[AfricaRealities] Summits will not fix investment problems in Africa

 

Summits will not fix investment problems in Africa 

By Ken Opalo Updated Friday, August 8th 2014 at 23:17 GMT +3 Share this story: This past week, African leaders trooped to Washington DC for the inaugural US-Africa summit. At the summit, President Barack Obama announced 14 billion dollars worth of US corporate investments in Africa. This is all very good news. Africa's top three needs are jobs, jobs and jobs. And anything that helps achieve this goal, regardless of where it is coming from, is welcome. But while the summit has yielded much needed foreign direct investment dollars, the whole premise behind it needs a little more scrutiny. For starters, the Summit should have been hosted in an African capital. It is bad behaviour for African leaders to continue holding summits in Beijing, Brussels or Washington ostensibly to discuss problems facing Africans. In order to demonstrate their seriousness, African leaders should host such summits on the continent. Let the potential American, European or Chinese investors visit the dilapidated government offices, and see the potholes and crumbling infrastructure. Holding the conference away from these realities gives African heads of state the chance to continue with their heads-in-the-sand approach to tackling the problems bedevilling the continent. In Washington, many of them waxed lyrical about the "Africa Rising" narrative, even as they continued to choke businesses with unreasonable regulations, graft and lack of investment in infrastructure. 

The optics of the whole summit suggested a gathering of beggars for "humanitarian" investment rather than salesmen who were out to get the highest bidders for choice products. Sudanese billionaire Mo Ibrahim summed it all by challenging US businesses to google the myriad opportunities in Africa instead of sitting back and waiting to be cajoled to invest in the region. Put simply, the fact that most investors still consider Africa a political risk minefield can be blamed squarely on the begging mentality that is so pervasive on the continent. Instead of creating an attracting business environment that can attract investors, we choose to beg for foreign investment. Remember the Swahili saying "chema chajiuza, kibaya chajitembeza." In addition, for far too long African leaders have chosen to engage investors as if the latter were doing them a favour. This is why many of the business deals – from China, to Europe to the US – tend to yield little benefit to African people. For instance, over the next three years, Kenya will create jobs here at home for about 5,000 Chinese workers to build the new standard gauge railway line from Mombasa to Nairobi. Take note; we will repay back the Chinese loans, plus interest, and we'll have created 5,000 jobs for their people to boot. Elsewhere in Africa, from the Congo to Guinea, African resources are creating dollar billionaires outside of Africa because African states are unable to strike deals that benefit their people. So why are African leaders unable to make good deals for their people? The answer is twofold. First, they are corrupt. Many of them would rather stash a few million dollars in offshore accounts than create billions for their economies. They would rather create non-African billionaires than fathom equally successful countrymen with the potential to upstage them politically. The second reason is Africa's poor business environment. Yes, Africa is rising, but not because of any effort by African leaders. The bad investment climate in the region is primarily driven by high political risk profile of most African countries – even in supposedly stable ones like Ghana. 

As such, most foreign investors tend to do politically connected deals that are shrouded in secrecy – because they are political. This is the reason you will be hard pressed to find contracts between oil companies and most African governments. Politically connected beneficial owners will never want their names mentioned in public documents. Such a move protects the identity of political tenderpreneurs, but it also gives foreign companies a license to operate with little regard to locals. As a result very few jobs get created locally and profits get repatriated through transfer pricing and other accounting gymnastics. This while the same leaders sing about local content and capacity development for indigenous companies. If African governments are serious about attracting foreign investors, they have two options. They can try to de-politicise their economies (which is hard) or work to bring about legal and regulatory predictability in their economies (a relatively easier task). On the latter, they can learn a thing or two from China. The country is a proud non-democracy yet it has a reasonably predictable legal and regulatory environment that give Africa a fair look. See also: County summons former chief officers over cash 

Read more at: http://www.standardmedia.co.ke/?articleID=2000130966&story_title=Kenya-summits-will-not-fix-investment-problems-in-africa

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Posted by: Afrika Watch <afrikawatch@yahoo.com>

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