Regulatory frameworks vital for FDI
There is much opportunity for Africa to attract investment flows
ENABLING regulatory frameworks across Africa are vital for the continent to attract more foreign direct investment (FDI).
As both developed and emerging economies seek new markets for growth, there is much opportunity for the continent to attract investment flows. One area in which Africa can attract more investment is the renewable energy space. While China has established itself as a dominant player in the manufacture of components of solar energy plants, Africa could compete by attracting FDI in this area.
Backed by lavish government support, tax breaks and incentives, China is now responsible for half of world production of solar energy components.
Countries such as SA have established enabling legislation, including the Integrated Resource Plan to attract investment into the green economy, but politicians also needed to send the right message about the country embracing FDI.
Pre conditions such as Black Economic Empowerment (BEE) and localisation requirements must be consistently applied. Politicians, labour and business need to send a unified message that they want to attract more FDI. Investors want a clear and consistent framework in which to work.
Many African countries have implemented regulatory reforms to specifically attract FDI. Out of the 15 Southern African Development Community (SADC) member states, for example, 12 have a specific law governing private investment, and/or foreign investment or have established an investment promotion agency.
Countries such as SA, Lesotho and Botswana have no specific FDI legislation, but have liberal investment regimes. FDI legislation is under review in Namibia, Seychelles and Zimbabwe, while Botswana’s Industrial Development Act, which deals with licensing, is also under review.
African countries are taking FDI seriously and looking to promote investment where possible. However, overcoming negative perceptions about investing on the continent is also vital to attracting more investment in future.
According to a recent survey carried out by Ernst & Young, capital in-
Reforms are required to meet the demands on the continent’s growing economy and to ward off the inevitable strains which will be placed on countries as a consequence of the international economic woes experienced by some of its main trading partners.
SA’S Minister of Finance ended 2011 with a hopeful note for those wanting to invest in the country. He announced that within a year to a year-and-half a clear, legal regulatory framework will be in place to provide foreign and local business a clear picture of how to go about investing in SA. No doubt this necessary initiative will be welcomed by commentators and businesses alike. In addition we will see moves afoot in other African states which are in need of such regulatory reform.
Many African countries have implemented regulatory reforms to specifically attract FDI Out of the 15 Southern African Development Community (SADC) member states, for example, 12 have a specific law governing private investment, and/or foreign...