Most African governments hang a “Welcome!” sign for foreign investors. But do they really know what investors seek in a recipient destination?
The available evidence is they do not. Most African leaders’ put forth generic, vaguely accurate, but limiting sales pitches: “Invest in my country because we have lots of natural resources and a large pool of young, skilled workers.” For many investors, these are necessary attributes, but for most they are insufficient when committing finances in a foreign marketplace.
Most African nations’ spotty records as investment destinations demonstrates this approach’s inherent limitations. To learn what other factors investors take into account, and how they prioritize them, the Democracy Institute conducted, in conjunction with Nairobi-based Kehosa Investments, an exclusive survey for the Douglas Development Institute.
A nationally representative sample of American High Net Worth Individuals was surveyed. Each respondent has a track record of significant levels of investing, domestically and internationally, as individuals and as corporate decision-makers. They were asked, “Which two of the following factors are the biggest obstacles to you investing in Africa?” and “Which two of the following factors would most encourage you to invest in Africa?”
What turns off American investors are mostly “Made in Africa” policy and institutional errors. The list reflects poorly upon many African nations’ political and economic climates.
Investors are keenly aware of confiscatory tax policies (22%), high crime rates (18%), onerous red tape (12%), unskilled labor (10%), and inadequate infrastructure (6%). Yet, they are as concerned about less tangible and less quantifiable challenges, such as weak property rights (34%), disquieting levels of political corruption (20%), politicized judiciaries (16%), the threat of terrorism (10%), and unstable governments (8%).
The greatest obstacle, however, is “Made in America.” Topping the list at 44% is the threat, real or imagined, of Trump’s tariffs. While not of their own making, respective African governments nonetheless need to improve drastically their strategic diplomacy and negotiating tactics to assuage investors’ fears.
Africa unsurprisingly will attract more investment if the aforementioned obstacles are minimized or removed. The investor incentive wish-list is dominated by trade-themed, export-oriented items, such as export potential (34%), the hope of low American tariffs (26%), undeveloped natural resources (22%), and inexpensive labor (10%). Interest in local and regional commercial potential led 18% to cite the appeal of untapped domestic markets.
Investment-seeking governments can walk their welcome talk by strengthening property rights (18%), lowering taxes (16%), reducing crime (14%), lightening the business sector’s regulatory burden (10%), and improving workers’ skill sets (8%) and infrastructure (4%). Most challenging will be ensuring impartial judiciaries (12%) and stable governments (8%).
African governments cannot control trade policies exported from Washington. But they can put their domestic houses in order, if they truly want to be foreign investment magnets.
Patrick Basham directs the Democracy Institute (www.democracyinstitute.org). A global pollster, he regularly surveys American voters for the UK’s Daily Express newspaper. He also provides governments and companies with strategic foreign investment counsel.
