Africa Foreign Investor Survey 2005 - unido

Summary
Wage and employment growth levels
The average wage per worker is, as predicted, closely linked
to the productivity of labour or (put differently) the capital
intensity. Thus, the sectors and countries that are represented
in the sample by a large proportion of investors that
exhibited high labour productivity are also likely to have
high average wages. The chapter digs to identify specific
subgroups that pay the highest wages.The groups that pay
high wages are also the groups that have the slowest
employment growth, at below 2 per cent.The lowest wage
groups, on the other hand, doubled their employment
numbers within last three years. The high wage – low
employment growth firms are better represented among
North, L-TNC, and older groups whereas the low wage –
high employment growth firms are better represented
among the recently arrived, South groups.
Some of the large regional exporters that were found to
be very factor efficient to compete in broader markets were
also found to have stagnant employment levels.
The predicted future employment growth among the
groups mirrored the past growth rates. One notable exception
is Côte d'Ivoire that has experienced a reduction in
employment over the past three years but where employment
figures are likely to resume again.
For all groups except Asian investors the predicted average
employment growth rate converges to around 10 per
cent annually. Asian investors, especially those in the garments
and other low value export sectors, are anticipating
the highest employment growth rates for the next three
years.
Re-investment
New investments made by existing investors during the
past three years amounted to $2.8 billion (not including
MTN-Nigeria) and the subsectors that have increased their
current investments the most are communication, finance,
utilities and food. In the next three years the investors in the
sample plan to invest another $3 billion (again excluding
MTN-Nigeria). The distribution of this for each country
and each subsector is provide, and the individual data can
be used by IPAs to targeting aftercare services.
In the last three years the biggest investor country for SSA
has been South Africa. SSA countries have also invested a
total of $226 million in each other making them the third
biggest investor group behind Europe and South Africa.
The subsectors that will increase the level of investment
in comparison to the last three years are communications
and chemicals sectors. The food sector, which was the
biggest investor in the past, will reduce its investments in
the next three years from an average of $6.3 million to $4
million.
From among the survey firms, the United Republic of
Tanzania and Mali are expecting the biggest jump in new
investments, 189 per cent and 113 per cent respectively.
Local sourcing and local skills enhancement
Inputs sourced locally by foreign owned firms can be used
as a measure of how much the local economy is linked into
FDI. The main surprise was that North firms, in almost
every subgroup, had a higher share of local content than
South firms. This was contrary to expectation since the
technological and cultural proximity was thought to make
South investors more amenable to using local inputs.
Within North firms, FEs had higher local content.
Investors that add lasting value through human capital
development are the same, to a large extent, as those that
pay high wages, have the largest proportion of skilled workers
(university graduates) in the workforce and have the
greatest output to labour ratios.These are the services sector
and L-TNC subsidiaries in general. One outstanding
group in terms of training expenditure per worker is South
Africa. Some 84 South African firms spent almost as much,
$13.4 versus $17.2 million, on training as 563 European
investors (assuming those who did not answer the question
do not spend anything on training).
The chapter identifies several investor groups with high
training expenditure per worker to help IPAs identify where
most of the spill over value is being created.
The skill intensity of different groups is assessed (proportion
of university graduates is used) and the extent to which
investors depend on foreign nationals to run the operations
is also investigated.The general finding is that small manufacturing
firms from South, mostly in the labour-intensive
export sectors, use the least amount of university graduates
in the workforce. Within these limited numbers however,
they also have the highest proportion of foreign university
graduates. It is suspected that these mostly FE and S-TNC
operations rely on the expertise and market links of these
individuals (who in the case of FE are frequently owners
and family) to run them.This technical, managerial knowhow
of these individuals is the intellectual and networking
capital that the foreign investors is contributing.This form
of know-how transfer is assessed as very important to the
operations of some of the firms surveyed.
These issues as well as others not yet covered will by presented
in subsequent papers on the impact of FDI in SSA.
There are several other indicators of impact that have been
obtained through the questionnaire including the amount
of effort that investors spend on providing assistance to
local suppliers to increase quality, the importance of internal
corporate channels for various transfers, etc. will be
incorporated into future analyses.
6 | Impact on the local economy
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