Sunday, May 24, 2009

Why has Africa not attracted more interest from the U.S. business community?

Like many of you I received a "strange" message from Fabiane Dal-Ri, providing a link to a study that was just accomplished about why corporate investment in Africa is lagging and what could be done to improve the flow of capital into Africa.

I was fisrt very skeptical about this message but after checking the website I realized that it was not a hoax.

Here’s a link to an online version of the report! THE CONVERSATION BEHIND CLOSED DOORS - FULL EXECUTIVE SUMMARY

Highlights:
  • Rule of law -- The rule of law does not prevail to the degree required to make Africa an attractive investment destination. This applies to corporate, societal, and criminal law

  • Attraction -- While the enormous natural resources are an attraction, Africa does not offer a sufficiently large middle class of consumers or show consistent economic growth that could promise a future market. Most African countries are small and have poor markets, and there are barriers to regional markets--such as taxes and the freedom of movement of people and goods

  • Risks versus rewards-- Given the currently perceived risks in Africa, the rewards have to be very high to make it worthwhile to invest. Presently, U.S. corporations say that there are very few visible promises of future returns high enough to justify significant interest in investing

  • Supportive business framework--Transportation and communications infrastructure, trained or trainable human resources, and equitable trade and employment practices are insufficient to support corporate investment

  • A welcoming environment-- African countries are not doing a sufficient job of providing education and health services to the potential workforce, which makes the potential hire-able local insufficient to support investment.
Following some links in that report, I realize that Fabiane’s organization is promoting “a new silk road” to Africa - Building the New Silk Road.

We have all in mind the study done by Harry G. Broadman on "Africa's Silk Road: China and India's New Economic Frontier" for the World Bank. The author of the book, World Bank Economic Adviser Harry Broadman, says that skyrocketing Asian trade and investment in Africa is part of a global trend towards rapidly growing South-South commerce among developing countries.