African countries must reduce their dependence on donor funds
16 April 2012
East African - 14 April 2012
Africa has experienced a rapid economic growth spurt in the past decade however private investment still remains low in the continent. BERNA NAMATA sounded out the deputy director IMF Africa Department about issues affecting private investment in Africa
Why is private investment in Africa relatively low despite the recent rapid economic growth?
The good news is that 10 years ago investment as a ratio of GDP was about 16 per cent and now it is about 23 per cent. Investment has gone up and most of that is private investment — that’s the good news. The bad news is that the level of investment is still lower than what we have seen in emerging markets such as Asia. There will be a need to increase investment further but clearly Africa is on the right track.
Private investors require at least a stable and predictable economic investment and African countries are increasingly providing that. This is reflected both in growth and investment numbers.
Investors also require regulatory and institutional framework that makes them feel comfortable and on that score — there are still large differences between African countries. Rwanda is an example of a country that has made huge progress in business environment and in other countries it has been far less.