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China and India boost investments in Africa: UNCTAD

China and India boost investments in Africa: UNCTAD
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First Published: Wed, Mar 28 2007. 10 50 AM IST
Updated: Wed, Mar 28 2007. 10 50 AM IST
By Aude Marcovitch, AFP
GENEVA: Chinese and Indian companies are turning into a promising source of direct investment in Africa, adding to an Asian investment surge in Africa over the past 15 years, a UN agency said in a report on 27 March.
Nonetheless, investment outflows to African nations are still just a small fraction of the global total of investment by Asian companies abroad, which has also surged since the mid-1990s, the UN Conference on Trade and Development (UNCTAD) said.
Asian investments are also sharply focused on energy and mining, it added, calling for a diversification of Foreign Direct Investment (FDI) in other sectors of African business and the economy.
An average of $1.2 billion (Rs51, 827 crore) a year of the $46 billion in Asian FDI in 2002 to 2004 went to Africa, the UNCTAD report said.
However, China and India have emerged as significant new sources of investment in Africa, fuelling the traditional flow from industrialising Asian tigers, UNCTAD said.
The report said the Asian investment flows are “set to increase further in the coming years” after a slight tail-off in the late 1990s.
Singapore, India and Malaysia were the top Asian sources of FDI in Africa with total stocks of $3.5 billion, $2.0 billion and $1.9 billion respectively, accumulated between 1996 and 2004.
Those figures compared with $2.08 billion of FDI stocks from Singapore in 1999, $296.6 million from India in 1996 and just $1.1 million from Malaysia in 1991, according to the UNCTAD report, which was not based on uniform data.
All of the most recent Singaporean investment went to Mauritius, which also snapped up up to half of the African investment by Indian and Malaysian firms, according to UNCTAD’s data.
Chinese stocks of FDI in Africa reached $1.6 billion in 2005 -- mainly in Sudan, followed by Algeria and Zambia -- and represented just 3% of Chinese global outflows.
In 1995, China’s FDI stock in Africa was $49.2 million, according to UNCTAD data.
Meanwhile, trade flows between Africa and China increased from $11 billion in 2000 to $56 billion in 2006.
The report indicated that the increase in FDI from Asia was helping to regenerate Africa’s share of global investment flows, after the continent’s share dropped sharply to 1.6 percent in the 1990s.
UNCTAD said it would like to see Asian FDI in Africa break from the traditional pattern of investment in the continent’s huge natural resources.
“The majority of new investments in Africa are in the energy sector,” UNCTAD analyst Hafiz Mirza told journalists.
“There is a need for diversification away from natural ressources,” he added, calling for more investment in Africa’s infrastructure to support economic growth.
The report said that it was “likely that (South) Korean firms will soon be seeking to secure their own natural resources from Africa.”
UNCTAD said that African governments could also learn from the pattern of development in many fast-growing Asian economies.
The agency underlined that investments in education and infrastructure in Asia proved crucial not only for overall economic development but also for attracting and creating efficient, export-oriented companies.
Asian FDI in Africa was also marked by a large proportion of greenfield investment, underlining the relatively low number of acquisitions of African companies, the report said.
India and China were the leading key drivers, setting up 48 firms and 32 firms respectively, out of the total of 126 Asian greenfield investments in Africa between 2002 and 2005, it added.
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First Published: Wed, Mar 28 2007. 10 50 AM IST