Keywords: Africa, foreign direct investment (FDI), transnational corporations (TNCs), reform strategy, economic development, technical modernization

The attractiveness of Africa for investors is growing rapidly, according to experts of the well-known British consulting company Ernst and Young. They made this conclusion after studying statistical data for recent years and conducting a survey among CEOs of large European companies.

According to the Africa Attractiveness Survey 2014, a survey of more than 500 top managers, the Black continent is not currently considered an outsider for business. "In recent years, attitudes towards Africa, in comparison with other regions, have changed dramatically," the document emphasizes. And further: "If in 2011 the continent was in the penultimate place in terms of investment attractiveness, then last year [2013] it took the second place, leaving only North America ahead" ¹.

Africa, in our opinion, is on the verge of economic renewal. The continent's countries need to diversify and structurally transform their economies and manage them more effectively. Transformation should include, first of all, industrialization and modernization of agriculture, including services and sectors such as infrastructure, energy and water use. This will allow us to ensure stable economic growth in the future, create new jobs, eradicate poverty and, as a result, embark on the path of sustainable development.

WHAT IS THE ROLE OF FOREIGN DIRECT INVESTMENT?

When such large-scale reforms are implemented, the inflow of capital from outside is not a panacea for possible difficulties in economic development. At the same time, attracting foreign direct investment (FDI), usually carried out by multinational corporations (TNCs), can open the way for African countries to create modern competitive industries.

Along with investments, recipient countries in some cases gain access to valuable assets of multinational corporations - advanced technologies, managerial and organizational experience, trademarks, special knowledge in the field of production and sales organization, marketing, access to financial resources and equipment markets, and modern methods of training and developing human resources.

At the same time, experts of the United Nations Conference on Trade and Development (UNCTAD) emphasize that developing countries should carefully weigh all possible costs and benefits of using an industrialization strategy that places a significant emphasis on participation in international production networks of TNCs. Indeed, their focus on this strategy inevitably leads them to enter into more and more restrictive agreements, the potential of which for economic development is not always clear to African entrepreneurs and managers.

The participation of African States in international production networks creates only limited opportunities for them to obtain the latest Western technologies. In addition, developing countries, which are usually only at the initial stage of industrialization, may find themselves permanently locked in the lower links of the"value chain".

This is due to strong competition from other, mainly European and American, suppliers of certain industrial or agricultural products, as well as due to strict control over the use of intellectual property on the part of the leading company producing goods of this group. Even relatively successful African companies do not enjoy a level playing field in many of these networks.²

In global pot estimates-

Today, the cautious optimism that was lost only recently is returning to the world of foreign direct investment. In 2013, the total volume of FDI inflows worldwide increased by 9% and reached $1.45 trillion. FDI inflows increased in all major economic groups-developed and developing countries and countries with economies in transition.

According to UNCTAD forecasts, global FDI flows should increase to $1.6 trillion in 2014, $1.75 trillion in 2015, and $1.85 trillion in 2016. This growth will mainly be attributed to investment in developed countries, as the economic recovery in these countries has recently been gaining momentum. However, the unstable situation in some emerging markets and the risks associated with political uncertainty in some States, as well as regional conflicts occurring in different parts of the world, may negatively affect the expected revival of FDI flows.

Developing countries have been playing a major role as recipients of FDI for a number of years. In 2013, FDI inflows to these countries reached a record level of $778 billion, accounting for 54% of global FDI inflows. However, the overall economic growth rate of these countries has slightly decreased.

INVESTORS ' INTEREST IN AFRICAN COUNTRIES IS GROWING

Although foreign direct investment flows from developed countries to developing countries resumed in 2012, following a sharp decline at the end of the previous decade, their share in total global FDI flows remains relatively low at 39%, down from the peak of ^{57% in 2007.3}

In Africa, FDI inflows increased by 4% in 2013 to $57 billion, supported by international and regional investments focused on new markets, as well as infrastructure projects. Expectations of further growth in the emerging African middle class have stimulated FDI flows to consumer-driven industries, including food processing, information technology, tourism, the financial sector and retail.

