FDI: Source of Sustainable Growth Africa Foreign Investors Survey 2005 2007 Africa Day Symposium

www.unido.org/afripanet

Tokyo Conference May 2007

UNITED NATIONSINDUSTRIAL DEVELOPMENT ORGANIZATION

FDI: Source of Sustainable Growth

Africa Foreign Investors Survey 2005

2007 Africa Day Symposium

Yoshiteru Uramoto

Deputy to the Director General

United Nations Industrial Development Organization




Comparison with Macro level FDI statistics

▶ Survey results suggest that inward investment flows measured by the balance of payments (BoP) of UNCTAD and IMF may understate the actual level of FDI in Africa

The number of foreign affiliates identified by survey was in some cases larger than the population of subsidiaries of TNCs recorded in BoP statistics.

Enterprise level surveys capture smaller units Some types of investment e.g. re-invested earnings only

measurable in surveys




UNIDO African Foreign Investor Surveys ▶ UNIDO has been working

with African IPAs since 2000 to improve their capacity to stimulate growth through investment

▶ The surveys measure: Impact of investment

climate on investor perceptions and actions

Impact of investor actions on domestic economy

▶ The scope of the survey is expanding and will cover more than 30 countries




▶ In total 1216 companies participated▶ The response rate was 35% (3484 companies

received a questionnaire)

Sample size and response rate

94(27%)88

(57%)

61(30%)

118(24%)

140(34%)

76(63%)

52(23%)

64(35%)

99 (34%)

42(35%)

50(48%)

104(28%)

86(35%) 80

(63%)62

(81%)

0

20

40

60

80

100

120

140

160

Burkin

a Faso

Camero

on

Cote d'I

voire

Ethiop

iaGhan

aGuin

eaKen

ya

Madagas

carMala

wi Mali

Mozambiq

ueNige

ria

Senega

l

Tanzan

ia, UR

Uganda




•Origin

•Organizational structure

•Market orientation

•Sub-sectors

•Share structure

•Age

•Growth

•Productivity

•Re-investment

PERFORMANCE IMPACTINVESTOR GROUP

•Local content

•Employment growth

•Training

•Technology transfer

INVESTOR PERCEPTION

•Importance and change of location factors

•IPA assessment

Measure investment according to investor groups Measure Investment other than in extractive industries (especially in Africa) Assess the relation between business environment and performance

Data Analyses:

Purpose of 2005 Survey




55

23 135

85132

3211527

100

62 251175

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980 andbefore

1981-1990 1991-2000 2001 andafter

L-TNC S-TNC FE

58

41255

184

69 237

108

221

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980 andbefore

1981-1990 1991-2000 2001 andafter

North South

Growing presence of entrepreneurs and South investors







Sales and employment structure

3.12.8

9.7

34.4

11.0

5.9

-

1

2

3

4

5

6

7

8

9

10

L-TNC S-TNC FE

Bill

ions

of U

SD

Sum

-

4

8

12

16

20

24

28

32

36

40

Mill

ions

of U

SDM

ean

Sum Mean

Sales Employment

160,117

103,029

113,426523

355

193

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

L-TNC S-TNC FE

Sum

-

100

200

300

400

500

600

700

800

900

Mea

n

Sum Mean




9

Training expenditure per worker

$769

$549

$407

$257

$103 $770

100

200

300

400

500

600

700

800

South Africa Sub SaharanAfrica

The Americasand Oceania

Europe Middle East andNorthern Africa

Asia

Trai

ning

exp

endi

ture

per

wor

ker (

in U

SD)




10

Sales performance for sub-sectors

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

Perc

enta

ge s

ales

gro

wth

(las

t yea

r)




11

Local content

42.5%

33.6%

23.9%

31.0%

41.2%

34.5%

42.0%40.3%

35.5%

20.0% 20.0%

30.0%

22.5%

30.0%

30.0%

40.%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

North South Sub SaharanAfrica

South Africa Middle Eastand Northern

Africa


Asia Europe0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%Mean Median

224 cases 234 cases 42 cases 26 cases 68 cases 26 cases 96 cases 196 cases

Note: Only manufacturing firms




12

Local expenditures on material and subcontracting (as % of sales)

