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UNCTAD
For Five African Least Developed Countries,
2002 A Bad Year for FDI
February 13, 2004Foreign direct investment (FDI) inflows to five least developed countries (LDCs) in Africa shrunk in 2002. Major structural problems, such as their landlocked status and the small size of their markets, largely explained the decline. Further economic liberalization and a number of investment projects now in the pipeline could, nonetheless, help them achieve a comeback on the global FDI market in the near future, the United Nations Conference on Trade and Development (UNCTAD) predicts. Two other African countries -- Botswana and Zimbabwe -- made modest gains, but not enough to recoup their losses in recent years.
Angola is now a major destination for FDI inflows to Africa. In 2002, however, those inflows slumped to $1.3 billion, down from $2.1 billion in 2001. Oil exploration and extraction accounted for a huge share of this amount. Recent offshore projects are expected to yield even more inflows, enabling Angola to maintain its position as one of the top FDI recipients in Africa.
FDI inflows into Burkina Faso tumbled in the past two years from $23 million in 2000 to $8.2 million in 2002, primarily because of a drop in gold production. Some recovery is expected, however, as the economy is further liberalized and the FDI in the services sector picks up.
Flows into Burundi have been similarly modest, reaching $11.7 million in 2000 before declining to virtually nil in 2001 and 2002. Burundi is a landlocked LDC with little attractiveness to foreign direct investors because of its small consumer market and limited natural resources. But UNCTAD expects marginal growth as the economy opens up further to foreign investment.
Botswana's FDI inflows turned around in 1995, the first year of positive flows after four years in the red. Following another decline in 2001, they have climbed from $31 million in 2001 to $32 million in 2002. Most of the inflows are explained by investments in mining activities, particularly diamond mining, and a strong global diamond market is expected to shore up future inflows.
Central African Republic, although rich in resources, has so far failed to attract much FDI. A landlocked LDC, it has witnessed cycles of political instability. In 2002, inflows slid to $4.3 million from $5.2 million in 2001, and liberalization has made limited progress.
Malawi has repeatedly failed to attract FDI inflows because of structural problems. Recent inflows have been negative, seesawing from -$32 million in 2000 and -$20 million in 2001 to nil in 2002. Like Burundi and the Central African Republic, Malawi is a landlocked LDC, possessing few natural resources in large commercial quantities. But the situation could change once current economic policy reforms begin to bear fruit.
Zimbabwe was a promising destination for foreign direct investors in Africa before it began experiencing problems with its reforms. Since then, FDI inflows have witnessed a major decline, although in 2002 they recovered sharply to $26 million, up from $4 million in 2001. This recovery is still far from the 1998 peak of $444 million.
National investment profiles are being published online as they become available, based on each country's reporting schedules. The profiles, which are part of UNCTAD's World Investment Directory, provide quick electronic access to the latest statistics on foreign direct investment and the operations of transnational corporations. They include statistical definitions and sources, a listing of relevant national laws and regulations, information on bilateral and multilateral agreements and a bibliography.
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