'African countries in dire need of more FDI'

Omobayo Azeez

In their quest for accelerated development and socio-economic improvement, African countries are in dire need of more foreign direct investment (FDI).

This was emphasised at the start of the World Economic Forum (WEF) recently held in Cape Town, South Africa.

According to experts, FDI into Africa remains small by global standards, but prominent in relation to GDP.

In terms of its sources, the experts noted that the US and western Europe remain Africa’s largest investors from where FDI flows to the most diversified, business friendly economies in the continent.

Sandile Hlophe, an Africa Government & Public Sector Leader, who led the discussion noted that South Africa, along with many other African countries, face an unprecedented set of economic challenges that need urgent attention that should be addressed by creating an enabling business environment.

Hlophe also said that as aspirational as WEF Africa’s aims were, dialogue at the forum would only be effective if followed by action.

Speaking from WEF Cape Town at the launch of the EY Africa Attractiveness report 2019 – that looks at how South Africa and the African continent, are attracting FDI to grow their economies, Hlophe said that it was high time for a “sleeves rolled up, action orientated agenda” to accelerate FDI flows to the continent. “We need a shift from ideology and dialogue to accelerated implementation.”

Hlophe noted that attracting FDI should be one the most important initiatives for African governments.

“FDI helps in economic development and is especially important for developing economies as it leads to job creation and wealth creating economic growth,” he said.

According to him, after a growth ‘drought decade’, Africa appeared to be making its way back onto a growth trajectory with FDI inflows to the continent expected to increase following a rise of 11% in 2018.

Encouraging as the signs are, he emphasized that more needs to be done because the continent’s growth remains below potential, adding that FDI inflows, for example, are still below the annual average of the last 10 years.

The WEF gathering also pointed at technology as a factor capable of stimulating FDI in Africa.

It was noted that technology focused FDI, in Africa and the rest of the world, is rising steadily as the pace of digital transformation picks up.

“While Africa is still behind the technology curve, there is a once-in-50-years opportunity for the continent to leapfrog incremental technology advancement. By adopting digital transformation successes from more advanced countries – such as intelligent automation, cloud-based software deployment and data storage – Africa can quickly scale up its technology use,” Hlophe said.

He added that the Fourth Industrial Revolution (4IR) meant investing in digital infrastructure that enables independent devices, such as smart phones, computers and vehicle navigation systems, to communicate with each other by exchanging and analysing data to provide humans with actionable insights.

“Getting businesses and governments to work together in investing in digital infrastructure, such as 5G data networks, WIFI platforms and Cloud data centres, will place African countries at the front of the FDI investment queue,” he concluded.