Foreign investment in Africa lags behind

Posted On Friday, 13 June 2003 02:00 Published by eProp Commercial Property News
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South Africa, along with Egypt, Nigeria, Morocco and Tunisia, accounted for 60 percent of all direct investment inflows into Africa from 1997 to 2001, a draft World Economic Forum (WEF) report had shown.

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Durban - South Africa, along with Egypt, Nigeria, Morocco and Tunisia, accounted for 60 percent of all direct investment inflows into Africa from 1997 to 2001, a draft World Economic Forum (WEF) report had shown.

However, foreign direct investment (FDI) flows to the region were still very low compared to other parts of the world, even though the profitability of FDI outperformed most other developing regions, the WEF said.

The FDI section of the upcoming Africa Competitiveness Report 2003/04 shows that most investments into the continent come from the US, UK and France, although the relative importance of each source has shifted over the past 30 years.

Also, the report shows South Africa has emerged as the only significant source of intracontinental FDI flows. Since the lifting of apartheid-era sanctions, South African firms from virtually all industries had been investing "all over the continent" as part of their restructuring and unbundling processes.

It argues that the largest of South Africa's transnational companies, such as Anglo American and SABMiller, used expansion into other African countries as a "stepping stone" in their quests to become truly global players  
. Now, although they continue to make investments into the continent, the expansion of their African operations has lost its strategic importance.

The report says investments into the natural resource sector - mining and forestry - were more important to Africa than to other developing regions.

But the level of investment into primary products was nearly matched by investments into services industries, with the two sectors representing 37 percent and 36 percent of the total FDI stock, respectively.

The investments in services - tourism, telecommunications and financial services - had been aided by "substantial deregulation and privatisation", the WEF report said.

The only two significant investment destinations for manufacturing operations were Egypt and South Africa because of their "sizeable home markets and large, relatively well-qualified workforces".

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