Attracting investment critical for developing countries

foreign investment in Africa
Miyelani Mkhabela writes for Biznews on the importance of Sub-Saharan African countries attracting investment.

In the following article, Miyelani Mkhabela, Executive Director and Strategist at Antswisa Management Group, discusses the importance of governments in transitional and developing African countries investing more time and energy in attracting investment as their main economic development strategy. Mkhabela places particular emphasis on the tourism industry, suggesting that more direct investment is needed for this industry in developing countries where tourism is one of the main sources of the counties’ revenue. – TR

Countries around Sub-Saharan Africa compete fiercely for investment that can encourage faster economic growth and job creation by infusing capital, technology, and know-how into key industries. Developing and transitional countries must prioritize attracting investment as their development strategy, particularly given the recent financial crisis and lack of capital inflow to some parts of African countries. An important question for investment promotion intermediaries in these countries is how to best develop the investor outreach, facilitation, aftercare, and strategy to attract direct investment.

The know-how of developing the integral foundation of generating new investment markets is the scarce strategy in Sub-Saharan African nations and their key attractive cities like Cape Town, Johannesburg, Nairobi, Pretoria, Accra, Durban, Lagos, Maputo, Beira and Lusaka.

Gauteng Premier David Makhura has presented a detailed State of the provincial Address that needs Public Private Partnerships for many outlined plans to be executed like Infrastructure, Renewable Energy, Agriculture & Agro-processing and Information Communication and Technology including Broadband rollout. For these initiatives to be implemented, enough investment promotion has to take place as special projects are high-capital intensive.

Well thought-out investment promotions will create action plans that will:

– Improve the legal and policy environment for both local and foreign investment

– Design and implement a program of sector-targeted investment promotion activities to attract and facilitate investment

– Design and implement effective investor facilitation and aftercare programs

– Enhance national and provincial agencies capacity to implement these promotion efforts.

Mining and Energy, ICT, Agriculture and Agro-processing, Manufacturing and Tourism are key sectors for economic development and employment generation in advanced, developing and Sub-Saharan economies. As a result of ongoing globalization, ICT and travel continues to increase in mature markets and especially in developing economies, driven by the rising purchasing power of the middle class in many of these countries.

Tourism’s and ICT’s share of world employment, consistent across every region, is greater than that for the automotive and chemicals manufacturing industries combined. However, shortage of capital is a major obstacle for tourism development especially in the developing world. Therefore, these economies increasingly look to foreign investors to provide capital that will help develop the sector. Foreign direct investment (FDI) is broadly recognized as a source of capital, jobs, knowledge, and market access across economies

National, provincial and regional government investment agencies must develop a sophisticated foreign direct investment strategy to maximize the effectiveness of investment promotion efforts. This includes:

– Vision and strategy

– Investment attraction

– Investment entry and investment retention

– Linkages and spillovers

– Inbound and outbound missions.

– Creation of an interactive business map for land-related transactions that contain useful information for investors on starting a business, such as economic and demographic data, infrastructure, natural resources, land use, investment procedures and investment benefits like tax and investment grants.

– Reduction in the number of documents required to obtain expatriate work permits by more than half as well as a cap on the time allowed for the government to approve permit applications.

These interventions proved to attract more foreign direct investments in industrialised nations and they can add more value in Sub-Saharan Africa to be a global leader of attracting capital-intensive investments and create more jobs for the continent.

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