International investment
It is well-known fact that, in all over the world, Foreign Direct Investment is welcomed, and the contribution FDI can make to economic development and the international investment integration of countries into the world economy is widely recognized. Over the past decade, African countries have made considerable efforts to improve their international investment climate; they have liberalized their investment regulations, and have offered incentives to foreign investors. More importantly, the economic performance of the region had substantially improved by the mid 1990s. However the expected surge in FDI has not occurred. Investors continue ignoring many African countries, especially the least developed ones.
It is important to point out that Africa has never been a major recipient of FDI flows and so lags behind other regions of the world. In the past decade and half, FDI inflows into Africa increased only modestly: From an annual average of US$ 1,7 billion for the period between 1981-1985 to US$ 2,8 billion in 1986-1990 to US$ 3;8 billion in 1991-1995 ( UNCTAD report 1997).
According to the recent UNCTAD Report, Africas share in global FDI inflows as well as in total inflows to developing countries dropped significantly. From almost 9 per cent of flows into developing countries between 1981-1985, this share dropped to just over 5 per cent in 1991-1995, to less than 3 per cent in 2000 - 2005. According to the same report, a slight improvement was observed in 2001, when inflows to African countries rose from US$ 9 billion in 2000 to more than US$ 17 billion in 2001. It should be noted however that this increase in FDI due to flows to South Africa and Morocco. In the case of Morocco, the huge increase in 2001 is due to the sale of 35 per cent stake in the local telecommunication operator, Maroc Telecom, to France Vivendi Universal.
Until recently, African leaders did not attach importance to FDI as an essential feature of economic development, reflecting largely fears by some that it could lead to the loss of political sovereignty, push domestic firms into bankruptcy due to increased competition and if entry is predominantly in the mutual resource sector, accelerate the pace of environmental degradation, although some of these concerns are legitimate ; for example, these is some evidence that the activities of foreign firms in the Nigerian oil industry have had perverse effects on the local environment.
According to the United Nations reports, the fundamental reasons for low FDI in Africa, which let foreign investors reluctant to invest in the region, especially, in the Sub- Saharan African countries, despite of its enormous profitable opportunities, is the relatively high degree of uncertainty in the region, which exposes firms to significant risks. Uncertainty in the region manifests itself in three different ways: First, the region is politically unstable because of the high incidence of wars, frequent military intervention in politics, and religions and ethnic conflicts, that the probability of war is very high. Second, the high incidence of currency crashes, double digit inflation, and excessive budget deficits have given evidence for the instability in macro economic variables, and has also limited the region ability to attract foreign investment. Third, in several African countries, it is often difficult to tell what specific aspects of government policies are, this due in part to the high frequency of government, as well as, policy changes in Sub Saharan African countries, the lack of transparency in macroeconomic policy, weak law enforcement stemming from corruption, inadequate infrastructure, high level of poverty and disease. In brief, the lack of favourable international investment climate prevails in the black continent..
In spite of its small FDI inflows, Africa should not to be considered a continent with poor investment opportunities. Grouping together 57 countries and projecting the same image on the all of them conceals not only a complex diversity of economic performance, including FDI performance, but also conceals factors determining FDI, which are in many cases similar to those in other developing countries, but not accompanied by adequate FDI inflows, whether it was because of the extension of the overall negative image of Africa to the countries with potential.
Indeed, according to the United Nations recent reports, it should be noted that not all countries are likely to attract significant flows in the future, the prospects for FDI in the medium term are best for South Africa, Egypt, Morocco, Nigeria, and Angola. Reports said: Countries such as Mozambique, Uganda, Tanzania, Namibia, Mauritius and Botswana are also likely to experience an increase in FDI flows because of the relative improvement in their economic policies in the last few years. This shows another approach of Africa out of the single image.
As for a sectorial perspective, the United Nations experts have identified FDI potential in Africa not only in the primary sector, as one would expect, but also in the services sector especially in tourism and infrastructural services, and in the manufacturing sector.
The overall picture shows that Africa has traditionally drawn FDI into enclaves of exports, oriented primary production such as oil and mining, with limited link to other economic sector.
Thats right, the primary sector remains the most important destination for FDI flows into the region, accounting for more than 50 per cent of inflows from major investors to Africa over the period 1996- 2000 ( UNCTAD 2001 Report). Within the primary sector, oil and gas are the most important industries. Since 1999, there has been an increase in inflows into tertiary sector. In fact in 1999, for the first time, tertiary sector attracted more inflows (US$ 3,108 million) than the primary sector (US$ 2,726 million) .
United Nations Experts indicate, in their several reports, headlines of a policy for a successful promotion of FDI to the region requires actions at the national, regional, and international level. They conclude that is essential to change the negative and stereotypical picture of Africa, which still prevails among large parts of the business community and the wider public outside the continent.
UN experts say: African countries themselves can do much to attract more foreign investments, they urge African governments to make efforts to ensure political and economic stability, promote private sector development, engage a greater dialogue with private companies, to develop infrastructure, and to adopt policy to protect property right, as well as, the rule of law.
The UNICTAD reports a variety of international initiatives
already underway: various schemes by the European Union to support investment in Africa. The European Union approved the everything but Arms in February 2001, with objective of eliminatory quotas and duties on all goods, excepts arms, from least developed countries, most of which are in black continent. By the same, US introduced the African Growth and Opportunity Act (AGOA); the act gives most African countries preferential access to US market for petroleum products, agricultural goods, and manufacturers such as textiles.
It should be noted that despite the progress made so far, it must be stressed that all these initiatives do not go for enough, and the international community should improve international investment market access for African countries. According to the UNCTAD reports , recent evidence indicates that about 40 per cent of the costs of trade barriers to developing countries are due to developed countries, which impose restrictions. Furthermore, there is evidence, that if the European Union, the United States, Japan, and Canada eliminate trade barriers and unfair subsidies on agricultural goods, the Sub Saharan Africas non oil exports will increase by 14 per cent and income by 1 per cent. At the same time, UNCTAD says: Debt reduction should thus be a cornerstone of the international communitys efforts to improve Africas growth prospects, in general, and its attractiveness for FDI in particular.
The question also rises to how the poor African countries can promote the investment .Everyone know that the investment promotion costly, the government of developed countries can assist the region in investment promotion through providing accurate information to investors in their countries about the investment environment and opportunities in the region. An argument in support of this approach is that produces best results, because investors in developed countries take the information received from their governments more seriously, than those from developing countries.
Finally, since the declaration of Kofi Anan the secretary of the United Nations ,in June 1999, who said : We are determined to help Africa to develop, and to play its fully part in the global economy, recently with the adoption of the Millennium development goals ( MDGs), and until now, has the International Community gone beyond the declarations and resolutions and has entered the era of application.
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