Africa Foreign Investor Survey 2005 - unido

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Figure 4.50 Share structure distribution by subsector Publishing & Media Elec., Gas & Water supply Non-Metalic mineral prods. Auto, Machinery & Equipm. Financial Intermediation Transport & Communication Agric., Fish & Nat. Resources Food, Beverages & Tobacco Basic Metals Professional Services Chemical, Plastic & Rubber Textile Construction Hotel & Restaurant Marketing, Sales & Distribution Wood prods. & Furniture Paper and Paper prods. Garment, Apparel & Leather 8 9 13 18 43 46 paper products. Firms originating from South (apart from South Africa) had a greater revealed preference for being wholly-owned – more than two-thirds of firms. Looking at the breakdown by main sectors (Annex Figures 4.1 through 4.4 and Annex Table 4.5), services companies that are joint ventures had significantly higher book values than manufacturing or primary sector joint venture firms – $59 million compared to $20 million for manufacturing and $15 million for primary sector joint ventures, reflecting the overall higher book values for the services sector. However this is not reflected among the wholly owned firms where the book values between the services and the manufacturing firms are of similar magnitude. As for the whole sample, on average, wholly foreign owned enterprises had significantly smaller book values than joint ventures in each sector. Average book values of services sector joint ventures were boosted by the presence of a small number of very large telecommunications and other infrastructure joint ventures in the sample. Six telecommunication companies in this group have a book value higher than $100 million, of which only 2 companies started their business as a new greenfield operation. Three companies acquired the assets from the state in the course of privatization and one company acquired parts of the shares from a local private entity. Other very large service sector joint ventures are six banks also with a book value of more than $100 million.With the exception of one bank, all those financial institutions started completely new operations at the time of arrival. When the preference for a joint venture strategy was examined in terms of the organizational structure, it was apparent that half of the sample of large TNCs opted for a joint venture compared with 39 per cent of small TNCs and 38 per 28 81 22 47 94 23 26 37 157 25 11 21 0% 20% 40% 60% 80% 100% Wholly-owned enterprise (WOE) Note: Numbers in columns represent frequency for each category 13 14 19 26 59 49 23 66 17 35 61 13 12 16 63 10 4 6 Joint Venture (JV) cent of owner-managed firms. In each case, whether L- TNC,S-TNC or FE,joint ventures had higher average book values and annual sales, and employed more people than comparable wholly-owned enterprises. For example, L- TNC joint venture subsidiaries had an average book value of $82 million compared to L-TNC WOEs that had an average book value of $11 million (annex table 4.1).The group of 156 firms that made up the sample of L-TNC joint ventures included 24 banks and insurance companies with $170 million average book value, 28 food companies and 17 Transport, storage and communication companies.Two thirds of these companies started operations as greenfield,19 per cent through an M&A deal and 16 per cent in the course of state privatization programs.The latter,i.e.firms that incorporated former state-owned assets have a book value of $87 million which is significantly higher than the average book value of L-TNC group. It would appear that when operating in sub-Saharan Africa, bigger foreign investors preferred joint ventures, whatever the particular characteristics of the foreign interest. Even FE-joint ventures had an average book value greater than that of wholly-owned FEs – $15.5 million compared to $4.8 million – and average sales of $9.5 million compared to $3.7 million. Share structure – export orientation A consideration of the relative efficiencies of the joint venture form of organization and the wholly foreignowned unit might suggest that export-oriented companies would favor sole ownership when operating in competitive export markets.The advantages of a clearcut line of command in managing a cross-national supply and distribution chain and lack of ambiguity in the division of profits tend to be preferred over the complexities of shared executive responsibilities inherent in a joint venture arrangement. Even if the local knowledge and business connections of a local partner are important, this expertise can be acquired over time. Contrary to expectations however, the survey suggested that export-oriented firms had no more than an slight preference for wholly-owned enterprises of no statistical significance. Moreover, global-oriented joint ventures had sales on average more than three times as great as that of wholly-owned global exporters – $40.4 million compared to just $9 million. Regional marketseeking joint ventures have also higher average sales of $24.8 million compared to their wholly-owned counterparts with $13.4 million.They also have higher average book values and employment. However, the cumulative employment contribution of 101 wholly foreign owned globally-oriented companies exceeds the cumulative employment of the 66 global joint venture firms in the sample, mostly due to the high labour forces of the wholly-owned Asian garment manufacturers. 48 Africa Foreign Investor Survey 2005
Share structure – period of entry Figure 4.51 gives the share ownership structure for the age groups. Figures 4.52–4.54 and annex table 4.4 describe the respective sizes of the wholly foreign owned firms and joint ventures within each age group. In a favorable investment climate for foreign companies, it might be expected that over time, with the accumulation of greater operational experience, foreign investors who deem their investments to be a success would takeover their local partner in order to obtain the benefits of complete managerial control. This is not observed in the data. The proportion of joint ventures was higher among firms that had been in the country longer. Thus, of the 289 firms established before 1980, 53 per cent were joint ventures, while of the 294 firms established after 2001, only a third were joint ventures. Even more striking, when sales and book values were compared, it was clear that regardless of the time period in which firms started operations, joint ventures had higher average sales and book values than wholly foreign owned companies founded in the same time period. Again, the older, larger TNC subsidiaries