Strengthen linkages, Africa urged

Strengthen linkages, Africa urged

via Strengthen linkages, Africa urged | The Herald 7 July 2014

THE lack of adequate infrastructure, low absorptive capacity, policy incoherence and the lack of a vibrant domestic private sector is hindering African countries from creating productive linkages with international enterprises, a United Nations Conference on Trade and Development report has said.UNCTAD Economic Development in Africa report recommended that African governments should create and strengthen linkages through developing and improving workforce skills as well as raising the adoptive capacity of local firms through the imposition of technology transfer requirements on Foreign Direct Investment. Zimbabwe needs a medium and long-term average growth rate of seven percent if the Government is to significantly reduce poverty and improve the standard of living.

Speaking at the launch of the Economic Development in Africa report, African Institute for Agrarian Studies executive director Professor Sam Moyo said there was need for the country to boost its economic growth in the long-run.

“To make significant progress in reducing poverty Government will have to sustain average growth rates of about seven percent and above in the medium to long term and this will require minimum investment rates of 25 percent of GDP” said Professor Moyo. Although the report generally referred to Africa, it shed some insights on the situation in Zimbabwe.

Zimbabwe’s investment rate currently stands at 14,8 percent of GDP, significantly below the required average investment rate of at least 25 percent of GDP.

Zimbabwe last had significant FDI in 1998 following huge investment by Zimplats in Ngezi.

Presently, Zimbabwe is attracting less than one percent of FDI’s to Africa which topped $65 billion in 2012 despite the country possessing vast natural resources.

The report states that African countries experienced a significant increase in FDI flows to the continent over the past decade but there are concerns that the developmental impact has been limited due in part to weak linkages between foreign and local enterprises.

“There is need to promote joint ventures between local and foreign enterprises and make FDI policy consistent with the promotion of domestic entrepreneurship. In this regard, it suggests that African countries should not promote FDI in a manner that discriminates against local investors,” the report says.

The report noted that Africa has low investment rates for a developing continent which aims to achieve development goals. It also says public investment rates have declined.

“Africa loses significant amounts of resources each year in the form of capital flight. The report underscores the need to address the problem of capital flight to release more resources for investment in Africa,” the report says.

Speaking at the same event, UNDP senior economic advisor Dr Amarakoon Bandara said Africa has improved economically but it is still in its first stages for it to be more productive.

“During the past decade or so, Africa has witnessed a significant turnaround from a region historically saddled with conflict, poverty, disease and corruption with no hope to an economically and politically vibrant continent with hope, despite this Africa is still in the initial stages of economic development. Industrial take off is yet to begin,” said Dr Bandara.

External financing in the form of FDI is still an important factor when it comes to investment but domestic sources are now contributing significantly to investment.

However there are significant constraints to investment in Africa. One major huddle was lack of access to credit.

African governments need to boost investment and channel that towards projects such as infrastructure development, the report said.