Investment opportunities and ways to improve the investment climate in Africa

Investment opportunities and ways to improve the investment climate in Africa

The first Forum for Heads of African Investment Promotion Agencies (IPAs) brought together Egyptian and African ministers, officials, and businessmen to discuss investment opportunities across the continent, and ways to improve the investment climate.

Prime Minister Mustafa Madbouli identified the major challenges facing investment in Africa: they included, he said, inequality in the distribution of coronavirus vaccines, travel restrictions, seasonal employment, increased global inflation and trade disputes that are reshaping geopolitical balances.

The prime minister highlighted the fact that the African continent is the world’s poorest despite its abundant natural resources and workforce.

Forum sessions were devoted to the role of governments and regional partners in enhancing investment opportunities for the private sector in projects, best practice for African investment agencies in terms of legislative and procedural reforms and ways to incentivise foreign investments.

Regional infrastructure projects were also highlighted during sessions — connecting Africa is central to improving its global competitiveness — as well as ways to enhance technical and investment cooperation between African investment promotion agencies.

Mohamed Abdel-Wahab, head of Egypt’s General Authority for Investment and Free Zones, said 270 bilateral meetings between Egyptian officials and businessmen and heads of African investment bodies took place during the forum as part of the discussion of investment opportunities across the continent. He stressed the importance of bridging the financing gap in order to achieve the goals of Africa’s Agenda 2063, and the role of the African banking sector in financing major projects in targeted economic sectors.

One of the most significant recommendations to come out of the forum’s different sessions, according to Abdel-Wahab, is the launch of an advisory council before the end of this year comprising representatives of African investment agencies, the private sector, and international experts to provide technical and administrative advice on the promotion of investment opportunities.

Recommendations also included establishing a continental online platform listing all investment opportunities in priority sectors and relevant legislation and procedures, and building supply chains that enable countries to reduce their dependence on imports and enhance their ability to compete in the global market.

The forum also recommended identifying contact points from all African investment agencies by next month to facilitate the exchange of investment data and information, as well as to prepare for the next round of the forum.

Abdel-Wahab announced that the General Authority for Investment and Free Zones in Egypt will organise five promotional missions for Egyptian businessmen interested in investing in African countries before the forum’s next round.

Minister of Planning Hala Al-Said pointed to the importance of the private sector’s participation in development efforts.

“Partnership between government and the private sector is one of the main pillars to achieving the UN’s 17 Sustainable Development Goals by 2030,” she said. Al-Said also stressed that the huge financing needs require concerted efforts to mobilise all available resources.

Gamal Abu Ali, president of the Egyptian Junior Business Association (EJB), said that many challenges face investors in Africa, including the absence of information about available investment opportunities and financing schemes, guarantees facilitating exports, the difficulty of finding a local partner, and a lack of training on how to enter relatively new markets.

He added that though Africa is an attractive market for investment, especially in the infrastructure, construction, new and renewable energy, training and technical education sectors, “companies operating in the private sector need support to increase their investments and exports and to benefit from free trade agreements.”

A new blog by Abebe Aemro Selassie, Luc Eyraud and Catherine Pattillo, respectively director, mission chief and deputy director of the International Monetary Fund’s (IMF) African Department, pointed out that African economies are at a pivotal juncture, with the coronavirus pandemic bringing economic activity to a standstill. They argued that high public debt levels and the uncertain outlook for international aid limit the scope for growth through large public investment programmes, concluding that “the private sector will have to play more of a role in economic development if countries are to enjoy a strong recovery and avoid economic stagnation.”

The IMF experts suggest that infrastructure, both physical (roads, electricity) and social (health, education) are areas where the private sector could be more involved.

Recent research published by IMF staff shows that the private sector could, by the end of the decade, bring additional annual financing equivalent to three per cent of sub-Saharan Africa’s GDP for physical and social infrastructure. This represents about $50 billion per year, and almost a quarter of the average private investment ratio in the region (currently 13 per cent of GDP).

Improvements in the business environment, particularly the reduction of currency and exit risks., are essential to attracting private investors, added the IMF experts. Governments may have to provide extra incentives to make infrastructure projects more attractive to private investors: though such incentives can be costly and carry fiscal risks, many development projects simply won’t happen without them. In East Asia, 90 per cent of infrastructure projects with private participation receive government support.

By Ahmed Kotb