By Tim Morris – Most African countries are promoting foreign direct investment to grow their economies. It is not a simple game, and it is worth asking what the keys are to success. What are African Governments seeking to achieve, and how do they intend to go about it? Here are some thoughts.
First, what is the policy? African countries want to drive forward the African Free Trade Area (AfCFTA) and empower the continent, promoting cross border trade and efficiencies. They are right. Only through the creation of scale, and the reduction of barriers and often exorbitant costs, can the continent be competitive and promote the growth demanded by its people. And for this growth to take off, the continent and individual countries must attract global investment at large scale – a vital point in promoting the AfCFTA globally. And it is worth remembering that this is a competitive game. There is an important role for cooperation, for example, to persuade the major global pharma companies to re-invest once they see a huge potential market, rather than lots of small ones. But this is in the end a competition, both between neighbours and globally between countries and with regions which may have similar offers, for example in Central Asia or Latin America.
Second, what is the best strategy for a country or a State? Given the above, you need to make a strong case. Why should a global investor come to you, or come to Africa at all? My suggestion, based on the UK’s success in this – we have been the most successful major European country at attracting investment, and overseas companies account for more than 50% of our exports – is as follows, three “P”s:
- Proposition. You need a business case directed at a specific sector or sectors, which says exactly what you are looking for, which identifies as far as possible who you are targeting, and which explains how there is a specific opportunity for that company to make money. Generalities or general descriptions such as “agriculture” do not attract business, nor does a political message delivered to foreign Governments. They are not the investor.
- Process. The best Government inward investment operations are private sector orientated. They are quick and unbureaucratic. They are there to help steer an investor through the necessary administrative details. Investors will respond to officials who understand their business and their timelines. This process is also of use to the Government working to attract investment. It gives it a good opportunity to reassure itself about the nature of the investor and its plans.
- Protection. The investor wants and needs to be reassured that its investment is welcome and is going to be supported by the Government and by all its institutions. It wants a contact point to which it can refer its questions and challenges. And it is essential that, at least in the case of major investors, the inward investment team or agency is connected to the President’s office or the equivalent. The investor wants to feel that its concerns are given due weight. And while any inward investment agency and Government will enforce its own rules, the investor wants to feel they are being treated fairly.
Attracting global investment is a tough competitive game, but success with a few significant projects can quickly raise a country’s profile. And there is lots of help out there in the market to get this right.
Tim Morris is a former British Ambassador, negotiator, and trade diplomat in Africa. He Directed the UK’s inward Investment Programme from Japan from 1998-2002.
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