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Opinion: Foreign Investment Isn’t Necessarily Good For Africa, But Here’s How It Can Be

Opinion: Foreign Investment Isn’t Necessarily Good For Africa, But Here’s How It Can Be

By Jostein Løhr | From African Arguments

From Carrefour to Coca-Cola, more and more foreign companies are eyeing up Africa with great interest.

In 2014, for instance, the world’s biggest yoghurt company, Danone, bought a 40% stake in East Africa’s largest milk producer, Brookside Dairy Limited, giving it access to 140,000 milk farms across the region. Danone also plans to raise its stake in Morocco’s Centrale Laitiere, which commands a 60% share of that country’s dairy market.

Elsewhere, Huajian Group, the Chinese footwear manufacturer that opened a factory in Ethiopia in 2012, continues to thrive. It is now Ethiopia’s largest footwear producer and accounts for over half the country’s footwear exports. It employs 4,000 workers, but expects to provide 30,000 jobs by 2022.

These are just two leading examples of companies tapping into Africa’s growing potential as a place to do business, but they are far from unique. Since the 1990s, advances in ICT and lower trade and investment barriers have made corporations more internationally mobile. And in Africa, cheap labour, land and raw materials; a reversal of low or even negative growth rates; and less burdensome business regulations have helped make certain countries on the continent ideal places to set up new facilities or buy up existing ones.

Global brands such as Tesco, Walmart and Nestlé and many more have made big strides on the continent.

In fact, Africa is now the fastest growing region for foreign direct investment (FDI) in the world. From 1990 to 2013, FDI inflows in Africa increased 19-fold from $3 billion to $57 billion.

This trend, and FDI in general, is typically seen as a good thing for low-income countries. And especially in Africa, where most countries have small stocks of savings, attracting FDI in order to grow the economy and create jobs can be crucial.

However, less talked about is the fact there are also plenty of challenges with FDI – foreign investment is not necessarily positive for the countries involved.

Read more at African Arguments