Investment increased mainly in eastern and southern Africa, while inflows declined in other subregions. In the southern part of the continent, FDI almost doubled to $13 billion, mainly due to unprecedented inflows to South Africa and Mozambique. In both countries, investment was mainly directed to infrastructure projects, although in Mozambique, capex in the gas sector also played a significant role. In East Africa, FDI increased by 15% to $6.2 billion. - as a result of the increase in their inflow to Ethiopia and Kenya. It should be noted that Kenya is generally turning into a significant center of business activity. And not only because of the development of new oil and gas fields, but also as a result of the growth of manufacturing industries and the development of transport. Ethiopia's industrial strategy is designed to attract Asian capital for the development of mainly manufacturing industries.

In North Africa, FDI inflows decreased by 7% year - on-year to $15 billion in 2013. In Central and West Africa, it also declined to $8 billion and $14 billion, respectively, partly due to political and security uncertainties.

AFRICAN COUNTRIES HELP EACH OTHER

In recent years, investment flows between African countries, in which TNCs play a leading role - between South Africa, Kenya and Nigeria-have been growing. The share of cross-border investment by African States in announced new projects (out of the total amount of investment within the continent) increased from 10% in 2009 to 18% in 2013. The table below provides specific data on foreign direct investment inflows to various African countries in 2008-2013.

In recent years, regional FDI flows have become a significant source of foreign capital for many, even the smallest, landlocked and non-oil-exporting countries in Africa.

The increase in FDI flows between African countries is a consequence of the efforts made by the region's leaders to deepen regional integration. These investments are mainly directed to the implementation of projects in the manufacturing sector and in the service sector. Extractive industries account for only 3% of the total value of announced new investment projects.

If the participation of African countries in global value chains is mainly limited to processing raw materials exported to developed countries, then banking assets can be considered the most attractive objects for intra-African investment. Quite a lot of investments are also directed to such areas as telecommunications, pharmaceutical and brewing industries.

If in 2006 investment funds operating in Africa had less than $1 billion in capital, then by the beginning of 2013, the number of investment funds operating in Africa was less than $ 1 billion. it increased to almost $5 billion.

Although Africa's economy accounts for only a small share of the world's gross domestic product, it is growing at a fairly rapid pace. The main drivers of this growth are a large young population and a growing environment-

Table

FDI inflows to Africa, 2008-2013 ($billion)

Источник: UNCTAD. World Investment Report 2014. Investing in the SDGs: An Action Plan. N.Y., 2014. P. 205 - 206.

research institutes of Russia, as well as export-oriented production facilities. Investors are also attracted by the economic reforms being implemented in many countries, as well as the growing trade turnover between different countries in Africa.

THE INTEREST OF THE "SHARKS OF GLOBAL BUSINESS" IS NOT DISINTERESTED, BUT IT IS SYMPTOMATIC

Many African assets have recovered much faster after the recent global financial and economic crisis than assets on other continents, which has attracted increased attention from foreign investors. The object of their attention was, for example, the Nigerian banks Guaranty Trust and Zenith. Bill Gates, the richest entrepreneur on the planet, has expressed interest in the Egyptian company Orascom Construction.

The Senegalese company Sonatel, which controls 64% of the telecommunications market in Mali, set a number of continental records for profit growth ⁱⁿ 2012.4.

According to experts from UNCTAD, foreign investors are currently, unfortunately, not sufficiently aware of the opportunities for highly profitable investment in Africa. This is not an easy job: bringing relevant information to potential capital investors requires the involvement of highly qualified specialists and significant costs. In some cases, it is advisable to work purposefully with specific investors who are interested not only in the natural resources of the Black Continent, but also, for example, in investment projects.-

investments in tourism, telecommunications, as well as in the food and light industries of African countries ⁵.

