attracting global investors to africa
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Professor Nicholas Biekpe President: Africagrowth Research& Professor of Development Finance & Econometrics University of Stellenbosch. Attracting Global Investors to Africa. Introduction. Economic growth & Poverty alleviation - PowerPoint PPT PresentationTRANSCRIPT
Professor Nicholas BiekpePresident: Africagrowth Research&Professor of Development Finance &
EconometricsUniversity of Stellenbosch
Attracting Global Investors to Africa
Introduction
Economic growth & Poverty alleviation– Direct link between economic growth, poverty
alleviation and resource mobilisation efforts;
– Links between human resource capacity and efficient resource mobilisation outcome;
Investment and development conundrum – Development requires resources;
– Resources require relevant skills-lacking in Africa
Why Invest in Africa?
Under-utilised human and natural resources;Expanding consumer base; Improving governance structures in
governments and private sector; Improving economic and political security;A continent is hungry for development- can
only get better;
Investor’s Checklist
Purchasing power of population; Level of Education; Level of Infrastructure Development; Level of flow of FDI into country; Skill of labour force; Degree of militancy of Unions; Geographical location; Consumption pattern;
Figure 1:Trends in Private and Public Investment in Africa, 1985-2001 (% of GDP)
Resource mobilisation: A brief
historical perspective Great depression and the need to mobilise
domestic resources; Positive intervention of states during the
depression; Europe and the US- Intervened to create
favourable conditions for resource mobilisation efforts;
Post-independent Africa- Intervened to create centralised political and economic administrations (this did not work!)
NEPAD and Resource Mobilisation- what is new now?
Involves business for the first time;NEPAD has well defined objectives;Emphasises on partnership rather than
donor support;Puts governance at the top of its agenda; Stresses on self-reliance rather than
donor reliance.
Some key objectives of NEPAD on the Resource Mobilisation Front
Facilitate business development in Africa; Promote transparency and good governance; Attract Investment (e.g. FDI and ODA); Reduce cost of doing business; Promote the spirit of entrepreneurship; Create environment for efficient taxes and
savings; Marketing Africa as an investment destination.
Impact of development grants on economic development
Grants mostly create obstacles to development;
Grants tend to serve donor interest;Historical pattern of failure from donor
models;Grants create a cycle of perpetual
dependency ;
Main resources channels: Inflow & Outflow
Figure 2: Resource Flow Channels
Inflow Channels Outflow Channels
Savings;FDI;TaxesODA;Debt Relief;Export Earnings;Capital markets and other financial instruments (e.g. venture capital, private equity, insurance etc.)Other private sector injections;
Capital flightImportsDebt servicesProfits paid to foreign investors/ shareholders
Source: ACIA & NEPAD (2004)
Key obstacles that really prevent investment in Africa
Cost of starting a business Dealing with numerous licences; Cost of hiring and firing staff; Registering property; Getting credit; Investor protection; Paying taxes; Cost of trading across borders; Enforcing contracts Closing a business
Dealing with numerous licences
Difficulty in employing workers
Ease of registering property
Ease of getting credit
Protecting Investors
Paying taxes
Trading across borders
Enforcing contracts
Closing business
Conclusion
To attract global investors, Africa will need to:– Promote transparency and good governance;– Reduce cost of doing business; – Improve and speedup capital markets reforms;– Market Africa as an investment destination.
continue
Encourage savings;Strengthen export capacity;Support venture capital initiative;Encourage small enterprise schemes;Help strengthen capacity to collect local
taxes;Develop schemes to attract sustained FDI
flow;
THANK YOU