Africa Foreign Investor Survey 2005 - unido

Within each individual sub-sector, North origin investors
had higher average local content than South origin
investors. Only in the construction and basic metal sector
did South investors display the tendency to use higher
proportion of local inputs.
Within South investors, the 39 firms of Lebanese origin
and 10 of Saudi Arabian origin had very high local
content as per cent of inputs purchased.
Another consistent observation is that FEs as a group
also had higher local content proportions than TNCs,
when looked at within the same country, sub-sector or
origin. Global and regional exporters also had much
higher average expenditures on local inputs and much
higher percentage of local sourcing than local market
seekers. The 38 large global market seeking firms from
North exhibited the highest percentage of local sourcing
with an average of 54 per cent. Interestingly, among
these firms, the more recent arrivals, those starting up
after 1990 had the higher local content at more than 60
per cent. The expectation would have been that the
older, plantation based FDI would have the highest local
content.
Another way of examining the local content was to look
at all local expenditures, including local outsourcing and
sub-contracting of services, as a percentage of sales. For
the sub-sample of manufacturers the average was 22 per
cent of sales spent on local expenditures (excluding
wages). The groups that exhibited a high proportion of
local expenditure in sales were older pre-1980 firms, the
natural resource intensive sectors (food and wood), basic
metals, and construction. Surprisingly garments
exporters had relatively high local expenditure content.
Cameroon, the host country of many old, large, French
origin, natural resource based L-TNC subsidiaries dominating
the country sample exhibited the highest proportion
of local expenditure in sales. Tanzania, Nigeria and
Kenya were also on the high end of the spectrum. The
region of origin that consistently exhibited highest proportion
of local content was America.
Training and R&D
So far, impact of FDI has been assessed in terms of
growth, wages, employment levels and local purchases
and expenditures; the direct economic effect of the
investors on the local economies. The technology and
skills enhancement effects of FDI were studied by looking
at the training and R&D expenditures of the surveyed
investors, at the formal and informal technology
and know-how transfer within the ongoing activities and
by looking at the skill intensity of operations.
Within the sample, 794 or 65 per cent responded to the
question on training expenditure, and of those that did
respond, 41 per cent indicated they spent nothing on
training. The 467 firms that reported positive expenditure
on staff training spent a total of $39 million for that
purpose. The types of firms that spend the most on training
are L-TNC subsidiaries, investors in the services sector
(transport and communication; financial services;
marketing and professional services). South African
investors spent the most on employee training both on a
per company and per employee basis. Six of the top ten
spenders on training are South African companies. Of
the $39 million total spent on training, $13.4 million is
spent by South Africans. The group that is second in
terms of average spending on training per employee is
SSA 4 . At least from the sample in this survey there is a
clear indication that African investors entering other
African markets as investors put the highest priority on
human capital development. This could be a reflection
of their long term commitment to the region.
On a training per worker basis, the countries benefiting
most from training by foreign owned firms are Côte
d’Ivoire, Kenya, Malawi, Mozambique and Tanzania,
with the highest density of South African investments,
also benefits from high per capita spending on training
from companies that do training.
Another metric used to assess the skill enhancement
propensity of FDI was to look at the percentage of university
graduates in the workforce (skill intensity) and the
proportion of foreigners within the university graduate
population. Expatriate graduates in the workforce could
be a measure of know-how transfer as well as a reflection
of reluctance by some investors to bring local staff into
the managerial decision making circle.
The most skill intensive sectors, those with the highest
percentage of graduates in the workforce, are the services
firms. The labor intensive, export oriented low tech sectors
exhibit a low proportion of graduates in the workforce.
The same sub-groups that had high levels of training
expenditure per employee also tended to have high
proportions of graduates in the workforce. Large South
(especially South African and SSA based) services firms
had the highest percentage of graduates. Joint ventures
tended to employ a higher proportion of graduates than
wholly foreign owned firms.
The proportion of expatriate graduates was highest in
sectors that had the least graduates within the overall
workforce. In the labor intensive manufacturing sectors
university graduates are a much closer proxy for management,
whereas in the skill intensive services sector they are
a much bigger portion of the overall workforce. Almost
every firm has a small number of expatriate graduates in
the management. This small number appears as a much
larger proportion of the total graduate population in a
4 The median for SSA is at similar levels to that for European and
American investors indicating that there is a high level of variation, but
the group can still be recognized as a high spender on training.
Executive summary
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