Africa urged to tap new foreign dealsBy LEE MWITI | Friday, October 29  2010 at  15:44

Africa is set to make significant gains as foreign investors troop back following what has been a difficult two years of the global economic slowdown, analysts say.

The continent has been experiencing a lull in foreign investment as investors struggle to shake off a cautious attitude, but the feeling is that plenty of business is set to come in over the next 12 months.

“Investment announcement numbers in Africa are picking up and should be seen as a statement of intent,” said Mr Robert Whyte, a World Bank foreign investment expert.

Africa is generally agreed to have suffered least from a diversion of foreign direct investment as the global shock led decision makers and managers to hold back on new deals in foreign countries. FDI levels were in 2009 seen to have dropped by as much as 30-40 per cent.

The World Bank estimates that inefficient investment promotion agencies (IPAs) will lose sub-Saharan African countries new business and is training investment officials in the region to tap any opportunities that will surface. Its Global Investment Promotion Benchmarking programme has been rolled out in 181 countries so far.

Handle inquiries

“National investment promotion agencies have to prepare themselves for the increased activity levels as the most worrying aspect is the way they handle inquiries,” said Mr Whyte.

A new study by the multilateral lender shows only two IPAs meet investors’ long-listing needs, namely Botswana and Mauritius, with the weakest performers being in French-speaking Africa.

Comesa bloc countries also showed a gain in response to inquiries by potential investors, at 32 per cent performance being  just above the sub-Saharan average of 25 per cent.  

But, with the largest share of foreign direct investment in countries such as Uganda and Tanzania being from neighbours such as Kenya, intra-regional investment is seen as a buffer to shocks in foreign markets.

The three countries, together with Burundi and Rwanda, are members of the East African Community (EAC) bloc.

“Common markets can only be possible with efficient linkages between people and activities,” said EAC secretariat deputy secretary-general Alloys Mutabingwa, as he called for the bloc to eliminate barriers to trade such as high energy and transport costs.

Railway network

EAC industries currently pay between $0.125-0.19 for a unit of power while those in Egypt pay an average of $0.05.

Roads are also lacking, with the bloc having only 20,000 kilometres of paved roads while by comparison, South Africa has 73,000 km and Japan 307,000 km.

But plans are currently underway to revamp the railway network in the region, with studies on a new standard gauge-rail track having been completed, despite major hitches over funding and the bidding process in some partner countries such as Kenya.

“We shall go standard gauge. We are no longer listening to who wants it or not,” said Mr Mutabingwa. “It is very costly but of long-term benefit to the region.”