The African archipilego nation of Cape Verde saw its FDI levels plummet 40% last year, a victim of the drying up of investment funds from key source markets in Europe. However, 2010 is showing a definite rebound, according to Cape Verde's minister of finance, planning and development, Cristina Duarte.
“In 2010 we are experiencing a positive trend – in the first half of the year there was an increase in FDI inflows of 5%,” she says. Most of the headline opportunities have been in the tourism sector, but the government has identified four key clusters for future development, described by Ms Duarte as “the sky cluster, sea cluster, ICT [information and communications technology] cluster and financial cluster“.
“In the maritime area, there is an opportunity for Cape Verde, and there is also an opportunity in the aviation area. We have international airline companies with all the international certification; we fly to the US, to Europe, to Africa and to Latin America," says Ms Duarte. “In the aviation sector we are looking for strategic partners that could support us from the operational side to tap the west African market – a market with huge opportunities in the aviation sector.”
Plans for construction of a deep-water port in Mindelo (the project will be completed in phases between 2010 and 2012) should help solidify Cape Verde’s sea cluster offering, which is based on the premise of the country as trans-shipment hub for the region.
“Brazil and other countries in Latin America are interested in exporting to Africa, and Cape Verde can emerge as a hub, as a platform, as a trans-shipment centre. Together with trans-shipment we have fishing opportunities, shipyard opportunities. In terms of shipyards we are working with private Chinese capital," says Ms Duarte. “In the fishing industry, as of today, we have been working with private capital from Spain, for example. We are trying to transform Cape Verde into an international fisheries centre.”
“In terms of the ICT cluster we have been working with a Chinese partner and Indian partners. We are about to set up the first cyberzone in Cape Verde to attract high-tech FDI. In a few months we will open a data centre, our first big data centre, and then work to build a technological park or cyber zone,” she says.
Additionally, Cape Verde is working hard to become an international service centre providing for west Africa – the finance minister cites Malaysia's role as a business centre within Asia as a model.
Being a small country, Cape Verde is not going to try to compete with the largest international financial centres, but rather seeks to fill a niche for certain types of offshore facilities. “We want to position Cape Verde as a perfect country to position for back-up services for back-office banking services. The financial institutions in Africa cannot have their financial services in the same country in which they operate. They need to have their back-up services overseas, they need to look for the country that is stable politically, macro-economically and socially and we believe that Cape Verde has these competitive advantages,” she says. “We are a very stable country from a political, economic and institutional standpoint. And we have been investing highly in human capital.”
After being cited as a rising star in Africa for its anti-corruption stance, relatively clean business environment and fast-growing economy, Rwanda has taken a battering in the international media with allegations of crackdowns on free speech and unfair advantages for the ruling party in this year’s presidential elections.
The country has been among the most proactive in the region in improving its international image, which is still recovering from memories of the bloody civil war that tore the country apart in the1990s, and has put great stock in public relations initiatives to try to turn media attention towards its thriving tourism industry and burgeoning investment sectors.
“When we try to sell ourselves there are some specialised firms that are good at marketing. It is even easier for them to market Rwanda as a country, as a destination for investment, with all the good things happening in the country. So we think it adds value. The professionals can do it better than us and we can get quicker results,” says minister of finance and economic planning John Rwangombwa. “I saw a report in the UK [in The Guardian newspaper] saying because our name is tarnished we are trying to rely on the PR firms....but the PR activity is how we have a good name, its how we sell it, how people get to know the good things we are doing back home – that is our aim. It’s not that we are trying to cover any bad things that are happening. No. We want people to know the good things that are happening.”
The global economic crisis put a dampener on some FDI projects – “we had one big setback because of the financial crisis and had to invest about $200m,“ says the finance minister – but good things continue to happen, he adds. “We received other investments. We have two big hotel projects going on, from Marriott and Radisson. There is also a big project to turn gas into electricity, at a cost of more than $100m. So even with the previous slowdown, with the new investments that we’ll get, all in all we’ll manage to keep increasing the FDI into Rwanda.”
Priority sectors for investment include tourism, transport and agriculture, in particular processing that improves the value of Rwandan agricultural products. “The main focus is on services – mainly the hotel and financial sectors,” says Mr Rwangombwa.
The World Bank’s Ease of Doing Business index ranked Senegal one of the top last year in terms of reforms – a badge of pride for finance minister Abdoulaye Diop.
Reform has been doggedly pursued, he says, despite challenges: “The presidential council listed 35 major areas that needed to be dealt with to improve the investment environment and all have been implemented, including a difficult one to put in place – a reduction in tax on revenue from 35% to 25%. There was no loss of income as a result of the drop in tax rate and it had a clearly positive impact on the investment environment. Also, in relation to setting up a business in Senegal, you can do it in 48 hours through a one-stop window which did not exist before and makes the whole process much easier.”
There are other examples of reforms, such as in labour flexibility, he says, adding: “This is all enabled by the macro-economic and political stability of the country – it is part of an economic and political union and a democratic regime with elections, a country that has been participating in elections since the 19th century – participating in French elections since that time. In addition, Senegal is part of Ecowas, an economic union of 15 west African states. Also there is a guarantee by the regional central bank for the ability to transfer and convert money back to foreign currency.”
A strategy has been put in place called the 'accelerated growth strategy' which has identified five fields in which the government feels Senegal has a comparative and competitive advantage: tourism, agri-business, information and technology, fishing and textiles.
There is also a fairly large infrastructure programme in Senegal for facilitating investment, Mr Diop explains. “The infrastructure upgrade programme is available for economic players to come and take part according to the procurement rules in a transparent way. Foreign companies are welcome to come and play a role in that.
"Another example [of Senegal's commitment to drawing in foreign investment] is a special economic zone being put in place by Dubai’s Jebel Ali Free Zone Authority (Jafza); the zone is intended to welcome the bulk of investors who want to invest in Senegal and Jafza is investing $300m in it. There are intentions expressed by the likes of Siemens and Nokia to operate in the zone.”
Thanks to the reformist zeal noted by the World Bank ranking, these new and future investors should find a superior investment environment in Senegal to that experienced by their predecessors.