United Nations Conference on Trade and Development (UNCTAD)’s secretary general, Rubens Ricupero, said global FDI inflows, already down by over 40% in 2001, fell by another 21% in 2002 to US $651 billion. Outflows were also down in 73 of the 151 countries, UNCTAD added.
Although foreign direct investment inflows to Africa declined by 41% in 2002, there is a ray of hope in Africa, because 30 of the continent’s 53 countries reported an increase in FDI inflows. Experts note that the outlook for FDI flows to Africa in 2003 looks promising, and is pleased to note that the downturn from US $19 billion in 2001 to $11 billion last year, occurred against slumps in FDI flows elsewhere globally.
According to UNCTAD, three major factors: Expanded exploration and extraction of natural resources, particularly petroleum; the continued and enhanced implementation of regional and interregional free trade initiatives; and advances in privatisation, are likely to spur Africa’s growth in 2003.
The prospect of better inflows also come at a time when the New Partnership for Africa’s Development (NEPAD) which was adopted in 2001, as the main development framework for the continent, has underpinned increasing private investment inflows to Africa, as one way to help overcome the region’s stunted growth and resources gap.
While many of the countries have seen a rise in foreign investment inflows over the years, experts note that corruption, wars, poverty, red tape have scared away discerning investors. They say it is therefore imperative that Africa creates conditions conducive for private capital investment.
Inflows improving
Things are improving in Africa, and UNCTAD notes that in 2002, African countries generally improved their FDI policies, and increasingly participated in international investment agreements. UNCTAD further states that more than half of the countries in Africa have at last expanded their FDI inflows, whereas elsewhere in the world, inflows for other areas remained the same or declined.
Angola, Algeria, Nigeria and Tunisia were the top FDI recipients in 2002, accounting for half of the inflows into Africa. However, an interesting trend emerged where some best traditional best performers, such as Morocco and South Africa, were displaced by newcomers such as Angola and Chad, countries that were relatively unknown as hosts to FDI inflows into the region.
Angola, Chad, Equatorial Guinea, Mauritania, Nigeria, Sao Tome e Principe and Sudan are being promoted among the hopefuls for new FDI inflows into their nascent petroleum industries. Morocco, Nigeria and South Africa may further implement the privatisation programmes of their major enterprises. Botswana, Kenya, Lesotho, Mozambique, Namibia, South Africa and Uganda are good examples of countries that can be expected to make gains, as transnational companies (TNC)s position themselves to benefit from advances in the Africa Growth and Opportunity Act (AGOA) and the Everything But Arms (EBA) initiative.
According to the African Development Bank, economic growth for Africa has averaged only about 3.5% per year over the last five years — far below NEPAD targets of between the 6-8% needed to achieve the Millennium Development Goals. Yet according to UNCTAD, the scope for better prospects is there, provided the investment climate is improved much further.
Chad has been singled as Africa’s star performer in attracting FDI in 2002. The country, which did not receive any FDI at all in 2001, managed to attract inflows well over US $90 million. Much of this investment is related to the proven oil reserves in the Doba basins of Lake Chad. Chad became the fourth largest recipient in Africa, and the second largest among Least Developing Countries (LDC)s after Angola.
The bulk of the foreign investment in Africa at present is dominated by the extraction of oil and minerals and rarely from goods which have been processed.
South Africa remains the largest source of investment outflows and is home to all three firms on UNCTAD‘s top 50 of developing country’s TNC‘s list. South African TNCs have historically invested abroad in the mining sector, but of late have shifted to the telecommunications sector. MTN and Vodacom have made inroads into the telecommunications industry of many African countries. South African breweries recently bought out a 64 percent stake in Miller Brewing Company of the United States of America, becoming SABMiller. SABMiller then acquired Bira Peroni (Italy) and Harbin Brew China in 2003.
Zimbabwe‘s economy was once an example of a well-managed economy. In past years, things have gone radically wrong, but recently, however, although dogged by an economic crisis, Zimbabwe has managed to attract about US $26 million worth of FDI — up from a mere US $4 million in 2001. Economists say the country needs to work on improving its investor climate.
- Tonderayi Mukeredzi, Zimbabwe, October 2003 — © Reproduction authorised, with usual acknowledgment