As the financial crisis takes a firm grip on the developed world, developing economies are also starting to feel the strain. In Africa this is translating into reduced trade volumes and falling investment. But as ministers at the Commonwealth Business Council (CBC) G8 Africa Business Forum have highlighted, not only are there continued investment opportunities in the continent, it is also seeing the beginnings of a reverse brain drain with the diaspora waking up to the potential in their homeland.
Despite the economic challenges that Africa faces, Mike Foster, parliamentary under secretary of state at the UK Department for International Development, points out that nine of the world’s 20 fastest-growing economies this year are predicted to be in the sub-Saharan Africa region. Speaking at the forum, he added: “New investment opportunities are constantly opening up across the continent and, in the 25 years from 2005 to 2030, we expect the global economy to double in size, creating hundreds of millions of new jobs – and the majority of them will be in developing and emerging economies.”
But it is a continent of mixed fortunes. While some nations are emerging from a period of political unrest and upheaval, others are getting on with the business of promoting their stability and good governance.
Take Zimbabwe, which Professor Welshman Ncube, minister of industry and commerce, argues has seen an upturn in business confidence since the transition government was agreed earlier this year. “The goods are appearing in the supermarkets. The raw materials are beginning to come in for the manufacturing sector and investment is slowly beginning to return,” he says.
While some investors are keen to secure their place in the queue, anticipating a gold rush if Zimbabwe can put its problems behind it, others remain hesitant. All changes in the country are taking place under the cloud of the discredited Mugabe administration and the remnants of his old guard. But Mr Ncube argues that things have changed, adding: “There’s a consensus that economic reform is necessary.”
But will this change in Zimbabwe’s governance be enough to ease investor concerns? “The Mugabe who is there is not the Mugabe who was there in the past,” says Mr Ncube. “We have a coalition government. In some ways, as ironic as it may be, you still need him in order to carry everybody along during this transition.”
Since the transitional government was formed, policies have been implemented aimed at addressing the country’s economic woes. The economy has been liberalised and exchange controls have been removed. “We had an economy where people were basically taking everything out of the country. We have now stabilised that with reform in the macroeconomic environment and have done away with the Zimbabwean dollar,” says Mr Ncube. “We are estimating that as of July 2009, the average capacity utilisation in the productive sector has gone up to nearly 30% since February. And we have been working round the globe to try to get investment into the country, to encourage infrastructure investment.”
A key element of the government’s investment plans is the creation of public-private partnerships. So far it has adopted a policy framework document for these partnerships. “What is now left is to get these partnerships up and running in the various ministries where they’ve been agreed. They are mainly in energy, in transport and in water,” says Mr Ncube.
The Niger Delta region of Nigeria is also emerging from a period of upheaval. Its amnesty for militants is now in progress and a series of work training programmes for them and young people is being introduced. “Part of the problem we faced in Niger Delta was the failure to provide employment for young people,” says Chief Ufot Ekaette, Nigeria’s minister of Niger Delta affairs. “They started off as a restless, disaffected group and they ended up as militants. To solve this, the government is investing in training for jobs that will be available in the Niger Delta.”
But there are challenges ahead. The minister admits there might be an element of truth in international accusations that the oil company regulatory system is weak. He says: “I have noticed oil companies have not been carrying out their corporate social responsibility, which has estranged communities and made the oil companies targets whenever there is any crisis. Host communities have complained that the oil companies are not treating them well. And that’s an area that we’ll have to address in collaboration with the minister responsible for these firms.”
The government’s wider economic policy is to involve stakeholders in its programmes. “Essentially, we believe in people-centred programmes, unlike in the past when people complained about projects being pushed down their throats,” says Mr Ekaette.
He adds that the region has great investment potential: “It is for the companies that want to invest in the market to make up their minds and invest. All we can do is our best to make sure that peace returns to the area, and that their investments are protected and safety is guaranteed.”
Namibia’s economic and political stability is making it an attractive location for investors. Since its transition from apartheid to democracy, the country has had four elections and a peaceful transfer of power from one president to another. “We are the fifth most competitive country in Africa, we have a very low debt stock at 25% of GDP. We’ve had an average of 4% GDP growth rate since independence. Our debt is well managed and, at 1.8% last year, is within EU requirements of less than 3% in Africa,” says Dr Hage G Geingob, Namibia’s minister of trade and industry and former prime minister.
As part of Namibia’s strategy to attract investors, the country has set up an investment centre that can act as a one-stop shop for help with work permits, appointments with ministers and other investment questions. The government has also established an industrial policy team to help it achieve its ‘Vision 2030’ target of being classified as an industrialised nation by 2030.
In addition, Nambia has been developing the corridor concept, with the Walvis Bay Corridor attracting investor attention. “What is interesting is Botswana, Zambia, Zimbabwe and the Democratic Republic of Congo are all trying to position themselves to use Walvis Bay as their port,” says Mr Geingob. “To meet the demand we are enlarging and deepening Walvis Bay and providing dry port facilities.” The government is aiming to establish further corridors and railway links between neighbouring countries and Walvis Bay. “Corridors and south-south co-operation are exciting to us,” adds Mr Geingob.
But there are challenges to business, which the government is addressing, according to the minister. For example, although registering a company takes about three days, starting a business is still too slow, something that Mr Geingob is working to improve. “Business people shouldn’t sit and wait for answers for 30 days. People sit on things. I don’t like that. You must process and say ‘yes, you’ve got it’, or say ‘no’ so they can go somewhere else,” he says.
He is also promoting good governance. “I don’t think Namibia is a country where people don’t do a job because they are bribed. Civil servants are meant to be service-oriented, to be courteous, and this is enforced through our charter.”
Transformation has been key to Mauritius’s post-independence growth. “At independence [in 1968], sugar was king,” says Dr Rama Sithanen, the country’s vice-prime minister and minister of finance and economic empowerment. “The commodity accounted for a high share of employment and GDP, and almost all of it was exported for exchange earnings. The level of education was low and we were written off by the experts. But we have risen to the challenges and our per capita GDP has risen from $200 at independence to $7000 today.”
The country is now positioning itself as a bridge between Africa and Asia. It has about 35 double taxation treaties with India, China and parts of Africa. “We have strengthened our exchange of information mechanism to fight money laundering and the illicit financing of some transactions,” says Mr Sithanen. “We are attracting business in Mauritius to service Africa. For example, China is investing in a trade and economic zone [Shanxi Tianli Enterprises Business Park] that will create 40,000 jobs to serve the African market.”
When the minister’s Alliance Sociale party returned to power in 2005, it rolled out a number of initiatives to improve the business climate, such as making it easier to start a business, introducing the concept of silent agreement and simplifying the taxation system. “We used to have a very complicated tax system. We now have a simple rate of taxation: 15% for corporate, income and value-added taxes,” he says.
Mr Sithanen reports that there has been a surge in the number of small to medium-sized enterprises in the country and a dramatic increase in FDI since the reforms. He says: “FDI in the one year after the reform has exceeded FDI for the five years preceding the reform.”
But some sectors of the economy, such as textiles, have lost their competitive advantage. “It’s difficult to stay competitive in Mauritius in the high-volume, low-value end of the market, so we’ve relocated the production to Madagascar and Mozambique,” he says. “But the rest of activities are carried out in Mauritius itself: the financing, the merchandising, the marketing.”