Investment in Africa

Some findings from a recent survey of corporate executives of leading US companies:

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• Rule of law -- The rule of law does not prevail to the degree required to make Africa an attractive investment destination. This applies to corporate, societal, and criminal law
  
  
• Attraction -- While the enormous natural resources are an attraction, Africa does not offer a sufficiently large middle class of consumers or show consistent economic growth that could promise a future market. Most African countries are small and have poor markets, and there are barriers to regional markets--such as taxes and the freedom of movement of people and goods
  
  
• Risks versus rewards-- Given the currently perceived risks in Africa, the rewards have to be very high to make it worthwhile to invest. Presently, U.S. corporations say that there are very few visible promises of future returns high enough to justify significant interest in investing
  
  
• Supportive business framework--Transportation and communications infrastructure, trained or trainable human resources, and equitable trade and employment practices are insufficient to support corporate investment
  
  
• A welcoming environment-- African countries are not doing a sufficient job of providing education and health services to the potential workforce, which makes the potential hire-able local insufficient to support investment.

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To be fair, you should probably read the whole piece, but I thought these assessments ring true. They reflect a cultural problem in many African countries. Where you have rampant corruption, it amounts to organized theft from the society as a whole. The strength of the free market system or culture is that the guy with the best product and service at the best price gets the deal. In corrupt cultures the guy willing to pay the most to corrupt officials gets the deal regardless of price or quality.

There is also the issue of property rights. Why would anyone invest in Zimbabwe where their property can be seized at the whim of the government?

When I talk about culture, I am not saying Africans are not capable of adapting to a modern free market culture. Certainly many Africans have found success adapting the the culture of the US. Nigerian immigrants have achieved exceptional results in the US. Unfortunately, it is much more than they would have had to opportunity to achieve in Nigeria. Changing the culture of corruption will be the key to success for Africa.