May 9th, 2011
10:13 AM GMT
Assessing attractiveness can be a subjective undertaking.
However, an international company has used objective data to examine Africa’s “attractiveness” as a place to do business.
Ernst and Young launched its “Africa attractiveness survey” at the World Economic Forum on Africa in Cape Town. It makes for interesting reading if you want to understand the perceptions surrounding business in Africa.
The firm polled 500 companies from around the world, as well as Africans themselves, and found that - no surprises here - Africa is becoming increasingly attractive to international investors.
Importantly, emerging-market investors were more positive about Africa’s long-term prospects than developed-world investors, which obviously points to stronger and deepening relationships between the BRICS countries and the rest of Africa. Ernst and Young note that the mining and manufacturing industries, in particular, experience a strong capital influx from emerging-market economies.
What will cheer many within the continent is the huge optimism Africans feel towards business opportunities in their own backyard. Africans themselves are leading the growth in investment.
This is key. There is a growing self-confidence amongst Africans, as well as a growing awareness that regional barriers need to be broken down so that intra-African trade can be increased.
So while reports like these - and there were many at this year’s World Economic Forum on Africa in Cape Town - make for happy reading by Afri-optimists, it is worth putting a sobering note on the assessment.
Significantly, three quarters of foreign direct investment was in just 10 countries, out of a continent of more than 50 states. Why are the 40 other Africa nations considered to be the “ugly sisters?”
There are many reasons - beyond political instability - like bad infrastructure, red tape and a lack of skills, that are cited as common reasons for a lack of investment.
Mostly, though, there is a lag between the optimism directed towards Africa and capital flows. Foreign direct investment is still relatively low when compared on a global scale and African intra-trade is woeful.
Although beauty is in the eye of the beholder, many would like to see more tangible benefits to Africa’s growing attractiveness.
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