R/€ = 15.32Change: -0.02
R/$ = 14.44Change: 0.04
Au 1065.25 $/ozChange: 1.55
Pt 834.50 $/ozChange: 3.00
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?

And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters About Us
RSS Feed
Article   Comments   Other News   Research   Magazine  
Sep 30, 2010

Infrastructure deficit deters foreign investment in Africa

The World Bank African chief economist Shantanyanan Devarajan speaks about possible economic challenges in South Africa
© Reuse this

Economic growth in Africa is expected to reach 6% in 2011, but the continent continues to battle to attract foreign investment, a World Bank economist said on Thursday.

Africa only draws about half the private foreign investment that China attracts, at around 15% of the continent's gross domestic product (GDP) growth.

Speaking at a lecture at the University of the Witwatersrand in Johannesburg, World Bank African chief economist Shantanyanan Devarajan said that this was mainly as a result of infrastructure and educational deficits playing a deterring role.

Interestingly, he pointed out that these deficits were rather being brought on by governmental failures than a lack of capital.

Nevertheless, Devarajan said that the continent had made some "impressive" strides in the past two decades as far as policy reform goes.

"Overall, progressive political decisions over certain economic policies that previously hindered growth had significantly improved across the continent."

In 1995, 13 African countries showed inflation rates above 20%, while only two countries showed inflation rates over 20% by 2007.

The progressive policy changes had led to growth accelerating to around 6%, alleviating poverty at around 1% a year for more than a decade, faster than the poverty decline in India.

Devarajan emphasised that the growth also took place outside the traditional oil, resources and commodities sectors.

With the onslaught of the economic recession, however, the continent's growth rate dropped to 1% again, but most African governments continued to follow sound economic policies, which catapulted the continent back to strong economic growth as the world economy started to recover. Africa is set to show GDP growth of around 5% for 2010.

Yet, the continent battles with certain developmental deficits and attracting foreign investment.

Devarajan said that greater African integration through cooperation, rather than trade, could greatly assist the continent in relieving some of its infrastructure challenges.

"Infrastructure, specifically in areas such as power, water, and transport, requires the benefit of economies of scale. This benefit could be leveraged from greater cooperation between the different countries in Africa. The problem is politics, and nations running scared of losing their sovereignty, so when push comes to shove, nobody wants to cooperate."

Further, Devarajan showed that progress had been made in attendance rates at schools, with an average of 80% of pupils now enrolled for primary education across the continent. However, a study done by the World Bank showed that 50% of grade three graduates could not write a complete sentence in their mother language.

The study further showed that 20% of the time teachers were not present at schools, while of those that were present, only 18% were actually busy teaching pupils.

These statistics emphasised Devarajan's earlier point, that these developmental deficits could easily be overcome by some fundamental intervention rather than increased capital investment.

He recommended several changes that could revolutionise the way most African countries and their citizen's operate, including the spread of information, especially relating to funding and where the funding goes, transferring the power to the client such as the communities, and implementing incentive structures that would motivate production.

Devarajan said that Africa was at the brink of a growth offtake, similar to where China found itself 30 years ago, or India, 20 years ago. Nevertheless, it still needed to work on some of the developmental challenges that the continent was faced with and pull increased foreign investment going into the future.


Meanwhile, South Africa has shown an average growth of around 3% over the last decade.

Finance Minister Pravin Gordhan recently declared the country's ambitions of 6% to 7% sustainable growth over the next 20 to 30 years, to eradicate poverty and grow employment rates.

While South Africa has been known as a relatively free economy, certain calls had recently been made for increased State intervention in the country's economic policies, mainly from the side of labour unions. The country has also been plagued with continuous industrial action in recent times.

Devarajan said that foreign investors were always looking for economic and political stability, paired with a competitive labour environment and added that these recent issues could be seen as a deterrent for foreign investment into the country.


Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
© Reuse this Comment Guidelines (150 word limit)
Other Economy News
Corruption Watch executive director David Lewis
Updated 4 hours ago The latest Transparency International report paints a bleak picture on corruption in Africa, with more than half of those surveyed perceiving corruption to be on the rise – and South Africa emerging as one of the worst performers. The African edition of the Global...
Sasol Inzalo chairperson Khungeka Njobe
Updated 5 hours ago Following hot on the heels of the listing of MTN Zakhele earlier this month, petrochemicals company Sasol’s broad-based black economic-empowerment (BBBEE) fund Sasol Inzalo Public, followed suit on Tuesday – the second company to list on the Empowerment Segment of...
Public Enterprises Minister Lynne Brown
Updated 7 hours ago Public Enterprises Minister Lynne Brown reported on Tuesday that far-reaching interMinisterial committee (IMC) discussions were advancing on how best to reform South Africa’s State-owned companies (SoCs), many of which were currently underperforming. There are around...
Latest News
Updated 3 hours ago Construction company Murray & Roberts (M&R) on Tuesday said board members Mahlape Sello and Royden Vice would be excluded from any discussion and documents relating to the investigation of the October collapse of a support structure of a pedestrian bridge being built...
Updated 3 hours ago The Nuclear Industry Association of South Africa (Niasa) is not sitting by idly while National Treasury and the Department of Energy mull over the various options for the country’s controversial 9 600 MW nuclear build programme. While Energy Minister Tina...
Updated 3 hours ago While a resurgence in manufacturing in Africa has been popularly touted as the silver bullet that will accelerate the continent’s economic growth prospects, The Economist management editor and columnist Adrian Wooldridge has suggested that Africa’s industrial...
Recent Research Reports
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
This Week's Magazine
The BMW Group will invest R6-billion at BMW Group South Africa’s (BMW SA’s) Rosslyn plant to produce the next-generation X3 sports-activity vehicle (SAV) for the local and export markets. Rosslyn will continue production of the current 3 Series through its lifecycle,...
The lack of consequences for poor performance and transgressions on the part of contractors remains a significant hurdle to tackling South Africa’s service delivery challenges, delegates heard at the Consulting Engineers South Africa Infrastructure Indaba, on...
City of Ekurhuleni executive mayor Mondli Gungubele earlier this month officially named the city’s bus rapid transit (BRT) system, Harambee.
NICK CHRISTODOULOU As about 58% of data stored by organisations is dark, they must identify this dark data to expose risks and valuable information
About 58% of unstructured data stored by companies is dark data, which means that the value or regulatory importance of the data has not been determined. Subsequently, most of the stored data add costs, rather than increasing revenue or reduce regulatory risks, says...
BRIAN VERWEY Effective management, review and administration of non-core elements can improve business operations and increase revenue and decrease unforeseen risks
Effective logistics, import/export and manufacturing consulting services require detailed industry knowledge and experience, but can add significant value to these industries by providing expert advice on various technical elements in their value chains, says...
Alert Close
Embed Code Close
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96