April 8, 2003
People investing their money in Sub-Saharan Africa last year have probably not regretted it. According to a report by the World Bank, foreign direct investment (FDI) in Sub-Saharan Africa yielded the highest returns in the world in 2002.
"The rate of return on FDI was highest in Sub-Saharan Africa, compared with other regions in the world, perhaps because, given perceived higher risks in the region, investors chose only high-return projects," the World Bank said. The Bank said the economy of Sub-Saharan Africa would grow at 3% this year, provided weather conditions are normal and commodity prices higher.
Migrant workers
The report also said that FDI and migrant workers sending part of their pay checks home have become more important sources of finance for developing countries than private lending. The World Bank said this development has "profound consequences" for developing countries.
"The boom and bust in private lending was a crucial element in a series of financial crises that started with the 1997-1998 East Asia crisis and continued in a new round of Latin American debt problems in 2002," the Bank said. And workers' pay checks and FDI are less volatile sources of income for developing countries than private lending, according to the Bank.
In 2002, foreign direct investment remained the most important source of external financing for developing countries, with net FDI reaching $143bn in 2002. Workers' remittances reached $80bn last year, up from $60bn in 1998, while net lending by official creditors to developing nations was $16bn, with another $33bn given in grants.
The World Bank is the main development partner of Sub-Saharan Africa. In addition to providing debt relief, the main priorities of the World Bank in Africa are to fight the spread of HIV/AIDS and stimulate private sector development.
More Information on Foreign Direct Investment
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