UN: AFRICA ATTRACTS FOREIGN DIRECT INVESTMENT by KHALIL HAMDANI: 18/04/08 (MaximsNews Network)

UNITED NATIONS - / MaximsNews Network / 18 April 2008 - Africa has done well in attracting foreign direct investment, according to the "World Investment Directory: Africa" of the United Nations Conference on Trade and Development (UNCTAD).

Foreign direct investment (FDI) inflows to Africa grew by 70 percent annually over the past two decades. The stock of FDI climbed from $42 billion in 1985 to US$315 billion in 2006. Africa currently receives about $36 billion of FDI annually. 

The contribution of FDI to capital formation was less than 5 percent in the 1980s. It now contributes 20 percent. Policy reforms have worked.

However, Africa’s share of global FDI flows has remained steady around 3 percent, which is also its share of world exports and world output. Africa remains on the sidelines of globalization.

Also, foreign investment has gone mainly to the natural resource-rich countries, and even there the primary sector tends to create few benefits for the wider economy, in terms of productive jobs and supplier linkages with domestic enterprises.

FDI in manufacturing has not kept pace with foreign investment in the primary or services sectors, in most African countries.

“Africa has to do more, in particular promoting investment in the manufacturing of basic and intermediate goods and industrial inputs for regional markets to continue to attract FDI,” says Masataka Fujita, Chief of UNCTAD’s Investment Trends and Data Section.

Although global prospects are uncertain, investor interest in Africa is expected to continue, thanks to the current worldwide commodity boom and the rise of South-South investment flows, particularly from Asia. Local business is expanding.

Also, African governments are pursuing polices to extract greater benefits from FDI. Nigeria is determined to invest wisely its windfall revenues from higher oil prices and to avoid the “resource curse” this time around. Tanzania is giving attention to entrepreneurship and infrastructure. Zambia has revised its mining code and incentives regime to generate greater revenue from the extractive industries.

Furthermore, Egypt, Nigeria and South Africa should provide growth poles for the smaller African economies through intra-Africa trade and investment. With the expansion of regional activity, Africa will become more attractive to manufacturing FDI. It is already happening. A Chinese investor recently set up an automobile assembly plant in Uganda to serve the regional market.

Africa also has sleeping giants, such as Zimbabwe and Congo, which could provide further stimulus to regional development in the future.

Thriving local markets and a booming private sector have created high demand for private financing.

"Many African economies are now in the early stages of what promises to be a protracted growth cycle," says Hans Humes, President of Greylock Capital Management, which has been active in emerging markets for 11 years and plans to expand to Africa in 2008. "Domestic demand is the primary driver of recent growth in SSA (Sub-Saharan Africa), not commodity exports." 

“The long-term outlook is promising for investment in raw-material value-chain activities,” says the UNCTAD report.  “Particularly important for the region are recent changes in the United States' African Growth and Opportunity Act (AGOA), which are expected to increase further the continent's diversification into textile processing.”

The "World Investment Directory: Africa" contains 700 pages of data on FDI and activities of foreign companies in each of 53 African countries.

Labels: United Nations, U.N. Africa, Foreign Direct Investment, FDI, UNCTAD 

 

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