A Decade of NEPAD - Economic Commission for Africa - uneca

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42 A Decade of NEPAD: Deepening African Private Sector and Civil Society Ownership and Partnership Concentration of FDI Flows to Africa 2004-2010 (US$ million)-Oil Exporting Countries Country 2005 2006 2007 2008 2009 2010 Egypt 5,376 10,043 11,578 9,495 6,712 6,386 Nigeria 4,978 4,898 6,087 8,249 8,650 6,099 Sudan 2,305 3,534 2,426 2,601 2,682 1,600 Tunisia 783 3,308 1,616 2,758 1,688 1,513 Morocco 1,654 2,449 2,805 2,487 1,952 1,304 Algeria 1,081 1,795 1,662 2,594 2,761 2,291 Libya 1,038 2,013 4,689 4,111 2,674 3,833 Equatorial Guinea 769 470 1,243 -794 1,636 695 Angola 6,794 9,064 9,796 16,581 11,672 9,942 Ghana 145 636 855 1,220 1,685 2,527 Total top 10 African Countries 24,923 38,210 42,757 49,302 42,112 36,190 Rest of Africa 13,237 8,049 20,375 24,111 18,055 18,850 Africa 38,160 46,259 63,132 73,413 60,167 55,040 Flows of foreign direct investment to Africa, 2005-2010 (billions of United States dollars, current) Africa 38.2 46.3 63.1 73.4 60.2 55.0 North Africa 12.2 23.1 24.8 24.0 18.5 16.9 Central Africa 2.7 3.1 6.0 4.4 5.4 8.0 West Africa 7.1 6.9 9.5 12.7 12.7 11.3 Southern Africa 14.7 10.5 18.8 28.6 20.0 15.1 Eastern Africa 1.4 2.6 4.1 3.7 3.6 3.7 Source: ECA (2012) Financing for development: A progress report on the implementation of the Monterrey Consensus. Regionally, North Africa attracts the highest FDI in Africa and the region’s investment-friendly policies and on-going privatization programmes attract the widest diversity of investment. In 2007, US$22 billion was invested in North Africa in projects related to generic pharmaceuticals, textiles, chemicals, oil and the services sectors. Egypt was the largest recipient of investment garnering US$11.6 billion in 2007, but this fell to about $6 billion in 2010 probably due to the political unrest in the country associated with the so-called Arab Spring. West Africa continued to benefit from ongoing privatization initiatives and the commodity boom and attracted about US$6 billion in 2007, an amount that it maintained in 2010. Nigeria received 80% of total West African investment, mostly in petroleum sector. In Southern Africa, Angola attracted about $10 billion in 2007 and retained about the same amount in 2010, while in Central Africa, FDI was $6 billion in 2007 but increased to $8 billion in 2010. For Eastern Africa, which historically has been the lowest recipient of FDI on the continent, FDI in 2007 was about $4 billion, slightly falling to $3.7 billion in 2010. Indicative of the increasing focus on intra-regional African corporate expansion, outbound FDI flows equalled US$6 billion (down from a historic high of US$8 billion in 2006) in 2007. South African trans-nationals drove this positive trend accounting for over 80% of FDI outflows, although Egypt, Morocco, Liberia, Angola, Algeria and Nigeria also made significant investments in other countries on the continent. Most African FDI outflows were in the extractive industries but banking, ICT, infrastructure, telecommunications and retail were also strong investment sectors 53 . Private capital and debt allocated for Africa continued to grow throughout the 2000s as well. Private equity and debt flows (i.e. portfolio bond flows and bank lending) by 2007 reached an all time high of US$53 billion. Private equity capital raising, which was static at US$2.3 billion in 2006 and 2007, increased to US$3.2 billion, brining the total funds invested through private equity to US$7.6 billion. South Africa’s private equity industry rose to roughly US$12.5 billion in funds under management at the end of 2007, representing 2.8% of GDP. The largest source of private equity capital for South African funds was from the United States which provided 64% of all private equity capital for Africa in 2007. South African private equity activity reached 11 th place globally in 2007 rankings, the country’s highest placing ever. 54 53 African Economic Outlook, 2009 AfDB and OECD p. 41 54 African Economic Outlook, 2009 AfDB and OECD p. 42
In addition to economic reform, peace and stability, and high commodity prices, the emergence of China as a major market for African goods and commodities also helped bolster both manufacturing and natural resource investment. International banking activity in sub-Saharan Africa nearly tripled between 2004 and 2007 when total foreign claims on sub-Saharan economies held by banks reporting to the Bank for International Settlements rose to roughly US$205 billion at the end of 2007. In addition, bond flows increased by US$7.13 billion between 2006 – 2007 as Nigeria (US$350 million), Ghana (US$750 million), Gabon (US$1 billion) and the Seychelles (US$200 million) issued international bonds for the first time. 55 Portfolio equity flows to