Libmonster ID: U.S.-1483
Author(s) of the publication: G. E. ROSHCHIN
Educational Institution \ Organization: Institute of Africa, Russian Academy of Sciences

Foreign direct investment (FDI) is a key component of global capital flows. Experience in attracting and using FDI shows that, with appropriate government policies, it is an important source of renewal of production and acceleration of economic growth. FDI allows receiving States to take advantage of the international production network of transnational corporations (TNCs) and can open the way for them to create competitive industries.

In order to restructure their economies and transition to a resource-saving model of reproduction, the countries of developed capitalism seek to bring to an acceptable technological level those developing countries whose industrial and resource potential can be organically interwoven into the new international technological system. Certain measures are being taken to ensure that a number of countries in the African region with their unique natural potential are also integrated into the single economic mechanism in a timely manner.

It seems that the strategic importance of this potential is enormous and it will undoubtedly grow over time. Even today, fundamental shifts in production and technology are generating demand for many non-ferrous and rare metals, rare earth elements, which were not in demand just yesterday. Therefore, the statistically traceable "withdrawal" of TNCs from some raw materials industries is usually compensated by an increase in their inactive participation in the exploration of new deposits, in the final processing, transportation and marketing of the product.

TNCs return to the African commodity sector through the provision of loans with the simultaneous conclusion of management contracts, through lease agreements for nationalized enterprises, and in other forms. As a result of all these factors, only a relatively narrow group of African countries with large reserves of energy carriers and other valuable minerals, as well as a fairly large domestic market and a liberal investment regime (Nigeria, South Africa, Egypt, Tunisia, Ivory Coast, etc.) will likely remain the geographical arena for attracting foreign private capital in the foreseeable future. Morocco, Angola, Namibia, and some others).

At the same time, a noticeable increase in the risk of socio-economic destabilization in the region will lead to the expansion of mixed forms of entrepreneurship, the so-called "non-traditional", "alternative" (in relation to direct investment) methods of activity of foreign private capital (contracts for enterprise management, technology transfer, license sales, engineering consulting, contracting, etc.).However, new forms of foreign private capital activity will be able to reach significant proportions only in a relatively small group of countries that will have the potential to increase foreign exchange reserves.

FDI TRENDS AND PROSPECTS

According to UNCTAD estimates, total FDI inflows to African countries amounted to $57.2 billion in 2013, $55.2 billion in 2012, $48 billion in 2011, and $47 billion in 2010.

Meanwhile, in the sub-Saharan Africa (SSA) sub-region, FDI inflows in 2013 increased by a quarter compared to 2010 and amounted to $41.7 billion. Consequently, more than two-thirds of total FDI flows to Africa in 2013 went to SSA. The lion's share of these inflows came from South Africa ($8.2 billion), Mozambique ($5.9 billion), Nigeria ($5.6 billion) and Angola ($4.3 billion). Other countries in the region received significantly lower amounts of FDI, with 20 of them registering a decline in the level of direct investment inflows from abroad in 2013.1

Botswana, Ghana, Namibia, Senegal, Uganda, and Tanzania have undoubtedly made progress in attracting capital from abroad.2 These countries are characterized by stable political and economic policies, active implementation of privatization programs, a noticeable increase in GDP growth, favorable foreign trade policies, measures to stimulate FDI and improve the skills of workers and employees.

The development of the service sector is becoming an important driver of FDI inflows to SSA. In addition to traditional patterns of FDI inflows in capital-intensive extractive industries (mining, oil and gas), capital flows to banking, retail and telecommunications are increasing. This is facilitated by the rapid pace of urbanization and the formation of a middle class with significant free funds. As a rule, middle-income consumers use higher-level services, including financial (in particular, in the field of mortgages), telecommunications (especially in the field of mobile telephone communications), educational and medical services, and purchase expensive consumer durable goods and passenger cars.

Most developing countries view FDI as an important channel of access to development resources. The import of capital in all its forms adds to the internal sources of finance.-

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investment growth helps to ease the tension in the credit sector. The most valuable assets that can be obtained from TNCs engaged in FDI are technology, trademarks, special knowledge, the ability to organize production, establish marketing networks, provide preferential access to markets for financial resources and equipment, and develop human resources.

