Africa Foreign Investor Survey 2005 - unido

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period (average of 15 years) over which to assess changes in the location factors. The plot does however give a rather clear view of which factors are improving the most over time.Those towards the upper right corner are factors that were assessed to have been improving the most in 2003 and have continued to do so since then.The distance below the 45-degree line indicates the degree by which the improvement in 2005 was less than that in 2003. Political stability, presence of key clients, availability of skilled labour, and regional market conditions were consistently rated as location factors improving the most. Quality of life, incentives and cost of labour were the factors that seem to have actually worsened over the last three years whereas they were assessed to have been improving in 2003. The factors that were consistently reported as the most important (not shown in figure 8.18) are political and economic stability, local and regional markets conditions, infrastructure and skilled labour. Figure 8.19 shows the same plot, but this time it compares the responses of all the investors that participated in the 2003 survey with all those that participated in the 2005 survey (not only the 335 that participated in both). Figure 8.19 Assessments of changes in location factors before 2003 and between 2003 and 2005 Mean change in location factor over the last three years (2005) “better” “worse” “same” 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 -0.05 Labor Cost M&A Project Incentive Reg. Mrkt Local Econ. Stab. Mrkt. Infrastructure JV Loc. Support EBA Legal framework AGOA Transparancy Quality of Life Raw Material Key Clients Skilled Labor Loc. Supplier Politic. Stab “better” -0.10 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 Mean change in location factors since investment decision (2003) Note: Sample covers only 2003 survey countries It is remarkable how similar the plots are, especially in view of the fact that there are many more services firms in the 2005 survey. This is a good indication of the robustness of the data in reflecting perceptions of how investment conditions are developing in the region. Another interesting exercise is to look at the plots at a country level. A cursory observation indicates that, from the perspective of existing investors in the countries, conditions have generally deteriorated in Cameroon; went from bad to worse in Malawi; slightly worsened in Uganda; unclear which direction conditions are developing for Madagascar; important factors improved and the unimportant worsened in Mozambique; improved for some key factors in Burkina Faso; and generally improved for Ethiopia, Kenya, Nigeria, Senegal and Tanzania (these are the 11 countries covered both in 2003 and 2005). Summary The analysis of investors' perceptions of their investment location in sub-Saharan Africa reveals that just as firms have different structures and performance characteristics so do they have differing views on the quality of the investment climate in which they operate. One interesting finding is the generally more positive opinion of investors from the South, by comparison with those from the North, of changes in the investment climate in host countries. North investors seem significantly more worried about deteriorating infrastructure, physical security and quality of life. Investors' responses to IPA activity were quite positive, although the impact varied enormously between countries and investors. In the sample as a whole, the survey identified investors from the South that have established operations since 2000 as a group which particularly values IPA assistance. The effect of IPA actions and achievements on FDI in a country can be significant. In order to be more effective as promotion agencies, IPAs require more information about the characteristics of existing and potential investors, their impact on the host economy and their changing investment motives and priorities. This information can assist in selecting investor groups to target in accordance with the type of impact that is desired. Clearly IPAs acting alone can have little impact on the business climate. Better information is necessary both to strengthen the advocacy role of IPAs within government and to sharpen the focus of their operational activities. In the concluding chapter of this report these issues are addressed directly. 124 Africa Foreign Investor Survey 2005
9. Conclusion The present study contributes to a deeper understanding of the dynamics of foreign direct investment (FDI) to the region and captures some of the underlying trends that may be relevant for shaping future policies. In particular, by studying the characteristics of different categories of foreign investors, the analysis highlights options for more focused strategies that target specific investor groups. It is anticipated that the findings will advance FDI promotion activities in the region by linking specific development objectives to investment promotion. It also highlights a growing emphasis on FDI leveraging and the facilitation of domestic investment tied to FDI.While the report mainly focuses on the contribution of FDI, it also details some of the drawbacks associated with different types of FDI. There are several encouraging observations emerging from the analysis. One is the possibility that the actual amounts of foreign investment going into the region may be significantly higher than macro figures generated through balance of payments measurements suggest. Secondly, according to foreign investors participating in the survey, an increasing proportion of firms are “meeting and exceeding expectations” by comparison with selfappraisals of performance in the UNIDO surveys of 2001 and 2003. The survey also highlights the variety of the contributions made by foreign direct investment in fifteen African countries. It identifies a number of different categories of foreign firms operating in the region together with their main characteristics. The central thesis of the report is that African countries need to study the motivations, operational characteristics, and dynamics of different investor groups in order to be able to forge better promotion strategies responding to investors’ differing needs and analyzing their various contributions to the host economies. This could be useful for eventually forging strategies for maximizing these contributions. Large mature transnational corporations (TNCs) from Europe that have been operating in the region for many years make a different contribution from their more recently arrived counterparts, for example, from South Africa or the labour intensive, relatively new garment manufacturers from Asia. The UNIDO survey confirms that new types of foreign investors, many originating from the South, are emerging.These firms seem well-equipped to cope with the exigencies of doing business in the investment climate prevailing in many parts of Sub-Saharan Africa. In the majority of cases, their governance structures are different from those of well-established subsidiaries of North origin TNCs. The enormous multiplicity of foreign firms that already invested in Africa (and potential new investors) poses a challenge for policy makers and investment promotion agencies (IPAs). While recognising the severe resource constraints on public budgets, how can governments best frame a policy that maximises benefits accruing to national welfare from the variety of FDI attracted to a particular country? Before addressing this question it may be helpful to summarise the main features of important investor groups identified by the survey.The grouping criteria chosen represent only a small selection of possible ways of grouping the firms that participated in the survey.They are selected to highlight the range of different investor categories, their impact on economic development and the challenges they pose for national governments and IPAs seeking to obtain the maximum benefit from inward foreign direct investment. Investor groups The key performance indicators used to classify firms are projected future employment growth rates; and future investment plans over the next three years as a percentage of total sales 30 . As shown in the main report, sales and investment are highly correlated so this latter performance 30 The sample in the subsequent analyses was limited to firms that answered both future annual investment growth rate (as % of sales) and future annual employment growth (over the next three years). In order to minimize the effect of very new firms with high investments but few sales, firms started after 2002 and very small firms with annual sales of less than $50,000 and with less than 20 employees are excluded from the analysis. 9 | Conclusion 125