22.5%20.4%

13.0%

17.4%

29.9%

17.8%

20.3%

33.6%

12.4%

7.7% 7.4% 7.1%

16.2%

7.6%

11.9%

19.7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

North South Sub SaharanAfrica

South Africa Middle Eastand Northern

Africa


Asia Europe0%

5%

10%

15%

20%

25%

30%

35%

40%Mean

Median

168 cases 180 cases 35 cases 21 cases 55 cases 22 cases 65 cases 144 cases

Note: Only manufacturing firms




13

Home regions

239 (20.4%)17 (1.5%)

18 (1.5%)

18 (1.5%)

19 (1.6%)

22 (1.9%)

24 (2%)

27 (2.3%)

32 (2.7%)

38 (3.2%)

38 (3.2%)

39 (3.3%)

42 (3.6%)

47 (4%)

63 (5.4%)

66 (5.6%)

84 (7.2%)

106 (9%)

233 (19.9%)

0 25 50 75 100 125 150 175 200 225 250

Rest

Zimbabwe

Côte d'Ivoire

Belgium

Saudi Arabia

Italy

Mauritius

Netherlands

Switzerland

Kenya

Germany

United States

Portugal

China and Hongkong

Lebanon

India

South Africa

United Kingdom

France

Asia14.8%

(MENA)11.2%

South Africa7.2%

SSA12.9%

Europe48%

Americas5.9%%




14

Three-year performance evaluation

Above expectations

10.9%

In line with expectations

45.4%

Below expectations

31.0%

Well below expectations

7.1%

Well above expectations

5.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

South

Africa

United

State

s

United

King

dom

India

Keny

a

Portu

gal

Netherl

ands Ita

ly

German

y

Franc

e

Leba

non

Switz

erlan

d

China a

nd Hon

gkon

g

Mauriti

us

Perc

enta

ge o

f sam

ple

popu

latio

n

Well below and below expectations In line with expectationsWell above and above expectations




Inter-Africa investment ▶ South African investors in sample:

Have the highest average investment levels of any source country

Are the most satisfied with the performance of their operations Spend most per worker on training Have highest sales growth expectations Pay the highest wages

▶ Other African investors: High expenditure on training per worker High labor productivity High skill intensity




Key outcomes of the 2005 Survey▶ Proportion of South-South FDI increasing over time; their

perception, performance and decision making characteristics differ from North

▶ Individual investors (FEs) are an important element of FDI in SSA and require new investment promotion strategy

They need and want more investment assistance Regarded as growth sector by equity funds Many have regional market orientation

▶ Large differences between Francophone West Africa and Anglophone East Africa (structure, growth, age, etc. reflecting differing investment climate and response)

▶ Dichotomy of jobless growth versus employment generation with limited value creation.

Northern L-TNCs - stagnant employment but high share of skilled labour force South S-TNCs – labour-intensive industries with fast growth but no human

capacity development and low wages




Future investment rate and volume

Note: Over the next three years, normalized with 2004 total firm sales

32.7%

64.0%61.3%

27.4%

107.3%

65.8%

49.2%

29.7%

7.3% 7.5% 8.0% 8.0%12.5%

4.5%7.3%6.5%

0%

20%

40%

60%

80%

100%

120%

North South SubSaharan

Africa

SouthAfrica

Middle Eastand

NorthernAfrica

TheAmericas

andOceania

Asia Europe0%

20%

40%

60%

80%

100%

120%

Mean Median

NMEAN

(in USD)MEDIAN (in USD)

SUM (in Million of USD)

North 481 $3,526,968 $384,800 $1,696.5

South 401 $3,269,820 $167,000 $1,311.2

Total 882 $3,410,056 $250,000 $3,007.7

Sub Saharan Africa 112 $4,352,050 $198,483 $487.4

South Africa 55 $7,052,639 $102,410 $387.9

Middle East and Northern Africa 93 $2,561,292 $288,600 $238.2

The Americas and Oceania 48 $4,160,346 $550,715 $199.7

Asia 133 $2,897,093 $100,056 $385.3

Europe 429 $2,871,042 $378,183 $1,231.7

Total 870 $3,368,060 $245,250 $2,930.2

Expected new investment volume (over the next 3 years)