FDI is directed, as a rule, to long-term projects for the development of modern industries, and sometimes to the creation of fundamentally new high-tech types of production (computers, communications equipment, etc.).

TNCs pursue, first of all, the goals of increasing their competitiveness on a global scale. But when their interests coincide with the interests of local companies, TNCs can provide these companies with significant and even decisive advantages in economic competition, thereby stimulating the accumulation and growth processes in the recipient countries.

When assessing the near-term prospects for the development of the African economy, UNCTAD experts pay special attention to changes in world commodity prices. They note that if they fall, we should expect a reduction in the incomes of a number of African countries and an influx of investment in the raw materials sector. 3 The slowdown in export income growth will be most pronounced in countries with less diversified economies, especially in those whose exports are dominated by oil, other minerals, and metals.

According to experts of UNCTAD, investments in the development of new hydrocarbon deposits are a good basis for a significant increase in the inflow of foreign direct investment to Africa in 2013, as well as in subsequent years. The scenario outlined in one of the latest UNCTAD world investment reports calls for an increase in FDI inflows to African countries4. Such a forecast is likely to be implemented while maintaining high commodity prices and accelerating economic growth.

IMPROVING THE INVESTMENT CLIMATE

Current trends in investment policies in African countries are characterized by further liberalization and simplification of foreign investment procedures. At the same time, efforts have been intensified to regulate them in order to achieve public policy goals (for example, to protect national security).

The formation of a policy focused on attracting private business investment from abroad begins with the development of a holistic legal regime for these investments. Its main objectives are to reduce risk factors, legally protect investors from expropriation of their property, reduce the tax burden and, in some cases, ensure long-term tax stability, as well as provide guarantees for the repatriation of capital and export of income for investment in the home countries.

Many countries on the continent (Ghana, Nigeria, Namibia, Zambia, etc.) have revised their legislation to remove most restrictions on investment and establish a single legal regime for national and foreign investors. Measures taken included, inter alia, liberalizing access to previously closed sectors, as well as the land acquisition regime, eliminating monopolies and privatizing State-owned enterprises. Measures to promote and simplify procedures included, first of all, the creation of fiscal and financial incentives to encourage FDI in specific industries or regions, including special economic zones; simplification of verification and approval procedures; and speeding up the issuance of project permits.

Significant privileges are provided for investments in priority sectors of the national economy - the export sector, agribusiness, housing construction.

Tax incentives are an important measure to encourage investment in priority industries. Eligibility for these benefits is usually subject to special negotiations with foreign investors. In Lesotho, for example, agribusiness and manufacturing companies enjoy such benefits.5

The investment attractiveness of the continent's states depends on the level of political stability, the rate of economic growth, the availability of natural resources, the development of entrepreneurship, and the effective functioning of economic, financial, and information infrastructures. However, in terms of profitability and a unique wealth of resources, the continent's raw materials sector is the most attractive for investors. Africa's resource base is enormous, and its strategic importance is rapidly increasing due to the depletion of the planet's non-renewable fossil resources.

It is quite clear that long-term investments of TNCs in the extraction of certain types of mineral raw materials and energy carriers here, in particular at the bottom of the World Ocean, will continue to grow, despite significant economic and political risks. Today, investment by the world's largest corporations in this sector is booming.

Africa has found itself at the center of a strategic struggle between the major Powers for access to its vast natural resources. Companies from the United States, European countries, China, and other BRICS members, including Russia, are making large capital investments in an effort to secure their sources of valuable raw materials in many African countries (Angola, Sudan, Chad, the Democratic Republic of the Congo, etc.) 6.

In summary, it should be emphasized that the Governments of most African countries welcome foreign investors, provide them with significant benefits and guarantees of market rights in the interests of developing mutually beneficial cooperation and partnership.


1 UNCTAD. World Investment Report 2014. Investing in the SDGS: An Action Plan. P. 205-206.

2 Ibidem.

3 UNCTAD. World Investment 2012. Towards a New Generation of Investment Policies. N. -Y., 2012. Table 2. P. 6.

4 Ibidem.

5 UNCTAD. Lesotho Investment Policy Review. N. -Y., 2003. P. 27.

6 BICS. November 23, 2006. p. 1.


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