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INVESTMENT IN AFRICA

INVESTMENT IN AFRICA. OPPORTUNITIES AND CHALLENGES & CASE STUDY THE HONORABLE DOCTOR RAMA SITHANEN. Outline of presentation. Facts and Figures on FDI/PI in Africa Opportunities going forward Challenges to overcome Some lessons from Mauritius Conclusion. Facts and Figures on FDI in Africa.

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INVESTMENT IN AFRICA

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  1. INVESTMENT IN AFRICA OPPORTUNITIES AND CHALLENGES & CASE STUDY THE HONORABLE DOCTOR RAMA SITHANEN

  2. Outline of presentation • Facts and Figures on FDI/PI in Africa • Opportunities going forward • Challenges to overcome • Some lessons from Mauritius • Conclusion Facing the Challenges of Doing Business in Africa

  3. Facts and Figures on FDI in Africa • FDI peaked in 2008 at US$ 72 b. Down in 2009. Below 2008 in 2010 • Rising but still low share of global FDI. 4.5 % in 2010 • Impact of recession and events in North Africa on FDI • Destination: unevenly distributed: few countries and few industries • Origin: high but falling % of developed countries. BRIC/intra African • FDI is 25 % of capital formation • Important for growth and development Facing the Challenges of Doing Business in Africa

  4. Facts and Figures on PI in Africa • PI is still small, but of growing importance • US$ 2b in 2000,US$ 8b or 23 % in 2004. Peaked in 2006 at US$ 24 billion • US$ ‑22 billion in 2008. Recovery in 2010 at US$ 22 b and 30% of FDI • Mainly equity (78 % equity and 22 % debt) • Destination : significant % to South Africa (80%) • Stock of US$ 150 b in 2009 • Source : US (42 %),Luxembourg(10%),Mauritius & UK (5%) Facing the Challenges of Doing Business in Africa Page 4

  5. Opportunities going forward • Strong and sustained economic growth • Improving investment policies and business environment • Better macroeconomic management • Structural & policy reforms and market friendly measures • Political stability/democracy? • Strong competition from emerging markets • Improved perception of continent Facing the Challenges of Doing Business in Africa

  6. Opportunities going forward • Natural resource/minerals abundant • Young and growing population : labour • Rising number of households with discretionary income • 60 % of world uncultivated arable land: key for food security • Opportunities in many sectors beyond resource/minerals • FDI of US$ 150 b in 2015 • Highest returns on investment Facing the Challenges of Doing Business in Africa

  7. Challenges to overcome • Political and social instability • Governance and state capability • Strong and predictable policies • Consolidate and strengthen reforms • Enabling business/regulatory environment • Weak national infrastructure • Scarcity of skills and human capital Facing the Challenges of Doing Business in Africa

  8. Challenges to overcome • Structurally balanced development: low quality growth/no diversification • Absence of strong and vibrant private sector • No one size fits all • Low level of regional integration. Duplication • Weak regional infrastructure • Continue to improve perception • Domestic resource mobilisation Facing the Challenges of Doing Business in Africa

  9. Some lessons from Mauritius • End of an economic cycle based on trade preferences • Structural reforms to sharpen competitiveness • Policy, fiscal, regulatory and institutional reforms • Complete review of taxation : direct and indirect • Open up the economy • Ease of doing business • Strong partnership with private sector Facing the Challenges of Doing Business in Africa

  10. Some lessons from Mauritius • Silent agreement • Rules based v/s discretionary procedures • Labour market reforms : flexi security • Trade reforms : simplification • Pension reforms • 100 % foreign ownership • Pragmatic and practical Facing the Challenges of Doing Business in Africa

  11. Some lessons from Mauritius • Building an international financial centre of repute • Competitive tax regime • No foreign exchange control • Flexible and modern legal and regulatory framework • Good network of DTAA and IPPA • Open to talent, skills, knowledge and capital • Investment in infrastructure : hard and soft • Stable and predictable policies + governance Facing the Challenges of Doing Business in Africa

  12. Some lessons from Mauritius • Upper middle income country with high GDP/capita • High on HDI : education, health and income • Good rank in governance, ease of doing business and competitiveness • Dynamic, diversified and resilient economy • Tried, tested and trusted gateway for Investment into Africa & Asia • Is model exportable? • Challenges remain. To run the next development lap Facing the Challenges of Doing Business in Africa

  13. Conclusion • Is Africa the next Investment frontier? A contingent Yes? • Lions on the move : McKinsey • It’s time for Africa : E & Y • Africa may be the most exciting opportunity world wide : Barclays CEO • Are African lions really roaring ? All Africa • The global financial agencies’ desperation for an African success story should be taken with not a grain but a calabash full of salt’. All Africa • Progress, stagnation and regression continue to coexist on the continent K. Annan Facing the Challenges of Doing Business in Africa

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