Ngozi Okonjo-Iweala, finance minister of Nigeria

Nationwide strikes in response to the partial removal of oil subsidies by the government and ongoing violent attacks in the country’s north have placed Nigeria in the media spotlight for all the wrong reasons this year. Yet Nigeria’s finance minister, Ngozi Okonjo-Iweala, remains positive about the country's FDI performance.


"I am optimistic about FDI – I believe there is strong interest. The returns from Europe and the US are not that great, so people are taking an added interest in Africa. Recently General Electric’s [CEO] Jeffrey Immelt made his first trip to Africa and came to Nigeria. [GE] wants to invest in 10,000 megawatts [of] power in hospitals, healthcare and rail," she says.

Speaking to fDi Magazine at the African Development Bank’s summit in Tanzania, Ms Okonjo-Iweala states that Nigeria’s macroeconomic fundamentals are improving, and the statistics back her optimism. Nigeria’s GDP will grow from 6.7% in 2011 to 6.9% in 2012, according to the African Economic Outlook, a report produced by the UN, the UN Development Programme, the African Development Bank and the Organisation for Economic Co-operation and Development (OECD).

The government has also made significant strides in diversifying Nigeria’s sources of income. Growth in 2012 has mainly been driven by the non-oil sectors including telecommunications, construction, manufacturing and agriculture. Ms Okonjo-Iweala says that diaspora remittances are another understated yet critical source of wealth.

“The remittances from the diaspora have been on an uptake,” says Ms Okonjo-Iweala. “About $17bn [of] remittances are entering [Africa]. The World Bank’s estimates for Nigeria are $10bn. Remittances are becoming a rival [to] aid and this is something we need to watch.”

Ms Okonjo-Iweala admits that Nigeria, much like other countries in Africa, remains vulnerable to global economic shocks. “There has been a dampening effect of the global financial crisis,” she says. “During the last crisis of 2008 and 2009, we used up much of [our] fiscal space, so one of the things we need to do is build up our buffers. The economic prospects for Africa are reasonable. The world is projected to grow at slightly over 3%. Africa is projected to grow [by] almost 5%. We could do with more but in a global environment where growth has slowed down in the OECD, this is reasonable.”

John Rwangombwa, finance minister of Rwanda

Rwanda’s stellar economic performance in 2011 bolstered its growing notoriety in Africa as a country that punches well above its weight. In 2011, Rwanda recorded its best GDP growth rate since the 2008 financial crisis, increasing from 7.2% in 2010 to 8.6%, according to the African Economic Outlook.

Despite being the smallest country in the East African Community (EAC) bloc, the World Bank’s 'Doing Business in the EAC' report found that Rwanda had made the greatest progress in improving its business environment between 2005 and 2011. The country also moved up to 45th in the World Bank's global Ease of Doing Business ranking, making it the highest ranking country from the EAC. 

Bent on sustaining its growth, Rwanda's government has focused on developing its traditional agricultural, minerals and tourism sectors, as well as modernising its financial and information and communications technology (ICT) services. According to Rwanda’s finance minister, John Rwangombwa, the government is working hard to attract investors. “In Rwanda we are looking at investment into ICT and tourism,” he says. “We are in a good position. When you look at the growth prospects, they are moderate.”

Nonetheless, Rwanda’s GDP growth is expected to decelerate to 7.6% in 2012 and 6.9% in 2013, according to the African Economic Outlook. Although the overall balance of payments will remain in surplus in 2012, persistent trade deficits will pose the government significant challenges over the medium term. 

Yet Mr Rwangombwa remains positive, claiming that Africa’s untapped potential for investors remains highly lucrative. “The potential for the growth of these economies is really big,” he says. “Africa has been doing quite well, and it has been growing over the past 10 years. As investors are looking to diversify their risks, investments in Africa [will] prove to be more profitable than elsewhere in the world. These are still green economies with big potential, so [for] any investor coming in now, their prospects for growing into a bigger business is high because we are just starting, and [they will] grow with the expanding economy.”