Note: MTN Nigeria was not considered




18

Expected future investment

MEANSUM (in Mio

USD)Nigeria 12,702,843 1,257.6Mali 10,947,235 416.0Cam eroon 8,122,000 430.5Tanzania, UR 5,570,643 423.4Ethiopia 4,549,279 263.9Mozam bique 3,896,047 335.1Madagascar 3,362,682 218.6Côte d'Ivoire 3,187,843 111.6Burkina Faso 3,107,334 220.6Senegal 2,209,855 99.4Uganda 1,675,309 117.3Malaw i 1,155,492 60.1Kenya 1,143,730 96.1Guinea 849,722 36.5Ghana 792,452 24.6TOTAL 4,537,613 4,111.1




19

Past and future investment volumes for different sub-sectors

Past 3 years Next 3 years

MEANSUM (in Mio

USD)Transport & Communication 7,739,167 518.5Elec., Gas & Water supply 6,107,175 103.8Garment, Apparel & Leather 5,977,332 137.5Financial intermediation 4,373,072 310.5Chemical, Plastic & Rubber 4,009,733 505.2Food, Beverages & Tobacco 3,913,097 453.9Marketing, Sales & Distribution 2,871,228 439.3Non-Metalic Mineral prods. 2,511,421 65.3Hotel & Restaurant 2,420,677 101.7Textile 2,358,313 61.3Agric., Fish, & Nat. Resources 2,161,411 88.6Basic Metals 1,990,403 55.7Paper & Paper prods. 1,748,856 24.5Professional Services 1,340,930 77.8Construction 1,270,522 34.3Auto, Machinery & Equipm. 1,111,747 38.9Publishing & Media 519,946 6.8Wood prods. & furniture 327,752 7.2Total 3,348,984 3030.8

MEAN in (USD)

SUM (Millions of USD)

Food, Beverages & Tobacco 6,290,836 761.2Transport & Communication 5,881,507 441.1Elec., Gas & Water supply 5,199,078 98.8Financial intermediation 3,513,575 263.5Marketing, Sales & Distribution 2,488,457 420.5Agric., Fish, & Nat. Resources 2,402,680 81.7Garment, apparel & leather 2,322,219 58.1Chemical, Plastic & Rubber 2,112,482 278.8Basic Metals 1,822,333 60.1Textile 1,809,529 48.9Non-Metalic Mineral prods. 1,546,089 40.2Professional Services 1,246,432 78.5Auto, Machinery & Equipm. 1,209,066 43.5Paper & paper prods. 1,189,690 14.3Construction 1,134,993 35.2Hotel & Restaurant 873,756 40.2Publishing & Media 731,587 10.2Wood prods. & furniture 368,777 8.5Total 2,896,327 2783.4




20

IntermediaryAgencies

Political willPolitical will INVESTMENTINVESTMENTCLIMATECLIMATE PERFORMANCEPERFORMANCE IMPACTIMPACT

Management of FDI-Local

economy

•Growth Employment Investment•Local supply chain•Training•Technology diffusion•Export

•Output growth

•Investor satisfaction

•Productivity

•Market conditions

•Local resources

•Operational and regulatory impediments

Priority issues to be addressed Investor

support services

Political willPolitical will

Policy Policy InterventionIntervention




21

Indicators

PolicyStrategy/services

Measure policy impactCalibration

Survey data

CountryData

Enterprise Diagnostic

Data

Supplier Sub-contr.

Data

Country(Gov. inst.)

Civilsociety

RECs &Development

partners

FinancialInstitutions

Companies

Investment opportunitiesTrends

Suppliers/buyers partnersSupport services

Growth areasSpecific opportunities

Technical assistance

needs

Transparency

Online tools

Other Data

Sources

Company BenchmarkTrainingAnalysis




22




23

Thank you.


Mr. Yoshiteru UramotoDeputy to UNIDO Director General

Documents

FDI: Source of Sustainable Growth Africa Foreign Investors Survey 2005 2007 Africa Day Symposium