Private sector growth is good news out of Africa
By Adnan Kassar
As published in the Journal of Commerce, 23 March 2000
Paris, 23 March - There is a positive story about Africa that deserves to be heard amid the reports of war, famine, disease and natural disasters.
Almost unnoticed, and despite setbacks, a viable private sector is gathering momentum in many countries. Furthermore, major international companies with considerable investments in Africa are there for the long term and a significant proportion even plan to increase their investments.
Such were the conclusions of a survey of 300 companies carried out by the UN Conference on Trade and Development (UNCTAD) and the International Chamber of Commerce between November 1999 and January 2000.
ICC's own extensive contacts with businesses of every kind throughout Africa confirm the existence of grass roots growth, particularly of the small and medium-sized businesses that are the backbone of any economy.
Those who persist in seeing the whole of Africa as a basket case should recognise that the continent consists of 53 sovereign states whose political, economic and physical realities differ greatly.
Africa merits closer and discerning attention from business, country by country, industry by industry and opportunity by opportunity. As the world business organization, ICC is working with UNCTAD to convey that message.
Evidence of more hopeful underlying trends in many parts of Africa emerges from the ICC-UNCTAD survey on foreign direct investment, which covered the world's biggest multinational companies. The survey produced 63 responses from companies with 1.6 million employees abroad and foreign sales of US$ 625 billion from their affiliates abroad alone. Only 3% of the responding companies are headquartered in Africa.
One third of the multinationals that responded to the poll want to increase investment in the next three to five years. More than half of the companies expect their investments to remain at present levels. Only 6% of the respondents said they plan to decrease their investments or pull out of Africa altogether.
Predictably, most respondents placed South Africa at the top of their list of the most attractive countries for investment. Egypt came second, followed at some distance by Morocco and Nigeria. South Africa and Nigeria, together with Egypt Morocco and Tunisia, account for the bulk of FDI inflows into Africa.
South Africa was most frequently mentioned among countries expected to make the most progress in creating a business-frien
dly environment in 2000-03l, followed by Egypt and Morocco. Then come Tunisia, C´te d'Ivoire and Ghana in that order.
Several least developed countries - including Mozambique, Uganda, Tanzania, and Ethiopia - figure in the list of countries seen as attractive destinations for FDI.The floods that have devastated Mozambique seem all the more tragic when one considers that this is a country whose outlook at last appeared to be improving.
Separate research by UN agencies and the World Bank's Multilateral Investment Guarantee Agency, show that profitability of FDI in Africa can compare favourably with that of other regions. The stereotype of Africa as merely a provider of natural resources no longer holds good.
Half of the companies saw investment potential in tourism, followed by telecommunications. As was to be expected, many countries singled out petroleum, gas and related products as well as mining and quarrying as offering investment potential. But agriculture, pharmaceutical and chemical products, and foods and beverages were also on the list.
Neither ICC nor UNCTAD play down the problems facing Africa, and it would be fair to say that the companies were at best cautiously optimistic about prospects. Of the companies polled, 73% described the overall FDI potential for Africa as "limited" and only 12% said it was "large" or "very large".
Peace and political stability will be fundamental to any African renaissance. Apart from progress in the prevention of armed conflict, the survey confirmed that major companies regard the prevalence of extortion and bribery and difficult access to global markets as by far the most discouraging factors for investors. Good governance, a transparent and predictable regulatory framework, and the rule of law are three essentials.
By the end of this year, ICC is set to have national committees in more than a dozen African countries - twice as many as at the beginning of 1999. ICC national committees cannot be formed unless the countries concerned have a broad-based private sector with an international outlook and are capable of meeting the stringent standards required for ICC membership.
In 1999 Ghana and Nigeria joined the existing line-up of Burkina Faso, Egypt, Morocco, Tunisia, Senegal, South Africa, Togo and Tunisia. In 2000 we are on the way to adding Kenya Uganda, Tanzania and Zimbabwe.
ICC's expansion in Africa testifies to the ground swell of private business development that catches no headlines but in the long run will change perceptions of Africa and be the key to the continent's development.
There is much work to be done to improve the African image. But it can be done - and it must to be done if Africans are to have a brighter future.