Conflict and Crime Threaten Africa's Economic Future

Apr 03, 2013, 04:21 ET from Geopolitical Information Services AG

VADUZ, Liechtenstein, April 3, 2013 /PRNewswire/ -- 

Foreign direct investment (FDI) is declining across Africa as a result of political instability, conflict and criminal activity, despite the continent's vast untapped wealth.

"FDI inward stocks accounted for 31.3 per cent of gross domestic product (GDP) in Egypt, 49.5 per cent in Libya and 67.8 per cent in Tunisia," writes Teresa Nogueira Pinto in the World Review website. "Foreign investment is expected to decline further in those countries while the future of their governments is uncertain and conflicts persist."

Coal, oil and gas have been the main targets for foreign investment, accounting for 43 per cent. Manufacturing industries - mostly metal related - have accounted for 29 per cent, and the service sector as a whole accounts for 28 per cent.

"The huge potential of the Sahel and neighbouring countries, north and south, has exerted a strong pull on foreign investors in the past decade. Companies located in this region in 2012 were among the largest operating in Africa," she says. "But in spite of the progress made in the Horn of Africa, especially Somalia, conflicts over resources continue to undermine security and territorial integrity."

"The costs of doing business in the region will rise if Western companies have to spend money on security and reduce the number of people they employ."

Foreign investment in Sub-Saharan economies, including Guinea, South Africa, Djibouti, Rwanda, Zimbabwe, Burundi, Mozambique and Kenya, rose by around 28 per cent from 2010 to 2011. But a number of those countries face challenges ahead.

This is especially true for Kenya, where the total of FDI in 2011 reached US$335.2 million, says Pinto. But the results of the 2013 election, won by Uhuru Kenyatta, have been contested, and the president-elect faces charges of crimes against humanity at the International Criminal Court.

Click here to access the full World Review report.

About the Author

World Review author Teresa Nogueira Pinto is an African Affairs expert. She is an international relations consultant in Gaporsul Ltd, a business intelligence and advisory company which has some of the main Portuguese banks and companies among its clients.


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