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Unveiling the Investment Gap in Strategic Sectors in Sub-Saharan Africa: Analyzing an Old Development Anomaly

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Unveiling the Investment Gap in Strategic Sectors in Sub-Saharan Africa: Analyzing an Old Development Anomaly

INTRODUCTION

Sixty years after independence, sub-Saharan Africa is struggling to make its contribution to the global economy. According to the World Bank, for about 16% of the world’s population, sub-Saharan Africa accounts for only 3% of world GDP and barely 5.6% of foreign direct investment (FDI). One of the causes of this situation seems to be the crying insufficiency of investments in the strategic sectors of its economy. Health, transport, industry, agriculture, energy and education are in clear need of domestic and foreign capital. What explains this gap and how can it be filled?

Reasons for investment gap in  Sub-Saharan Africa countries

There are three reasons for the investment gap in strategic sectors in sub-Saharan Africa. Firstly, they are historical in that Africa has always been subject to various forms of domination, particularly by the West. Contracts or treaties have therefore long kept the African economy in a lethargic state to the point of preventing the implementation of sustainable and independent economic policies.  Then come the structural reasons in terms of approximate governance, the ineffectiveness of austerity policies (reduction of the state’s lifestyle), the budget deficit approaching 5.6% (source: World Bank), over-indebtedness etc. Finally, the weight of economic factors that increase the risks for national, inter-African and international investors and therefore discourage investment should not be underestimated. These are: the resurgence of epidemics, political crises, terrorism, the tightening of international financial conditions, uncontrolled migration (brain drain and skilled labour), the development of the criminal economy (embezzlement, trafficking of all kinds, maritime piracy, etc.). As stubborn as the difficulties are, there are fortunately ways of solving them.

Solutions to the investment deficit

In response to sub-Saharan Africa’s need for investment, a number of avenues exist and are being implemented by the various actors in the African economy. Firstly, states have undertaken measures such as the diversification of strategic economic partnerships and the revision of colonial agreements. This is in order to gain full control over their economies. Secondly, we are seeing the development and promotion of inter-African investment markets such as the African Continental Free Trade Area. The aim here is for Africans to solve their own economic problems. Finally, we advocate greater security for investments in general and foreign investments in particular. This could have positive effects on the attractiveness of Africa as an investment location. Security sweeps away risks and engenders confidence, confidence frees up capital at lower interest rates and the available capital benefits the sectors that need it most. This securing of investments must go through the elaboration and concerted adoption of legal and judicial rules that can guarantee them. 

CONCLUSION

Since the problem of insufficient investment in sub-Saharan Africa is a cross-cutting one, the remedies must involve the economic, political, legal, diplomatic, social and even the cultural. States and international and regional organisations must also play their part to the full. With the measures that are currently being taken, it is to be hoped that the gap will be filled in the coming decades.

Source: Rightforeducation.org

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