A positive change in the investment image of Africa is being promoted by the measures taken by many countries of the continent to liberalize the regulation of foreign direct investment. Over the past decade, a number of African countries have lifted most restrictions on the financial activities of foreign investors in their countries, as well as revised their legislation to fully integrate FDI into their economic development strategies.

According to annual surveys conducted by UNCTAD, in 2013, 59 African countries and territories took 87 concrete steps, in one way or another, related to stimulating the flow of foreign investment. At the same time, unfortunately, the number of regulatory and restrictive measures taken by the authorities, which limit the investment policy opportunities of Western partners, is growing, although not very quickly.

In recent years, the leaders of some European countries (including the countries where TNCs are based), referring to the need to overcome the consequences of the financial and economic crisis and the growing unemployment rate almost everywhere on the African continent, have begun to recommend entrepreneurs to return funds that have already been invested or are planned to be invested in the African economy. It is argued that such measures are necessary to create new jobs in Europe. Such intentions have been met with little enthusiasm in Africa, and some African Governments have recently responded by countering the unmotivated withdrawal of foreign investors ' investments in their economies.⁶

In an effort to attract more FDI, the Governments of a number of African countries, not only by liberalizing investment regimes, also apply a wide range of special measures to encourage investors, including tax, customs, financial, etc. benefits. Among the important levers of stimulating foreign direct investment are tax breaks: changing the tax rates on corporate activities and on dividends transferred abroad to a favorable side, granting tax discounts, and tax exemption for several years (tax holidays).

Eligibility for tax benefits is usually determined by national priorities. For example, in Egypt, tax holidays for up to 15 years are granted to investors when they implement socially significant projects, such as the construction of cheap housing. In Senegal and Cote d'Ivoire, benefits are provided to investors working in small and medium-sized businesses. Guinea and Kenya offer special tax rebates if they invest in the economies of the least developed regions of the country.

In Guinea, Ghana and Mali, tax incentives are granted to foreign companies that develop local mineral resources, while in Lesotho, the development of labor-intensive industries is similarly encouraged. In Ghana, back in 1994, the income tax on mining companies was reduced from 55% to 35%, and the royalty rate - from 6% to 3%. In Mali, mining companies are exempt from property and investment income taxes, value-added and service-related taxes, and registration fees for the first three accounting periods of their production activities.⁷ In many African countries, the priority category (in terms of attracting foreign capital) includes enterprises operating for export and companies operating in agribusiness.

Most African States reserve the right to impose certain currency restrictions in the event of an unfavorable balance of payments situation. However, these restrictions generally do not affect transfers of income from foreign investment to recipient countries. Many local governments legally guarantee foreign investors the right to repatriate their capital and profits. In some countries, such as Ghana, Zambia, Uganda, and Tanzania, any currency transactions are generally removed from the control of central banks.

At the same time, it should be noted that the development goals of most African states do not always coincide with the global interests of TNCs and other major foreign investors. An important task of these countries is to maximize the benefits of FDI, ensure acceptable terms of partnership with foreign capital for all parties, and create mechanisms for its effective participation in the development of national economies.

¹ Africa Attractiveness Survey 2014 -http://www.ey.com

² UNCTAD. Trade and Development Report, 2014. N.Y. and Geneva, 2014. P. 103 - 106.

³ UNCTAD. World Investment Report, 2014. Investing in the SDGs: An Action Plan. N.Y., 2014. P. XIII-XIV.

⁴ http://www.sonatel.sn

⁵ UNCTAD. World Investment Report 2003. FDI Policies for Development: National and International Perspectives. N.Y., 2003. P. 36 - 37; UNCTAD. World Investment Report 2005. N.Y., 2005. P. 50 - 62.

⁶ UNCTAD. World Investment Report 2014... P. 106 - 114.

⁷ UNCTAD. Economic Development in Africa. Rethinking the Role of Foreign Direct Investment. N.Y., 2005. P. 42 - 43.

Permanent link to this publication: