Investing in Africa - Does it Really Mean Business?

CSAE/CDC Conference,
Oxford, April 5/6 1998

Proceedings

The Conference

This two-day conference held in April brought a large number of businessmen, policy makers and academics to Oxford. It was jointly organised by the Centre for the Study of African Economies (CSAE) and the Commonwealth Development Corporation (CDC), marking CDC's 50th anniversary.

The main message of the conference was that Africa has changed. Economic policies which had had disastrous consequences in the past had radically changed in the last decade. In many countries this has now transformed the climate for doing business.  There is a new optimism and self confidence. We were honoured that President Museveni of Uganda who symbolises this new success of Africa gave the speech at the conference dinner.

The change in Africa has not gone unnoticed. Investors are beginning to look seriously at opportunities in Africa which previously would not even make their shortlist.

But their attitude is still one of caution: Africa continues to be seen as extremely risky. The continent's poor reputation, the legacy of past policy errors, hinders progress. This partly reflects the poor state of information on Africa. There is a tendency to ignore the enormous diversity of countries, treating all of Africa as a single block. As a result, a country may fail to attract investment simply because the poor reputation of its neighbours. The conference discussed evidence that the risk ratings used by many investors exaggerate the riskiness of African countries. The ratings are adjusted only very slowly so that even a country which has
radically changed its economic policies (such as Uganda) still has to live down its past.

The conference was held at a critical time, with the new optimism still tempered by concerns about the sustainability of the recent progress. There now is a small number of very successful African economies. They have recorded growth rates which were previously associated only with what used to be called the "Asian tigers". But that growth - critical if poverty is to be reduced - cannot be maintained unless investment rises. Private investment is still dismally low, a point stressed by Clare Short, the Secretary of State for International Development, in her keynote address. The growth-promoting policies of the successful countries - the "African lions" - must now be locked in. The conference focused on what institutional changes, both domestically and in international relations, were needed to achieve this.

This issue is very much part of the CSAE research agenda. The conference generated a surplus which will be used to start a scholarship fund for African D.Phil. students undertaking research on African economies at Oxford. In honour of the Ugandan president this has been named the Museveni Scholarship Fund.

Jan Willem Gunning

Director, CSAE