CHANGING NEGATIVE INVESTOR PERCEPTIONS REMAINS SOUTHERN AFRICA'S KEY CHALLENGE, by Grace Buhera

Globalisation is here to stay and Africa cannot afford to miss the boat, was the message of a recent investment conference in Windhoek, Namibia. The winds of change currently sweeping across the globe call for a new thinking on how the continent does business, the investors said. Countries in the southern African region, in particular, need to engage in more effective partnerships in order to take advantage of globalisation in its broadest sense, said the participants who attended the trade and investment summit organised by the International Herald Tribune newspaper. Partnerships between governments and the private sector, between governments themselves and between the region and the developed world constitute the engine for growth and present the only avenue through which the region can extricate itself from the web of poverty, underdevelopment and escalating debt, according to the international investors. Addressing the sixth annual trade and investment summit in Windhoek in early October, Namibian Prime Minister, Hage Geingob called for "inclusive partnerships that involve Africans themselves. We ask our partners to consider the region not just as a market, but also a place where goods can be produced and exported." "Economic linkages, comparative advantages, economic exploration, and not exploitation, should form the basis for a new relationship with the developed world," added Bilisoni Itayi, Chairman of Malawi Investment Promotion Agency. For development to take place there is need for investment that "adds value to natural resources in terms of skills development and technological transfers rather than concentrate on extractive investment," Itayi said. Traditionally, investment in Sub Saharan Africa has gone where the resources are, regardless of the environment in terms of political stability. Investment has not been responsive to conditions often demanded by foreign investors - liberalisation, privatisation, deregulation or peace and stability. Angola, for example, has attracted over US$700 million worth of investment up to the end of 1999 because of its oil resources despite the fact that it is at war. However, most delegates agreed that SADC member states have worked hard to create the right conditions for increased investment and economic growth. The region has been described as the "next frontier of economic growth in the continent." Many SADC countries have embraced development strategies which have resulted in market liberalisation, fiscal restraint, privatisation of state enterprises. Investment projects such as Maputo Development Corridor and Trans-Kalahari Highways as well as the recent implementation of the SADC Trade Protocol underline the region's commitment to facilitate trade and investment by ensuring smooth transport systems and removal of tariff and non- tariff barriers to trade. Such spatial development initiatives (SDI) aim to rationalise investment projects and unlock inherent economic potential in specific southern African sectors According to statistics, 800 SDIs valued at US$32.4 billion have been identified with capacity to generate 85,000 new jobs within the region. These SDIs are often in infrastructural development, mining, privatisation of state enterprises and joint management of natural resources. Despite these efforts, very little foreign direct investment (FDI) has found its way into the region.

The World Investment Report 2000, shows that in 1999 Africa attracted 1.2 percent of global FDI flows, representing only five percent of FDIs into developing countries. Acting Chief Economist at the SADC Secretariat, Angelo Mondlane, has some interesting statistics. In 1999, SADC investment rate averaged 16.3 percent of Gross Domestic Product (GDP), with strong influence coming from South Africa which invested about 14.6 percent of GDP, and estimated to account for two thirds of total investment in SADC. Without South Africa, investment levels in the rest of the region averaged 23 percent of GDP ranging from 8.1 percent in DRC to 32.7 percent in Botswana and a high of 37 percent in Lesotho. This reflects the anomalies caused by the magnitude of a few projects relative to the size of the country's economy. Generally, SADC's gross domestic investment as a percentage of GDP compared negatively to Africa's overall investment including its FDI. Studies have shown that the risk index for countries in the region is lower than in other parts of the world. Some projects undertaken in the region have produced better returns than competing operations abroad. But the investor is not coming to southern Africa unless there is oil or precious minerals. For the region to be able to make a meaningful impact in attracting FDI, there is, therefore, need to change investors' perceptions of the region. Perceptions are deep rooted and take a long time to change and the region needs to act quickly to improve investor confidence. "We have to believe in ourselves before we expect anyone else to do the same," reiterated Jacob Zuma, Deputy President of South Africa. The outlook is bright. The recent launch of the SADC Trade Protocol provides an excellent opportunity to increase regional trade. The Africa Growth and Opportunity Act (AGOA), which has seen 10 out of the 14 SADC countries meeting the compliance criteria, also presents enormous opportunity for manufactured exports to the US Market. The challenge that remains, for the region, is in forging ahead and strengthening alliances among member states and building a strong economic block. Opportunities abound, but it remains to be seen how the region will utilise them in a win-win situation between the private and public sectors. The high-level meeting attracted captains of industry from the region but few investors. Delegates expressed frustration at the lack of interest from the investors given the enormous efforts the region has made to make the region attractive to investment. The response from the region, based on the attendance by the private sector and senior government officials, is a reflection the desire to foster deeper integration. The confidence shown by the region in its own development efforts is hoped to send the right signals to the international investor. The summit is viewed as "an awakening call" for the region, the conference concluded. It presented opportunities but not guarantees. More aggressive marketing of the region still needs to be done, especially in changing investor perception, most participants agreed. The conditions are almost right for this process to unfold. Domestic private sector participation is seen as vital for growth and the engagement of captains of industry in this meeting was an encouraging development.

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