Africa: ‘harness FDI for development’

27 July 2012

Africa is sitting on the cusp of increasing investment, but needs to take advantage of this to drive a more sustainable developmental path for the continent, says South African Trade and Industry Minister Rob Davies.

Davies was speaking at the launch of the South African United Nations Conference on Trade and Development (Unctad) Investment Policy Framework for Sustainable Development (IPFSD) at the University of the Witwatersrand in Johannesburg on Thursday.

Unctad’s IPFSD is a guideline for national and international investment policy-making to support more sustainable, development-friendly policy-making.

It was established to assist policy-makers to design policies that effectively mobilise investment and ensure their positive contribution to sustainable development.

Benefits of FDI ‘not automatic’

Davies said that while foreign direct investment (FDI) could make a positive contribution to sustainable development, “the benefits to host countries are not automatic”.

Regulations were needed, he said, “to balance the economic requirements of investors with the need to ensure that investments make a positive contribution to sustainable development in the host state.

“The associated benefits of investment as they relate to technology transfer, skills development and research, among others, need to be purposefully built into the investment regime, and not taken for granted.”

Davies said that a recent Unctad report indicated that global foreign direct investment (FDI) showed global FDI flows exceeded the pre-crisis level, averaging US$1.5-trillion in 2011.

According to the International Monetary Fund, emerging economies – including those in Africa – are projected to grow by 5.5% this year, and Africa is the second fastest growing continent after Asia.

Seeking out new investment opportunities

South Africa’s inclusion in Unctad’s list of top prospective host economies for FDI over the next two years was a positive reflection of the country, as well as the continent’s growth and development potential, Davies said.

South Africa has seen growing investment from India and China, and the country is also seeking out new investment opportunities.

“We are trying not to make [the attraction of investment into the country] a step- child. There is an incredible amount of negotiation going into it,” he said.

“We are sitting on a cusp where there’s growing investment in Africa and South Africa.”

Davies attributed the growth on the continent to the mineral products boom, consumption, infrastructure development and that the continent had been spared a sovereign debt crisis.

“Although FDI increased across all major economic groupings in 2011, it’s striking that developing economies now account for 45% of global FDI,” he said. Most of the investment was in sub-Saharan Africa.

South African companies were also investing into the continent, with direct investment increasing from R3.8-billion in 1994 to R115.7-billion in 2009.