Africa needs more FDI projects

Image: Wikimedia

By: Thandisizwe Mgudlwa – AfricanBrains

African leadership is calling for more Foreign Direct Investment projects for the continent’s renewal.

One area in which Africa can attract more investment is the renewable energy space, a study has revealed.

While China has established itself as a dominant player in the manufacture of components of solar energy plants, Africa could compete by attracting Foreign Direct Investment in this area.

Greg Nott, Director at Werksmans Attorneys states: “Backed by lavish government support, tax breaks and incentives, China is now responsible for half of world production of solar energy components.”

Nott says countries such as South Africa have established enabling legislation, including the Integrated Resource Plan to attract investment into the green economy, but politicians also needed to send the right message about the country embracing FDI.

He continues: “Preconditions, such as Black Economic Empowerment and localisation requirements, must be consistently applied. Politicians, labour and business need to send a unified message that they want to attract more FDI. Investors want a clear and consistent framework in which to work.”

The study also shows that many African countries have implemented regulatory reforms to specifically attract FDI. Out of the 15 Southern African Development Community member states, for example, 12 have a specific law governing private investment, and/or foreign investment or have established an investment promotion agency.

And countries such as South Africa, Lesotho and Botswana have no specific FDI legislation, but have liberal investment regimes. FDI legislation is under review in Namibia, Seychelles and Zimbabwe, while Botswana’s Industrial Development Act, which deals with licensing, is also under review.

“African countries are taking FDI seriously and looking to promote investment where possible. But overcoming negative perceptions about investing on the continent is also vital to attracting more investment in future,” adds Nott.

According to a recent survey by Ernst & Young capital inflows into the continent are expected to reach US$150 billion by 2015, yet Africa still attracts less than 5% of global FDI projects.

Nott further reveals: “With Africa forecast to grow at rates above 5% and as the continent makes strong progress towards political reform, regulatory and economic stability and social development, investors will increasingly look to invest in a range of industries.

In conclusion he points out that investors emphasise stability – both political and regulatory – as a major consideration when making investment decisions.