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Jun 06, 2008

Infrastructure improvement projects attract foreign investment

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Agriculture|Engineering|Port|Africa|Industrial|Projects|Resources|Roads|Whitehouse & Associates|Africa|Democratic Republic Of Congo|Ghana|Malawi|Zambia|Zimbabwe|Energy|Energy Products|Integrated Trade Infrastructure|Logistics|Manufacturing|Mining|Products|Council For Scientific|Council For Scientific And Industrial Research|Industrial Research|Duncan Bonnett|Infrastructure
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International investment in a number of Southern African mining and agricultural projects is on the increase owing to local companies focusing infrastructure improvement projects, trade consultancy Whitehouse & Associates director Duncan Bonnett tells Engineering News.

While foreign investment encourages the growth of private businesses, as well as emerging economies, a study by the Council for Scientific and Industrial Research (CSIR) states that the budgets of many developing countries' economies are overstretched by competing claims on the available resources.

But, to increase the public sources of funding for infrastructure investment, the CSIR adds that several countries with emerging economies are developing schemes that will enable the use of private financing from both domestic and international investors.

In the Southern African region, foreign direct investment (FDI) initiatives are boosting the trade industry, especially in the intergovernmental South African Development Community (SADC). The SADC aims to create a common market through harmonising member countries' trade and economic policies.

"There is a strong increase in interest in the SADC region in terms of mining, building materials, energy products and to some extent agriculture. Most of the governments in the region are reforming their investment codes to increase their share of global FDI," Bonnett says.

He points out, however, that in spite of this increased interest, there is still a long way to go towards establishing a functional, competitive and integrated trade infrastructure in the region, particularly for landlocked countries such as Zimbabwe, Zambia, Malawi and the Democratic Republic of Congo (DRC).

He cautions that the trading process is not only about getting commodities to port, but also forms a key part of any mining or other operation.

"If it takes several weeks to get inputs to sites on non-existent or badly damaged roads, it affects on the cost of doing business even further. From a logistics point of view, it is important to be able to move goods into and out of countries as quickly as possible," he says.

Bonnett emphasises that, from a normal manufacturing and trade perspective, it is essential to import and export goods rapidly, since supply chains are continuously competing against one another, and one weakness can leave the company at a competitive disadvantage.

Better infrastructure creates opportunities for the development of businesses and trade within countries in the region, and creates the demand for goods and services that were not previously available at a reasonable price. This has the ability to improve trade in terms of creating markets and wealth in previously untapped areas, he explains.

In addition, Bonnett says that processors, traders and others involved in the cycle from extraction or production to final processing and retail, are willing to take risks in order to ensure continuity of supply. Therefore, more investors are prepared to take a long-term view of investment, which would not have been possible a couple of decades ago because of uncertain commodity cycles and investment regimes.

"There is some discontent within Southern Africa governments over the level of royalties they're receiving, as well as the level of mining beneficiation being undertaken in the region," he says.

But, he adds that countries such as Zambia, the DRC and Ghana, which fall outside of the SADC's perimeters, have all stated their intention to extract more value from their minerals in this time of ‘super-profits'.

Edited by: Laura Tyrer
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