Global Policy Forum

By Steve Hirsch

Africa could easily become a vibrant international market, the secretary-general of the International Chamber of Commerce ICC said in an interview. The ICC and the UN Conference on Trade and Development last month reported the results of a joint survey that showed one-third of multinational companies wanted to boost investment in Africa in coming years. The two organizations said many of the companies are "cautiously upbeat" about the outlook for investment in Africa.

Although the companies polled were guarded in their optimism, there's "absolutely ... no reason" why Africa cannot become a dynamic international market, said ICC Secretary-General Maria Livanos Cattaui. But "it depends on what Africa we're talking of," she added.

There will always be countries "that push out in front ... show the example, dare to make the necessary changes, become attractive, become role models for the area," she said. To promote such changes, the ICC has set up, or plans to set up, national committees of business leaders in several African countries, including Morocco, Senegal, South Africa and Zimbabwe.

The Breakdown, By Country And Industry

South Africa was considered by most respondents to be the most attractive African country for foreign direct investment (FDI), followed by Egypt, Morocco and Nigeria. South Africa, Nigeria, Egypt, Morocco and Tunisia now account for most FDI into Africa, and the order is not likely to change much in the immediate future, according to the survey.

South Africa was also the most frequently mentioned as the country expected to make the most progress in creating a healthy investment climate in the next few years, followed by Egypt, Morocco, Tunisia, Cote d'Ivoire and Ghana. But less developed countries -- including Ethiopia, Mozambique, Uganda and Tanzania -- were also seen as attractive destinations for FDI and are expected to make progress in creating a business-friendly environment.

The companies looking at Africa are not just interested in raw materials extraction, she said, but are investing in manufacturing and services and are looking to build the strength of local markets and businesses they work with. Poll respondents saw tourism and telecommunications as having the best investment potential among industries, along with petroleum, natural gas and related products; agriculture; mining and quarrying; food and beverages; and pharmaceutical and chemical products. Special opportunities were seen in southern Africa in transport and storage, metals and metal products and motor vehicles.

According to Cattaui, the factors that matter most to international investors include progress in the prevention of armed conflict and the reduction of legal uncertainties. The biggest concern remains corruption. In addition, she said, companies are looking for the institution of a viable, grassroots private sector with competition.

The steps Africa still needs to take are similar to those of other emerging markets, Cattaui said, comparing the continent to Ireland a few decades ago, when the government put a major effort into education and its telecommunications infrastructure.

Investors Can Go Elsewhere

Despite the positive sentiment, Cattaui said FDI in Africa compares "badly" with that in other emerging markets. Seventy-three percent of the companies polled said the overall FDI potential for Africa was "limited," and only 12% thought it was "large" or "very large." The problem, Cattaui said, is that investors can go elsewhere, although she adds that companies operating in Africa's most promising countries have done well.

An International Trade Center report released at the same time as the UNCTAD-ICC report cited growing African exports since 1994, and Cattaui noted the two developments are "absolutely" linked. Economic development is measured worldwide by growth of gross domestic product as well as export and import capabilities, she said.

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