To direct more support toward the development of

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to direct more support toward the development of capacity for domestic resource mobilization as an important element in reducing dependence on official flows in the long run. Furthermore, there is the need for African countries to play a more active role in coordination of support from Southern and Northern partners to reduce transaction costs and increase development impact. In this regard,
Economic Development in Africa Report 201078African countries should develop or strengthen existing national aid management and coordination frameworks, with the support of their development partners, to enhance national ownership of aid processes and outcomes.
SOUTHERNFOREIGNDIRECTINVESTMENTTOAFRICAAfrican countries can use significant inflows of FDI to supplement domestic savings, create employment, access new technology and enhance prospects for meeting the MDGs by the 2015 target date. Before the onset of the financial and economic crisis, several countries in the region made significant progress in attracting FDI, resulting in an increase in inflows from $2.4 billion in 1985 to $87.6 billion in 2008. There has also been an increase in inward FDI stock from $42.9 billion to $510.5 billion over the same period (UNCTAD, 2009b). As a result of these positive developments, Africa’s share of global FDI inflows increased from 4.4 per cent in 1985 to 5.2 per cent in 2008. The recent surge in FDI to the region was driven largely by favourable commodity prices, high economic growth and a better investment climate. The positive trend in FDI flows to Africa was reversed in 2009 as the financial and economic crisis spread across the world. Although Africa is not well integrated in global financial markets, it has been severely affected by the crisis, with dire consequences for FDI growth. Inward FDI to Africa in 2009 is estimated to have fallen by 36.2 per cent relative to 2008 (UNCTAD, 2010). Currently, developed countries account for the bulk of FDI flows and stock in the region. In 2008, they accounted for 91.6 per cent of total inward FDI stock in the region. In recent years, however, FDI from developing countries has increased, with Asia being the most important source of recent increases in flows to the region. This chapter examines the evolving trends and geography of Southern FDI to Africa. It also discusses Africa–South cooperation in international investment agreements, in view of the potential role it could play in stimulating FDI. Finally, it examines the challenges facing Africa in attracting FDI from developing countries and offers suggestions on how to boost FDI flows between the two groups. In analysing South–South FDI, it is important to note that there are severe limitations imposed by data availability and quality. For example, many developing countries do not report data on outward FDI flows. Consequently, analysis of South–South FDI is generally based on data provided by reporting host countries that often do not reflect all FDI activities (box 8).

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