Africa: Go Beyond the Hardware!

Published on 4th October 2005

Foreign Direct Investment (FDI) has been the largest source of capital for developing countries, according to Vishwas Govitrikar of UNDP. Over 50% of this goes to China, Singapore and India, indicates Nardos Bekele-Thomas (Deputy Resident Representative, UNDP). In the past decade, adds Salma Mazrui (Chief Executive Officer, Kenya Private Sector Alliance), FDI has drastically fallen in Kenya, compared to Uganda and Tanzania. The African Executive talks to Julius Kipng’etich (Director, Kenya Wildlife Services) on FDI drivers.

Julius: There are four reasons why investors look for a country: resources, markets, efficiency, mergers and acquisitions.

AE: Why hasn’t Africa been able to tap FDI?

Julius: Africa has been good at advertising her hardware: scenic grandeur, pristine ecology and minerals among others, but neglected developing her software. Hardware goes hand in hand with software and software here speaks of Africa’s attitude, systems and perceptions. Kenya for example, has all along believed that she is the best in East Africa but the other countries are rapidly bypassing her in her complacency.

AE: So what is the way forward?

Julius: Africa must seriously address political stability and security. No investor will land where people are busy hurling bananas and oranges at each other. Look at Tanzania; she has been busy oscillating between The Common Market for East and Southern Africa (COMESA) and East African Community (EAC). At one time, she is in COMESA. The next minute, she has pulled out and is now in EAC. Why not be stable? Most African countries have either weak systems or poorly designed (or non existent) procedures. Are our Visa systems friendly? Are services in our public offices efficient and friendly? What about our linkages? Is there connection between our academic institutions and development? Is our education improving life or breeding parasites?

The broken linkage is further manifested in most policy frameworks. There is much policy formulation which just gathers dust on the shelves devoid of implementation. Consider the Communication Commission of Kenya. It has delayed telecommunication integration with the rest of East Africa. Take the privatisation bill for example. One minute, Kenya wants to sell the Kenya Railways and Posta. The next minute, she doesn’t. Investors pick such signals and take them seriously. A disappointed customer spreads a message eleven times more than a potential investor.

AE: Does branding have a role to play in attracting investment?

Julius: Absolutely yes! South Africa won the World Cup bid as a result of heavy branding. The same applied to Australia with the Olympics. But what are most countries doing? They either don’t know the value of branding or are busy branding themselves victims, arenas of death and wasting away, corrupt and violent. I am sorry to say that the African media has specialized in this. It is busy reporting on negative trivialities at the expense of investing in attracting issues. Why shoot oneself in the leg? If you are not proud of yourself, who will take pride in you? This poor image and high risk perception must be corrected. Some NGOs are very good at this. The mining of Titanium in Kenya has been delayed for nine solid years due to a negative NGO report. Africa must package herself well and this will attract investment.

AE: Corruption! There has been a lot of talk on this in Africa.

Julius: Whereas I do not condone it, we must learn from China. In China, corruption is tied to performance and speeds up action, hence attracting investment. It oils the process rather than causing friction. In Africa, the opposite happens. It is a road block and inhibits performance. 

AE: Can you illustrate your FDI points with Kenya as a case example?

Julius: Kenya has very good hardware. She is a land with the whole of Africa rolled in it. Talk about lakes, the Rift Valley, savannah, animal species and coastline. They are all found here, yet the country is poor for lack of strategy, accountability and value addition software. It is very difficult to move raw materials from the Kenyan port to the factory. There are a lot of delays at the port making cargo to incur hefty storage charges, not mentioning 28 different clearance stamps on imports. Doesn’t this impede investment? Does Kenya need foreign aid to clean its streets and the Nairobi River? What is the City Council doing? South Africa has a tourist strategy for Kenya. Does Kenya have the same for other African nations? Don’t we rush for “big guns” and neglect local and regional investments? Rwanda has aped South Africa and is looking at Kenya as her source of FDI. Rwanda has studied the Kenyan Tea industry and guess what? She recently beat Kenyan Tea in quality at a recent Tea auction. What message is she sending? Kenya exports 80 million kilograms of tea to Europe. Europe uses 20 million and repackages the remaining 60 million, branding it European tea. What message is Europe sending? Recently, Sudan told us, “Don’t send us tea in chests!” What message was Sudan conveying? Add value to your tea!

AE: What is your message to Africa?

Julius: Africans need to rewire their mindset. Africa has spent too much time talking but very little implementation. In addition, Africa has been a cry-baby, complaining and expecting the rest of the world to be merciful. This will never happen. In fact, one who is always complaining is a ripe candidate for exploitation. Africa must rise up and develop good negotiation skills with her population in mind. Tanzania has the best mining act in Africa but how has it benefited the ordinary Tanzanian?

If an Arab in Dubai could harness the desert and make it a hub of economic activity, what is impossible in Africa? What are African countries doing to harness their “deserts”? Who said that only South Africa is the gateway to other African countries? Can’t we make rapid changes in our airports? Why are big banks focussing more on laying operation rules for small banks? Can’t they focus on tapping the unbanked market? What is Africa doing about the high cost of doing business, start-and-stop sector reforms and high debt burden? People in Dubai looked at their options, developed their model and attracted investment. Africa needs a very high escape velocity from her current woes and this will happen through radical changes and sacrifice.

AE: You worked with the Investment Promotion Centre nine years ago before joining the Kenya Wildlife Society. Do you have any wisdom from the wild for Africa?

Julius: In the park, I have observed that weak animals rarely survive. They are the first to be devoured by predators. Africa must be careful because the international community will always look at the areas of her weakness to exploit. Investors are like bees, they are attracted by incentives and the right mix of packages. Africa must package herself well to attract investors.

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