Panel 67 Foreign Investment in Africa - Opportunities, Challenges and Strategies of Private and Public Enterprises

In 2008, foreign direct investment (FDI) inflows to Africa amounted to US$88 billion and contributed to an overall FDI stock of US$588 billion for the same year. These FDI inflows are concentrated on resource-seeking sectors such as oil, ore and timber and involve mostly a few economies like Angola, Sudan, Madagascar, Guinea, Equatorial Guinea and DRC. With considerable variation at country level, FDI plays a crucial role for host economies contributing for almost 30 percent of total investment in Africa. Recent changes within the African investment landscape are prompted by global megatrends which have led to the emergence of large-scale FDI in agribusiness, telecommunication and services. Multinational corporations shift their activities from production to distribution in order to reap global economies of scale. Others acquire large pieces of land to undertake export-oriented agribusinesses. Smaller private investors from emerging and developing economies enter to serve African niche markets. The key policy challenge remains to respond to these trends in a manner that translates FDI into sustainable growth by enforcing investment regulations based on the understanding of private investors’ underlying motives, but also of sweeping public programmes such as China´s “going global” strategy. It requires a shift of investment promotion away from taking FDI inflows as success indicator per se towards strategies that enhance the impact of FDI on Africa´s domestic investment, trade and employment.

Consequently, the panel seeks to (a) better understand scope and drivers of FDI in Africa, based on theoretical advances in international economics and recent UNIDO/UNCTAD empirical research, exemplified by three Africa-related studies: Chinese FDI (paper 1), German FDI (paper 2), cross-country investor typology (paper 3), and to (b) discuss possible improvements of FDI promotion policies for Africa (paper 4).