PROMOTING SUSTAINABLE INVESTMENTS IN AFRICA: KEY FACTORS

Africa is experiencing historic growth. Six of the ten fastest growing economies in the world are in Africa. The continent has enormous potential, and it is in the EU's interest to help African countries expand trade and investment to full development. At the same time the EU is applying pressure on African countries to have them signed EPAs (Economic Partnership Agreements) claiming that EPAs are beneficial because they will shift the relationship between the EU and Africa from one of dependency on tariff preferences to one that promotes business competitiveness. But if 30 years of non-reciprocal free market access into the EU did not improve the economic situation of the ACP, how can a reciprocal trading arrangement achieve anything better?

Under the type of EPAs currently proposed by the EU, African countries would eventually have to liberalize 80–90 per cent of their trade with the regional bloc in order to gain duty-free access to European markets. That would allow African countries to use tariffs to protect only a small portion of their products from competition with European goods.

To stay within that narrow band, governments would have to make some hard choices. They could choose, for example, to maintain tariffs on valuable revenue-raising imports such as cars and electronics, protect staple foods such as maize, exempt a few existing industries from competition or retain the ability to support future industrial development. In the short term, lifting tariffs on European goods would deprive many governments of an important source of fiscal revenue. Many countries would lose the valuable income they earn from tariff duties. Until countries are able to diversify their revenue bases — often a long process — they could be confronted with national budget deficits, possibly leading to lower spending on education, health care, poverty reduction and social security.

One possible solution, would be for the EU to accept an agreement that is only as reciprocal as necessary to meet WTO requirements, while leaving the ACP countries some room to safeguard their domestic markets and industries. Such an arrangement would initially require ACP countries to open up their markets only enough to comply with WTO rules. They would liberalize just 50–60 per cent of their EU trade over a long transitional period of 20 years or more, while the EU would continue to grant full market access to all ACP countries. During the transition, the EU also would support the building of viable industries in ACP countries.

Key Factors for Sustainable Investments

1. Provide a stable regulatory framework for business cooperation andn foster regional integration among African countries to increase regional trade.
2. Establish specific programmes for good governance and thus enhance overall investment stability. This would comprise: supporting a police and judiciary system based on the principle of separation of powers; supporting pluralistic election commissions; reinforcing national parliaments; supporting an independent court of auditors; strengthening public finance management syqstems; and fighting corruption at all levels.
3. Support civil society to make sure that its needs are heard and considered.
4. Increase transparency of taxation/customs laws and enforce their lawful application.
5. Reduce the costs, time and number of procedures required for setting up a business.
6. Beside fostering regional integration, engage in trade facilitation in the wider sense i.e. improve transport infrastructure, reduce customs tariffs, eliminate inverted tariffs, remove non-tariff barriers, decrease trade delays at borders and support export marketing and promotion.
7. Develop local capacities, notably through decentralization, to facilitate investments in all regions.
8. Simplify access to finance: reform collateral and bankruptcy laws, provide micro credits with affordable credit terms for local entrepreneurs, increase transparency of conditions for credits, establish an institution that proves the credit-worthiness of debtors.
9. Ensure investment protection: advance property rights and intellectual property rights, increase transparency of decision-making procedures of managers.
10. Look for ways to provide training and access to education to facilitate access to high skilled human capital.
11. Ensure energy security and energy effciency whilst already focussing on sutainability/renewal energies.
12. Reward companies ready to share challenges, experiences and opportunities around more competitive and sustainable strategies and practices in Africa.
13. Engage governmental institutions together with enterprises and stakeholders in new ways of thinking and partnering.
14. Secure support for codes of ethics in the private sector.

Establishing a network of reliable local partners is a challenge for European organizations. African business organizations remain very weak as they lack the necessary means (money, skilled manpower and expertise) to design and generate value-added services for their members and to foster international competitiveness.

European business organizations should further provide technical assistance and co-operation with their African counterparts with a particular focus on capacity-building and institutional strengthening.