Political Stability Is the Key Lure for Foreign Investment and Growth in Africa

Cape Times (South Africa), August 30, 2007 | Go to article overview

Political Stability Is the Key Lure for Foreign Investment and Growth in Africa


BYLINE: Mills Soko

African countries need to aim for political stability before they can achieve economic growth. It is the first crucial step in encouraging foreign investment and becoming major stakeholders in the world economy. This was the thrust of former United Nations secretary-general Kofi Annan's Nelson Mandela Annual Lecture last month in Johannesburg.

Annan said Africa's progress rested on three pillars: peace and security; development; and human rights and the rule of law.

"On the first of these pillars - peace and security - we have seen real and measurable progress in the past decade. Many bloody civil wars have ended and there are fewer inter-state conflicts than there used to be," he said.

This optimism is supported by new research that shows that Africa is indeed a continent on the move.

The World Bank's Governance Matters 2007: Worldwide Governance Indicators 1996 - 2006 report, released last month, reveals that a number of countries in Africa are striding forward in improving governance and fighting corruption.

The study covers 212 countries and territories, and says that, from 1998 to 2006, Kenya, Niger and Sierra Leone have shown marked recent improvements in the measure of "voice and accountability", while Algeria and Liberia have strengthened their rule of law. Algeria, Angola, Libya, Rwanda and Sierra Leone have greater political stability, and Tanzania has recorded gains in controlling corruption.

The report indicates that other African countries still face enormous governance and development challenges, but adds that the positive African examples show it is possible to make significant progress in a relatively short period of time.

Annan added that this growth in stability had gone hand in hand with development - peace, he said, would only endure when it was accompanied by economic and social development.

He noted that 27 African economies were projected to grow by more than 5% this year. Direct investment has increased by more than 200% in the past five years, and exports were on the rise.

According to Dianna Games, director of research and consulting company Africa@Work and managing editor of The South African Journal of International Affairs, the international perception of Africa as a high-risk location for doing business is now beginning to change.

She said that Africa is "generally more politically stable than 10 years ago", which is encouraging great international interest in investing in African companies and markets.

Games said the link between politics and economics is perhaps most vividly demonstrated by the case of Zimbabwe. The collapse of the Zimbabwean economy can be linked directly to the political turmoil and doubt that surrounds the legitimacy of that country's government.

"One of the main barriers to doing business in Africa is the lack of policy and regulatory certainty in many countries. Governments often change the playing field at random and with little logic. …

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Political Stability Is the Key Lure for Foreign Investment and Growth in Africa
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