Achieving economic growth in Africa
OVERALL, Africa is undoubtedly the world’s poorest conti
nent, albeit there are a few countries of some reasonable economic substance.
And as most of Africa has not recognised that it is for those who live in Africa to assure economic growth, the tendency is to blame the near destitution of many of Africa’s economies upon globalisation, colonial rule, and alleged economic oppression of the world’s developed countries and financial institutions.
Much of Africa has failed to accept that not only is economic growth essential to ensure sustainable development and poverty reduction, but that invigorating investment is a key to achieving such growth.
Efforts by African countries to improve their investment environments, together with international cooperation, are crucial to attaining that investment and economic growth.
It is therefore significant that at last year’s Tokyo International Conference on Investment to Africa, attended by more than 200 key participants from many African countries representing government, business and civil society, representatives of international organisations and enterprises which have engaged in investment projects in Africa, and by academics specialising in investment, the participants adopted an Agenda for Promoting Investment in Africa. That Agenda is of such import to Africa that it merits reproduction.
African countries offer comparative advantages and concrete business opportunities for attracting investment. They should maximise their comparative advantages and increase their competitive advantages. In addition, they should also make more use of existing investors for marketing domestic investment opportunities.
Many African countries abound in natural resources (for example, minerals and oil, agricultural land, forests, and biodiversity) and have great competitiveness in the international market. Stable and transparent policies are vitally important to utilise these resources effectively for sustainable economic development.
African countries offer comparatively abundant and competitive labour forces.
Developed countries, such as Europe, the US, and Japan offer preferential market access to African countries, and business opportunities will be enhanced when these are effectively utilised.
African countries account for 10% of the world population, and therefore, they basically have the potential to become a big and attractive market for investment.
Efforts of host countries are vital in creating an attractive investment environment. For this purpose, African countries can refer to the experience of other regions such as Asia.
African countries should clearly commit themselves to enhancing good governance in order to maintain peace and political/social stability. Fostering good relations with neighbouring countries is also important.
In addition, ownership of African countries is also indispensable for ensuring predictability of the investment environment by introducing a transparent and fair legal framework and strengthening the administrative and judicial system to support the effectiveness of such a legal framework.
It is necessary to improve the fundamentals for investment such as capacity building and economic infrastructure (electricity, communications, transport, etc) in African countries. Improvement of social and basic infrastructure such as health care, water supply and maintenance of public order is important for attracting foreign business people which is a presupposition of investment.
It is also important to simplify the procedures for the entry of foreign business people into African countries and to enhance the movement of business people by improving transportation facilities with a view to facilitating investment.
African countries should endeavour to make their macroeconomic environments stable and to strengthen financial systems (including responsibility handling external public debt, implementing appropriate exchange policies, and fostering financial institutions, etc). Moreover, for objective evaluation, development and disclosure of economic policies and economic statistical indicators are also important.
African countries should make an effort to implement policies which realise the effective functioning of the market economy, encourage medium-sized and small enterprises and improve the saving rate so that domestic investment will be promoted. Preparing a good environment for domestic investment is also a necessary condition for attracting foreign direct investment.
African countries should encourage active investment promotion policies that are well-coordinated with national development plans and poverty reduction strategies and can lead to the improvement of production capacity, development of the export industry and substantial economic growth in host countries.
Simplification and clarification of procedures by establishing organisations for implementing investment promotion, such as one-stop shopping, is useful as well as policy measures such as tax privileges, the introduction of special economic zones, and deregulation.
It is essential that African countries themselves take the necessary steps for implementing means to improve their investment environment and that they take ownership of their reform agenda.
Sharing information is essential to efficiently connect supply and demand of investment in African countries.
Communication between investment promotion organisations in African countries and investment and trade promotion agencies in investing countries should be further strengthened and also access to investment information and effective contact points should be facilitated.
In order to realise smooth and fast mutual provision of information, information and communication technology (ICT), such as websites should be utilised to the maximum.
Investment-related information provided through an international review process should be supplied to wider circles of potential investors.
Each African country should endeavour, as a first step, to make a successful case of existing investment and to use that case for attracting further investors.
In order to promote investment in Africa, African countries need to expand their economic scale and make their markets more attractive.
Regional cooperation is essential in this regard.
From the viewpoint of promoting investment in Africa, African countries should strengthen cooperation in mutual tariff reduction, harmonisation of customs procedures at each border, effective use of their own resources for investment promotion, and creating free trade areas, including establishing regional investment frameworks, or examining options for the proposed multi-facility economic zones. Regional ties should also be enhanced by strengthening air-transport networks.
Each region in Africa should endeavour to implement and promote policies to attract investment collectively as a region through measures by each regional organisation. Cooperation with other developing countries and regions should be strengthened.
Cooperation among local companies in African countries should be promoted (ie, promoting investment by an external foreign company to other African countries utilising know-how in companies in South Africa).
In conjunction with African countries’ commitment to sustainable development, home and host countries should cooperate to promote investments conducive to sustainable development and to encourage companies to be guided by standards of internationally recognised corporate social responsibility.
In order for African countries to implement the measures mentioned above, it is valuable for them to effectively benefit from the international cooperation efforts described below. Support from the international community in capacity building via which African countries could implement their own policies is of significant importance.
Each country in the international community should provide duty-free and quota-free treatment like that under Japan’s GSP scheme toward LDCs, AGOA by the US or EBA by the EU. African countries should endeavour to fully utilise these preferential measures.
Home and host countries should publicise their own schemes of investment insurance and those of financial institutions which contribute to investment in African countries and promote their utilisation by private companies, and thereby continuously promote public/private partnership.
In the meantime, African countries should strive to ensure that these schemes can be applied to investment in their own countries by realising a stable investment environment.
It is very evident that some of Africa’s countries are vigorously pursuing the Agenda set out above, including South Africa, Mozambique, Uganda, Tanzania, Botswana, and Mauritius. Ghana, Nigeria and some others such as Zambia, Malawi and Kenya are beginning to do so. But it is equally evident that others do not.
Amongst the latter, Zimbabwe is particularly notable, and especially so insofar as the Agenda’s methodology for improvement of the investment environment is concerned. That required methodology includes clear commitment to enhancing good governance, stable macroeconomic environment, and maintaining peace and political and social stability.
Zimbabwe’s actions over many years suggest that such a methodology is anathema to its government.