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Burkina Faso Cameroon Côte d’Ivo
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The designations employed and the p
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Preface Investment is the key to un
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Foreword This is a pioneering and m
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Abbreviations ACP AfrIPANet AGOA AN
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Africa IPA Network (AfrIPANet) serv
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historical roots and regional marke
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cially in the services sector) pay
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small, labor intensive manufacturin
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mostly subsidiaries of small TNCs,
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1. Introduction Little empirical st
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The simplest linkages involve being
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One of the objectives of this surve
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2. Survey methodology Outline of th
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The initial design of the questionn
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transformation explains the differe
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adds up to higher than the total FD
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Figure 3.5 Share of the 15 survey c
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Figure 3.8 FDI stock - book value o
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Table 3.2 Top-5 foreign investor su
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majority of firms global exporters
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Continuing links with the North Fig
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Figure 3.24 Sales, book value, and
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The 25 largest companies in the sur
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Figure 4.1 Sales according to organ
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Figure 4.5 Sales by main sector and
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In terms of job creation, it is cle
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Figure 4.17 Sales by organizational
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clear trend of increasing South com
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of Tanzania. In Western Africa, Cô
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ook value of South controlled, loca
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Figure 4.37 Sales by investor origi
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Figure 4.43 Sales in each start-up
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Figure 4.50 Share structure distrib
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Figure 4.52 Sales by share structur
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Entry period (start of operations)
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Figure 4.65 Sales by market orienta
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Figure 5.2 Investors’ self-evalua
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Figure 5.7 Last year’s sales grow
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Figure 5.10 Annual sales growth (pa
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sales, old L-TNC, is among the lowe
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Figure 5.18 Classification tree of
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mean and median of the output per e
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Figure 5.23 Sales per USD book valu
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6. Impact on the local economy This
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Page 113 and 114: other hand, the thesis, according t
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Page 117 and 118: Technology and know-how transfer In
Page 119 and 120: Figure 6.29 Expenditure on training
Page 121 and 122: Table 6.17 Number of university gra
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Page 125 and 126: Table 6.18 Foreign investor’s bra
Page 127: Summary Wage and employment growth
Page 130 and 131: Table 7.1 Exports for main investor
Page 132 and 133: Figure 7.2 Past and future export g
Page 134 and 135: Table 7.7 Top regional export desti
Page 136 and 137: Export markets The long-established
Page 138 and 139: global exporters’ contribution to
Page 140 and 141: Table 8.2 Location factors consider
Page 142 and 143: Figure 8.2 Assessments of changes i
Page 144 and 145: Figure 8.7 Comparison of importance
Page 146 and 147: Figure 8.11 Classification tree of
Page 148 and 149: Figure 8.15 Pre-investment services
Page 152 and 153: Figure 9.1 Future employment and in
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Page 156 and 157: associated with FDI. In these count
Page 158 and 159: Table 9.1 Major characteristics of
Page 161 and 162: List of tables and figures FIGURES
Page 163 and 164: Figure 4.65 Sales by market orienta
Page 165 and 166: Table 3.1 FDI stock - book value of
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Page 173 and 174: ANNEX
Page 175 and 176: Annex table 2.1 Detailed definition
Page 177 and 178: Annex 2.4 Sample size requirements
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Page 181 and 182: BOOK VALUE(in USD) WORKFORCE Number
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Page 186 and 187: Annex table 4.2 Sales, book value a
Page 188 and 189: Annex table 4.3 Sales, book values
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Annex table 5.13 Annual sales growt
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Annex table 5.19 Sales per USD book
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Annex: Chapter 6 Annex table 6.1 Wa
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Annex table 6.3 Annual employment g
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Annex table 6.6 Ratio of expected r
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Percentage of local content MEAN ME
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Annex table 6.11 Expenditure on tra
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Annex table 6.14 Proportion of univ
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Annex table 6.16 Proportion of expa
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Annex figure 6.1 Classification tre
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Annex figure 6.5 Classification tre
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Annex: Chapter 7 Annex table 7.1 To
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Annex table 7.4 Export growth (past
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Annex: Chapter 8 Annex table 8.1 Lo
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Annex table 8.4 Ranking of countrie
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Annex figure 8.1 Assessment of chan
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Economist Intelligence Unit (EIU) (
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Printed in Austria March 2007 UNITE
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