COMESA RIA COMESA and other African countries consistently figure among the


World Bank’s Most Improved in Doing Business Top 10 Lists. In fact, the Doing Business Report 2012 evaluated that up to 78% of African countries undertook meaningful governmental regulatory reform as a means of improving the business climate and encouraging investment.


Future, 10 COMESA member states are among the top 10 in 13 different classifications including best economic potential, best infrastructure, best business friendliness, best for quality of life, best FDI strategy, best human resources, best cost effectiveness, most inward FDI projects, internet users per capita, labour force, total tax rate per percentage of profit, and companies in high-tech manufacturing


“ WWW.IFLR.COM Through remarkable reforms and fresh investment codes, investors now


can repatriate profits from throughout Africa, and all are treated equally – whether local or foreign – and are offered trade and investment insurance. The African Trade Insurance Agency, a COMESA institution offering membership to all African Union member states, provides export credit insurance, political risk insurance, investment insurance and other financial products to help reduce the business risks and costs of doing business in Africa. It has been rated A with a long-term stable outlook by Standard & Poor’s. Similarly, COMESA countries, along with most African countries, are members of the World Bank’s Multilateral Investment Guarantee Agency (MIGA).


It is also important to mention that the improved business and


investment climate, and reduction in red tape throughout the continent, are benefitting not only large firms. Many African countries are building a healthy SME [small and medium-sized enterprises] sector which, along with vastly enhanced infrastructure, are proving to be the backbone on which investments are being made.


Statistics show that FDI into consumer industries in sub-Saharan Africa has risen over the last decade. Could these industries rival the traditional dominance of natural resource sectors? Indeed, Africa is now witnessing a commodity-boom that is driven by di- versifying economies, a growing middle class of over 313 million consumers, and consumer spending breaking through the one trillion dollar mark. In- vestors in Africa are now increasingly market-seeking. That said, I do not believe we can speak of a sector dominating another. I prefer to refer to the diversification of African and COMESA economies. While opportunities in the natural resource sectors remain huge, new opportunities in all other sectors are emerging.


What common pitfalls and misconceptions do you see foreign investors encountering either when making an initial investment or operating locally? Many do not realise that times have changed in COMESA and Africa in general. Africa has seven out of the 10 fastest growing economies in the world, consumer spending projected to hit $1.4 trillion by 2020, and a mar- ket of 1 billion people which is surpassed only by China and India. The continent has 600 million mobile phone users – more than in Europe or


COMESA’s ultimate goal is to achieve a fully integrated economic community. What are the recently completed and next steps towards integration into a single market? Following the Preferential Trade Area, which traces its origins as far as the 1960s, the treaty establishing the Common Market for Eastern and South- ern Africa was ratified in 1994, and the Free Trade Area, now comprising 15 of the 19 member states, commenced in 2000. Continuing on the road to regional integration, the COMESA Customs Union was launched in 2009, and a COMESA Common Market and Monetary Union have been established as future milestones.


COMESA, the Southern African Development Community (SADC) and the East African Community (EAC), bringing the total number of states to 26 and creating a market of close to 600 million inhabitants.


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Today, how does a foreign investor in a COMESA country benefit from the region’s economic integration? COMESA is Africa’s largest regional economic community. Its most obvious benefit to investors is the fully functional free trade area offering duty-free access to 15 of its 19 member states, which are located on strategic world trade routes and in close proximity to global markets including Europe, the Gulf, Asia, and the rest of Africa. COMESA therefore provides a larger mar- ket space for businesses to operate in, where procedures and policies are being further simplified and harmonised.


IFLR REPORT | FOREIGN DIRECT INVESTMENT 2014 11


Not investing in Africa at this time is like missing out on Japan and Germany in the 1950s and Southeast Asia in the ‘80s


Further, a Tripartite Free Trade Area is also being negotiated between


Most COMESA governments have been making bold political and economic reforms aimed at further liberalising their FDI regimes


Further, according to the Financial Times’ African Countries of the


EXPERT ANALYSIS


America – and productivity growth of nearly three percent per year (com- pared to 2.3% in the US) reflecting an improvement in the skills of Africans.


Along the same lines, according to the UNCTAD World Investment


Report global FDI fell by 18% last year compared to 2011 levels. Over the same period, African FDI increased by five percent and COMESA FDI by 66% (taking into account Egypt’s recovery in FDI levels). Also noteworthy are FDI inward stock 2012 figures, which grew by 424% compared to 2011 levels, and COMESA member states’ FDI outflows figures which grew by 225% for the same period.


At the same time, investors must realise that when operating in a new


place, they have to understand the culture and adapt to it, and not the opposite. Investing in Africa is not like investing in South America, Europe or Asia – the way to do business is necessarily different. The rate of return on investment on the continent has averaged 29% since the 1990s, compared to only 10% in the EU. This is the bottom-line. Foreign investors must seize the chance and adapt, or others will move in. In fact, three of the top five fastest growing investors in the continent’s new projects are African, and intra-African investment has more than doubled. Many do not realise that African corporate giants are now the ones setting the pace for everyone else.


Apart from the general business culture, another common misconception


is the perceived lack of guarantee mechanisms. Governments are keen to welcome investors and are putting in place the necessary measures, and investors have to do their homework and use these excellent mechanisms that are available in the region.


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