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On attracting investors
“We have to consider what makes Africa not as attractive to investors as other parts of the world,” says Mamphela Ramphele, the distinguished South African former managing director of the World Bank and currently co-chair of the global commission on international migration.
Investors are the pilots of economic growth and social development. They inject into an economy modern and better technology as well as management skills. Foreign direct investors bring into an economy information about world markets that is not readily available to indigenous entrepreneurs such as those of Malawi who are still in the infant stage of growth.
As to why Africa is not attractive to foreign direct investors as other continents several reasons can be identified. Some apply to all African countries while others apply only to some of them.
No foreign investors will go to a country where there is no peace. Some African countries with abundant resources are receiving little foreign direct investment because of the civil wars that have been raging there endlessly, in certain cases for decades. Peace is the precondition for investment. We in Malawi have for the past 41 years known no major disturbance to peace but this has not been enough for the economy to grow.
There must be political stability. Even if a country has got peace if governments come and go irregularly the investment climate does not attract investors. Investors like to know that the government leader with whom they have signed an agreement today will be there five years hence to review the agreement. In countries of political instabilities there is a tendency by new incumbent to repudiate agreements made by their predecessors. Investors are usually at a disadvantage when agreements are repudiated or drastically revised.
The law of the country must be friendly to private property. It has taken some potential investors a long time to accumulate the wealth that now they want to reinvest. They do not want their assets to be seized by the new government on any pretext. If nationalisation takes place there would be adequate compensation. By and large to a business person who has taken great trouble to have his business established, compensation that follows seizure is no reparation, continuity is what the business person prefers.
The general atmosphere in the country should be business friendly. It is unfortunate when top officials make threats to punish business people who are said to exploit the small farmer or trader. If there is a case to make it must be made in more diplomatic language. A business person has constantly to watch the costs of operation to stay in business. He is not inclined to purchase our farmers’ products at a higher price if he can buy the same products at a lower price in other countries.
Days are past when Malawi was almost the sole source of tobacco sugar, tea and several other agricultural products. Now Malawi is in full competition with other countries in whatever it produces and sells. We may have to be more choosy about those who sell in our market but with those who buy in our market we have to be more circumspect. The authorities have in the past formed their own import and export agencies whose performance has not been outstanding.
The resources of the country must be given publicity. In October 2002 I was on a flight from Panama to Ecuador and was seated next to a man from Brazil. Seeing I was finding it difficult to complete immigration forms in Spanish, he asked me where I came from. I told him I was from Malawi “Where is that?’ he asked. I asked him if he knew the country called Mozambique he said he did. I said Malawi and Mozambique were neighbours. He knew Mozambique but not Malawi.
Before potential investors come into a country they must know its existence and where it is. They must also know its resources and its opportunities for investment.
With the collapse of the Soviet Union opportunities for direct foreign investment have multiplied. It is an investors market that we operate in. Governments that are hungry for investment opportunities in magazines like Time and Newsweek.
I cannot recall seeing Malawi’s profiles therein.
Admittedly such adverts cost thousands of dollars but perhaps not much more than the cost of cabinet ministers’ overseas trips. If we are serious about attracting direct foreign investment we have to be pro-active. We have to do some canvassing.
Before deciding where to locate its factory an investor does research on the size of the market for his products. Countries with a large population and well developed infrastructures are preferred to those that do not offer such facilities.
Where a country like Malawi belongs to regional economic blocs it must offer investors inducements that are at least as good as those of any other member of the bloc.
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The recent visit by Professor Jeffrey Sachs is significant as that of Mr Daniel Benor almost a decade ago.
Professor Sachs commands worldwide respect as an advisor on the economics of ex-socialist countries and developing countries. Mr Benor’s name was linked 15 years ago with India’s food security programmes.
It is a pity that such distinguished visitors are never invited to address gatherings of men and women who are actively involved in trying to transform the economy of the country.
Through the press we just learn they have talked to officials. Yet the development of this country is a matter of several groups of people: business people, academicians, members of the faith community, members of the economics association, opposition parties and so on.
In this country most people who occupy influential positions are not as well informed about the causes of our economic failures and what can be done to solve them. Public lectures by distinguished visitors and experts could go a long way towards making our elites better informed.
In the United States Congress (parliamentary) Committees regularly invite distinguished people to address them on issues. Something similar should be done here.
The recent visit by Professor Jeffrey Sachs is as significant as that of Mr Daniel Benor
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