U$200 billion of FDI Could Bailout Africa’s Economy

President Paul Kagame and President Yoweri Museveni listen to an exhibitor at The Global African Investment Summit

Experts believe Africa can overcome its economic challenges if it taps into the U$200 billion of Foreign Direct investment-FDI that is waiting for bankable projects on the continent.

Last year, Africa which suffered a commodity price crunch plunging economic growth below 5% benchmark, is now focusing at FDI that stood at only U$ 54 billion in 2014 to grow its economies.

According to experts, bankable projects facilitated by investor friendly policies under the Africa integration would attract investors and thus tap into the resourceful FDIs.

“There is strong appetite for the region,” said Admassu Tadesse, President and Chief Executive, Preferential Trade Area-PTA Bank at the just concluded Global African Investment Summit.

The summit that attracted over 1000 delegates highlighted  investment opportunities to investors while promoting economic growth and improving infrastructure in East and Southern countries under the tripartite free trade area (TFTA).

The Tripartite Free Trade Area Agreement was established to encourage free trade and includes a collaboration of three regional economic communities (RECs); the Common Market for Eastern and Southern Africa (COMESA), Southern African Development Community (SADC) and the East African Community (EAC).

“We see very strong demand from our international partners to fund Preferential Trade Area-PTA bank to actually provide financial assistance to these economies.”

Experts say that strengthening the regional integration will also make the continent attractive to investors despite challenges of slow growth as well as risks instability in some countries.

So far, since the establishment of the Tripartite Free Trade Area Agreement (TFTA) foreign investments to the region increased by 78.1% to U$16 billion in 2014 although it is  still below the total global FDI flows amounting  to U$1.3trillion in the same year.

“East and Southern Africa’s ambition of harmonizing policies and removing trade barriers could be realised sooner if all member states fully utilise its features,” said Sindiso Ngwenya, Head of COMESA.

Participants at the Summit on Monday agreed that inability for member states to trade across borders makes the region less attractive to investors.

President Paul Kagame asked, “If we increase Africa intra-trade some of these problems would have been solved. Why can’t this be corrected which in the end gives some of the answers we are looking for?”

Experts at the summit noted that removal of barriers such as restricted movement of goods and people across borders, enhancement of infrastructure will facilitate trade in the region and thus boost growth for the economies.

“For example, Rwanda pushed for visas on arrival for all African passport holders to encourage freedom of movement and stimulate trade, as well as of course the One Network area initiative, which is likely to expand to Africa after its successful trial run,” said Francis Gatare, CEO of Rwanda Development Board (RDB).

Key sectors that are providing huge potentials for investment and have attracted more FDI’s since 2014 include; extractive industries, energy, information, communication and technology, services sector and  finance and banking.