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Why some African countries struggle to attract foreign investors
African countries need to focus on improving their rankings in the Corruption Perceptions Index, which dropped significantly during 2016.
Wed, 22 Mar 2017 10:44:22 GMT
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AI Generated Summary
- Corruption perceptions and ease of doing business are major factors influencing foreign direct investment into African countries
- Countries with good infrastructure, skilled workforce, legislative certainty, and legal protection for investors attract more FDI
- Countries like South Africa, Botswana, Rwanda, and Mauritius have seen success in attracting FDI due to positive perceptions and ease of doing business
African countries continue to face challenges in attracting foreign direct investment (FDI) due to issues with corruption perceptions and ease of doing business. John Ryo, managing partner for deal advisory at KPMG, highlighted the importance of improving these factors to promote African countries as desirable destinations for FDI. The Corruption Perceptions Index, provided by Transparency International, has shown a decline in African countries' rankings in recent years, indicating a need for significant improvements in transparency and accountability. Similarly, the ease of doing business survey reflects negatively on the continent, impacting investor confidence and hindering FDI inflows.
Ryo emphasized that countries competing for limited FDI must differentiate themselves by offering competitive advantages such as robust infrastructure, a skilled workforce, legislative certainty, and legal protection for investors. These factors play a crucial role in attracting funds and fostering economic growth. While economic growth is essential, it is not the sole determinant of FDI inflows. Ryo cited examples where countries with lower GDP growth rates outperformed others in attracting investment due to favorable business environments and policy certainty.
Regions like South Africa, Botswana, Rwanda, and Mauritius have excelled in creating positive perceptions and favorable business environments, leading to significant FDI inflows. These countries stand out for their commitment to combating corruption, improving ease of doing business, and offering a conducive atmosphere for investors. Other markets, like Nigeria, with significant potential as consumer markets, face obstacles such as recession, economic downturns, and policy uncertainties.
Ryo suggested that Nigeria's recent change in leadership and anti-corruption measures could potentially enhance its attractiveness to investors. Despite challenges in the oil-dependent economy, Nigeria has opportunities in sectors like agriculture and manufacturing. By addressing negative perceptions and implementing policy reforms, Nigeria could boost FDI in non-oil sectors and diversify its economy.
In conclusion, while progress in enhancing transparency, ease of doing business, and policy certainty is evident, the pace of change remains gradual in some countries. It is essential for African nations to continue implementing measures to improve their rankings in global indices and create investor-friendly environments. With the right strategies and reforms, African countries can overcome obstacles and position themselves as competitive destinations for foreign investment.