By Nasreen Seria and Renee Bonorchis
May 7 (Bloomberg) — Africa needs to do more to boost foreign direct investment and reduce its reliance on portfolio inflows that are vulnerable to crises elsewhere in the world, delegates at the World Economic Forum on Africa said.
Sub-Sahara Africa attracts 0.96 percent of global foreign direct investment, the lowest of any region, Tanzanian President Jakaya Kikwete said at the close of the three-day conference in the country’s commercial capital, Dar es Salaam, today.
“We don’t want quick flows in and out of Africa,” South African Finance Minister Pravin Gordhan said in an interview in Dar es Salaam yesterday. “We want foreign investment that results in infrastructure development on our continent, manufacturing industries being created, jobs created for Africans and a more sustainable platform for economic growth.”
The call for more long-term investment comes as the Greek debt crisis threatens to spark another wave of risk aversion that sent emerging market currencies tumbling late in 2008. South Africa’s rand touched a six-month intraday low yesterday on concern the crisis would spread, undermining growth in Sub- Saharan Africa, which the International Monetary Fund estimates will double this year to 4.7 percent.
“The last thing that Africa needs right now is the impact of contagion,” Obiageli Ezekwesili, the World Bank’s vice president for Africa, said in an interview. “The advanced economies have to take every necessary coordinated action to stem the tide of contagion.”
The conference was held in East Africa for the first time, attracting a record number of delegates of more than 1,000 as rising commodity prices helped improve the outlook for the world’s poorest continent.
The global economic crisis that started in 2008 pushed 27 million more people into poverty in Africa, putting the continent in a “precarious situation,” the African Union said on March 30. The proportion of African workers earning less than $2 a day probably increased to 86.6 percent in 2009 from 82.2 percent in 2007, the AU said.
Leaders including Mozambican President Armando Guebuza, Kikwete and Kenyan Prime Minister Raila Odinga said the right economic conditions need to be in place to boost investment, such as a stable political system, predictable economic policies and “good governance.”
“Africa is at the periphery of the global economy,” Kikwete said. “It can’t be left to continue.”
The World Economic Forum discussed ways that businesses and governments can tackle corruption in a session titled: “Corruption: the elephant in the room.” The forum said corruption is “conservatively estimated” to cost Africa more than $148 billion a year, increasing the cost of goods as much as 20 percent.
“Africa is really moving despite the governance, not because of it,” Michael Keating, executive manager of Geneva- based Africa Progress Panel, which monitors aid and investment to the continent, said in an interview. “Good governance rests on politicians being serious about it. A lot of African leaders are but there’s an awful lot of leaders in Africa who aren’t serious about it.”
African leaders also highlighted an infrastructure shortage that is hindering trade and growth. Africa needs to spend $93 billion a year on power, transport and water projects over the next decade to lift growth and reduce poverty, the World Bank said on Nov. 11.
Pascal Lamy, director-general of the World Trade Organization, told the conference that aside from a shortage of funding, poor infrastructure is also hampered by lack of integration between economies.
To contact the reporters on this story: Nasreen Seria in Johannesburg at email@example.com; Renee Bonorchis in Johannesburg at firstname.lastname@example.org.
Last Updated: May 7, 2010 10:15 EDT