ECONOMY: Africa Given a Small Slice of the Investment Pie

By Moyiga Nduru Reprint | | Print |

Moyiga Nduru

JOHANNESBURG, Sep 29 2005 (IPS) - Africa must redouble its efforts if it wants to attract more investment, an official from the United Nations Conference on Trade and Development (UNCTAD) said Thursday at the launch of the agency’s annual ‘World Investment Report’.

“There is a lot for Africa to do to attract more FDI (foreign direct investment),” said Anne Miroux, head of investment analysis at UNCTAD, in response to a question posed by IPS.

“The needs are huge: there is a market problem, you have infrastructure problems. These and many others pose obstacles to Africa,” she added, speaking via satellite from the agency’s headquarters in Geneva.

According to ‘World Investment Report 2005: Transnational Corporations and the Internationalization of Research and Development’, investment flows to Africa remained stable in 2004, at 18 billion dollars.

“The levels were relatively high in historical terms but still a mere 3 percent of such investment globally,” says the document. This puts Africa at the bottom of the investment ladder.

“On a per capita basis, FDI inflows to Africa rose from eight dollars in 1995 to 20 dollars in 2004, but this represented only about half of the per capita FDI inflows to China, for example, which stood at 46 dollars in 2004,” notes UNCTAD.

France, the Netherlands, South Africa, Britain and the United States led the way concerning those funds which did make their way to Africa last year – accounting for more than half of investments in the continent.

The report stated that FDI rose in 40 of the 53 countries in Africa and fell in 13, with Egypt topping the list of investment recipients, thanks in part to the country’s liberalisation and privatisation policies.

“Nigeria, Angola, Equatorial Guinea and Sudan – all rich in natural resources – joined Egypt as Africa’s top FDI recipients, all of them registering inflows of more than one billion dollars,” observed UNCTAD. “The oil sector accounted for more than 60 percent of FDI to Angola, Egypt, Equatorial Guinea and Nigeria, and also made up large shares of such investment in Algeria, Libya and Sudan.”

Other African countries registered less than 100 million dollars of investment in 2004.

George Djolov, chief economist at the Chambers of Commerce and Industry of South Africa, cautioned that resources alone were no guarantee of sustained FDI.

“Innovation is very important. I always refer to Zambia, which used to attract investments through copper in the 1970s. When the price of copper collapsed, investment also declined in Zambia,” he told IPS.

“Therefore, African countries must be innovative and not only rely on resources. Resources are important but they should be complemented by innovation.”

For its part, South Africa has put incentives in place for attracting foreign investors. These include compensation for up to 15 percent of the costs of moving new machinery and equipment to the country, up to a maximum amount of 500,000 dollars per unit.

However, global competition is still taking its toll on various sectors, causing large-scale job losses.

According to the Congress of South African Trade Unions (COSATU), 17,000 jobs in the clothing, textile, footwear and leather industries have been shed in 2005 alone – this after the lifting of international textile quotas earlier in the year.

The 1.5 million strong body plans to stage a number of strikes next month to protest against the losses, which it blames on an influx of cheap textiles from China.

COSATU says South Africa’s unemployment rate has risen from 34 percent to 41 percent in the past five years, (latest figures from Statistics South Africa, the national agency charged with monitoring key indicators, put unemployment at 26.5 percent).

“Every employed worker is supporting many family members. For every worker who loses a job, five to ten people fall into poverty and hunger,” says COSATU. “Our communities are still being torn apart by joblessness, poverty and despair.”

Wealthy countries are also grappling with the loss of jobs to nations such as China and India, which have lower labour costs. Miroux warned that this could have dire consequences.

“I think this is a short-sighted policy. Very soon the people in the developed world will revolt against this policy when they begin to lose jobs.”

FDI outflows from Africa more than doubled in 2004 to 2.8 billion dollars, with half of this amount originating in South Africa.