are more likely to be joint ventures, supporting the notion that investors that have been in the country longer have had better opportunities to acquire more assets, likely through partial buyouts. The finding that only a third of firms in the survey founded after 2001 were on the basis of joint ventures could be interpreted as a positive sign indicating that an Figure 4.51 Share structure distribution in each start-up period 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 155 136 53 60 increasing proportion of inward investors were willing to go-it-alone in sub-Saharan Africa. On the other hand, the average book value of joint ventures founded after 2001 remained much greater than for WOEs – $37.5 million compared to $4.3 million. However, this was largely a result of the contribution of 13 large joint ventures in the utilities and transport services subsector. Even so the median joint venture had a book value of $1.5 million compared to the median book value of a WOE of just $600,000. 195 308 96 198 1980 and before 1981-1990 1991-2000 2001 and after Significance: Chi(3,1201)=28.963, p
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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
Page 24 and 25: mostly subsidiaries of small TNCs,
Page 27 and 28: 1. Introduction Little empirical st
Page 29 and 30: The simplest linkages involve being
Page 31 and 32: One of the objectives of this surve
Page 33 and 34: 2. Survey methodology Outline of th
Page 35 and 36: The initial design of the questionn
Page 37: transformation explains the differe
Page 40 and 41: adds up to higher than the total FD
Page 42 and 43: Figure 3.5 Share of the 15 survey c
Page 44 and 45: Figure 3.8 FDI stock - book value o
Page 46 and 47: Table 3.2 Top-5 foreign investor su
Page 48 and 49: majority of firms global exporters
Page 50 and 51: Continuing links with the North Fig
Page 52 and 53: Figure 3.24 Sales, book value, and
Page 54 and 55: The 25 largest companies in the sur
Page 56 and 57: Figure 4.1 Sales according to organ
Page 58 and 59: Figure 4.5 Sales by main sector and
Page 60 and 61: In terms of job creation, it is cle
Page 62 and 63: Figure 4.17 Sales by organizational
Page 64 and 65: clear trend of increasing South com
Page 66 and 67: of Tanzania. In Western Africa, Cô
Page 68 and 69: ook value of South controlled, loca
Page 70 and 71: Figure 4.37 Sales by investor origi
Page 72 and 73: Figure 4.43 Sales in each start-up
Page 76 and 77: Figure 4.52 Sales by share structur
Page 78 and 79: Entry period (start of operations)
Page 80 and 81: Figure 4.65 Sales by market orienta
Page 82 and 83: Figure 5.2 Investors’ self-evalua
Page 84 and 85: Figure 5.7 Last year’s sales grow
Page 86 and 87: Figure 5.10 Annual sales growth (pa
Page 88 and 89: sales, old L-TNC, is among the lowe
Page 90 and 91: Figure 5.18 Classification tree of
Page 92 and 93: mean and median of the output per e
Page 94 and 95: Figure 5.23 Sales per USD book valu
Page 97 and 98: 6. Impact on the local economy This
Page 99 and 100: ices firms pay wages that are more
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Page 103 and 104: eveals a group of 77 subsidiaries o
Page 105 and 106: Table 6.2 gives the distribution by
Page 107 and 108: for accuracy. The whole sample expe
Page 109 and 110: Figure 6.16 Expected re-investment
Page 111 and 112: Local content impacts The analysis
Page 113 and 114: other hand, the thesis, according t
Page 115 and 116: Figure 6.25 Distribution of main in
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
Page 123 and 124: control is of paramount importance
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Table 6.18 Foreign investor’s bra
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Summary Wage and employment growth
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Table 7.1 Exports for main investor
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Figure 7.2 Past and future export g
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Table 7.7 Top regional export desti
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Export markets The long-established
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global exporters’ contribution to
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Table 8.2 Location factors consider
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Figure 8.2 Assessments of changes i
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Figure 8.7 Comparison of importance
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Figure 8.11 Classification tree of
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Figure 8.15 Pre-investment services
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period (average of 15 years) over w
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Figure 9.1 Future employment and in
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taking advantage of the opening up
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associated with FDI. In these count
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Table 9.1 Major characteristics of
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List of tables and figures FIGURES
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Figure 4.65 Sales by market orienta
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Table 3.1 FDI stock - book value of
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Annex table 6.10 Expenditures on su
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a work permit? How many engineers/s
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ANNEX
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Annex table 2.1 Detailed definition
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Annex 2.4 Sample size requirements
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Annex table 3.2 Distribution of for
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BOOK VALUE(in USD) WORKFORCE Number
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Annex: Chapter 4 Annex table 4.1 Sa
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Annex table 4.2 Sales, book value a
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Annex table 4.3 Sales, book values
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Annex table 4.6 Subsectors by inves
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Annex: Chapter 5 Annex table 5.1 In
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Annex table 5.7 Last year’s sales
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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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