Pravin Gordhan, finance minister of South Africa

Ratings agency Standard & Poor’s recently revised its outlook on South Africa from 'stable' to 'negative', citing structural economic and social problems among its chief concerns. This change in outlook reflects the country’s trajectory.

In recent years, South Africa has witnessed a reversal of its economic fortunes. Its GDP growth is well below Africa’s average, and it is expected to slow from 3.1% in 2011 to 2.8% in 2012, according to the African Economic Outlook. Africa’s average GDP growth is predicted to be higher at 3.4% in 2011 and 4.5% in 2012.

Although South Africa’s business climate is considered highly conducive for the private sector, domestic structural weaknesses and the fragile global economy continue to affect the country’s performance. Finance minister Pravin Gordhan contends that South Africa’s institutional mechanisms will continue to set it apart, both reinforcing investor confidence in the country’s systemic efficiency and buttressing the country’s macroeconomic landscape.

“In many respects, South Africa has been fortunate that over the past 10 years, [as] many institutional mechanisms have been put in place and we enjoy the top spot for transparency out of 94 countries in the world [according to a 2010 survey by the International Budget Partnership],” says Mr Gordhan. “The European situation is beginning to have a greater impact but we still have a better growth trajectory.”

South Africa remains a strong performer and this is reflected in the fact that Standard & Poor’s awarded it an A rating, the second highest sovereign rating in Africa on long-term local currency. Mr Gordhan says that South Africa’s destiny remains closely tied to Africa’s performance, and that Africa’s bright prospects will have positive knock-on effects on the country.

“Everybody knows they will get good returns when they come to Africa,” says Mr Gordhan. “Africa is on the threshold of very important developments. The time for Africa to demonstrate that it has the capability to create a new paradigm is now. We can learn many lessons from mistakes made on Wall Street [and in] Europe.”

When questioned about which sectors in sub-Saharan African are most in need of FDI, Mr Gordhan says: “Everybody has identified infrastructure [and] agriculture. Africa has indicated its preference for industrialisation, and we [must] look at how research and development facilities [can be] created. We [want] to prepare ourselves for a post-resources future, in order to get more value addition to Africa.”

Tendai Biti, finance minister of Zimbabwe

The troubled economy of Zimbabwe has experienced a revival in recent years, following the replacement of the Zimbabwe dollar with the US dollar and the South African rand in 2009. The country witnessed GDP growth of 9% in 2010 and 6.8% in 2011 – the fastest increase since the country's independence in 1980, according to the Financial Times.

As Zimbabwe’s finance minister, Tendai Biti, told fDi, this has been largely due to improved economic governance. “There has been an improvement in the macroeconomic management of our economies, which is why we were able to fend off the impact of the global economic crisis, [as] we had solid fiscal buffers,” he says.

However, Zimbabwe’s growth looks set to decelerate. GDP growth will slow to 4.4% in 2012, and inflation will increase from 5.3% in 2011 to 6.5% in 2012, according to the African Economic Outlook. Policy inconsistencies stemming from regulations involving indigenisation rules, as well as dilapidated infrastructure and frequent power and water shortages, will be critical bottlenecks constraining development.

Zimbabwe’s outspoken finance minister is frank in his criticism of the government, contending that it must do more. “What we are doing is largely a charade,” says Mr Biti. “We are failing to achieve growth with jobs, [and] growth that seeks to deal with key issues such as the dual enclave economies [that] we inherited from the colonial states. We are failing to deal with the massive levels of poverty in our economies and we are failing to deal with the issue of the deficit of gross capital formation. It is a disaster that we are not transforming these economies.”

When questioned about sub-Saharan Africa’s FDI performance, Mr Beti holds that international economic uncertainty means that FDI flows to Africa will not be spared. “There has been a reduction in FDI [to] Africa in the past three years,” says Mr Beti. But he is optimistic in his expectations, claiming that if opportunities in Africa are combined with improved macroeconomic governance, they could make Africa’s future prospects promising.

“Africa is the last frontier. South-east Asia has reached its optimum, as has western Europe. The temporary reduction [in FDI] is short term. In the long term, the place to be is Africa,” he says.