Africa’s equity markets also rose roughly 100% in 2006, doubling to US$15 billion although 88% of these flows went to South Africa. Cote d’Ivoire, Botswana, Ghana, Kenya and Mauritius were the other exchanges to experience portfolio growth. In addition to increasing FDI and private capital flows, another important source of capital for African countries over the past ten years has been formal and informally transferred remittances from African “Diasporans” based in North America and Europe, and from migrant workers on the continent. Africa today has over 30 million people in the Diaspora. Of all the world’s regions, however, Africa’s predominant migration is the most intra-regional although there is also significant international migration to former European colonial powers such as France, the United Kingdom of Great Britain and Northern Ireland, the Netherlands and Italy, among other countries. Remittance flows to and within Africa approach US$40 billion 56 . Countries in Northern Africa (i.e. Morocco, Algeria and Egypt) are the major remittance receivers on the continent, although Eastern African countries depend most heavily on these flows, with Somalia standing out as particularly remittance dependent. For the entire region, annual average remittances per migrant reach almost US$1,200 and on a country-by-country average represent 5 per cent of GDP and 27 per cent of exports. 55 Macias, Jose and Massa, Isabela, The Global Financial Crisis and sub-Saharan Africa: The Effects of Slowing Private Capital Inflows on Growth, African Economic Conference 2009, Addis Ababa, Ethiopia, AfDB and ECA, p.2 56 www.ifad.org/remittances/maps/africa.htm 4. NEPAD and the African Private Sector Today A Decade of NEPAD Remittances to rural areas are significant and predominantly related to intra-regional migration, particularly in Western and Southern Africa. The mobility of Africans within these regions has been followed by the sending of regular amounts of money. Two thirds of West African migrants in Ghana remit to rural areas in their countries of origin. However, when compared with other regions, money transfers to Africa are among the most problematic, mainly due to the two major challenges faced by the continent: high rates of informality, particularly within the continent, and a regulatory environment that favours monopolies. Consequently, transfer costs are higher and remittance senders obtain less value for their money. Most African countries restrict outbound flows of money unless used for trading and money transfers to banking depositary institutions. As a result, informality emerges as a solution to the need to remit. Another effect, however, is the persistence of monopolies on transfers by banks and the few money transfer operators (MTOs). In all of Western Africa, for example, 70 per cent of official payments are handled by one MTO, which demands exclusivity in money transfers of the banks Since banks are the only entities allowed to pay money transfers, all official flows end up being handled by a small group of financial institutions that rely on less than four MTOs. Migrants in South Africa are also faced with significant regulatory restrictions on sending money, and thus rely on informal networks. Because regulatory environments often prevent other non-banking financial institutions from making transfers, or restrict outbound transfers, financial access is also a casualty. As few institutions participate in the transfers, and banks do not cater to lower-income individuals, financial access among African senders and recipients is relatively low. In some countries, for example South Africa, barriers to entry relate to legal status, thus disenfranchising migrants. Other countries, for example Kenya, are seeking to increase financial access by leveraging remittance transfers through the use of mobile telephony. In 2010, remittances to Africa totalled close to US$40 billion. Dubbed DDI 57 (or Diaspora Direct Investment), these remittances were, in 2007, greater than overseas development assistance in Botswana, Cote d’Ivoire, Lesotho, 57 Thomas, D. and Ardovino, M., Diaspora Direct Investment: The Untapped Resource for Development, U.S. Agency for International Development, May 19, 2009 43
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Economic Commission for Africa NEPA
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Page 71 and 72: NEPAD and the African Civil Society
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92 A Decade of NEPAD: Deepening Afr
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Conclusion The African Union’s NE
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References AfDB (2009) Africa’s D
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Secretariat and the Secretariat of
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