Session 2: Environment for Private Investment in ...FAO Policy Learning Programme Module 3: Investment and Resource Management Session 2: Environ ment for private inves tmen i n ag

1 of 22

©© FAO January 2008FAO January 2008

Foreign Direct Investment (FDI) Competitiveness in Sub-Saharan African Countries

Module 3: Investment and Resource Mobilization

Session 2: Environment for Private Investment in Agriculture and Rural Development

F A O P o l i c y L e a r n i n g P r o g r a m m e

2 of 22


By

of the

FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS

FDI Competitiveness in Sub-Saharan African Countries

Maria Pagura, Rural Finance OfficerRural Infrastructure and Agro-Industries Division, FAO, Rome, Italy

About EASYPol

The EASYPol home page is available at: www.fao.org/easypol

This presentation belongs to a set of modules which are part of the EASYPol

Training Path Policy Learning Programme – Module 3: Investment and Resource Mobilization, Session 2: Environment for private investment in agriculture and rural development

EASYPol has been developed and is maintained by the Agricultural Policy Support Service, Policy Assistance and Resource Mobilization Division, FAO.

http://www.fao.org/tc/easypol

http://www.fao.org/easypol/output/browse_by_training_path.asp



http://www.fao.org/tc/tca/capacity_en.asp

http://www.fao.org/tc/tca/capacity_en.asp

http://www.fao.org/tc/tca/

http://www.fao.org/

3 of 22


FAO Policy Learning ProgrammeModule 3: Investment and Resource Management

Session 2: Environment for private investment in agriculture and rural development

Summary of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) study on investment conditions of six sectors for select countries in Africa.

The study, under MIGA’s Africa Enterprise Benchmarking Program, was conducted to assist investment promotion intermediaries to better understand local competitiveness for FDI and to develop marketing strategies to attract inward investment.

Enterprise benchmarking and SWOT analysis tools are also introduced in this presentation.

Introduction

See notes for details

4 of 22




FDI competitiveness study background

9 SSA countries - Ghana, Kenya, Lesotho, Madagascar, Mali, Mozambique, Senegal, Tanzania, and Uganda

6 industries analyzed - textiles, apparel, horticulture, food and beverage processing, shared services (call centres) and tourism.

Study designed to assist Investment Promotion Intermediaries in developing countries to attract FDI.

Used “Enterprise Benchmarking Program” tool to systematically compare countries by industry sector and to measure their potential to attract FDI.

This discussion will focus on the benchmarking analysis conducted on the ‘horticulture sector’.

5 of 22




Compare operating costs and conditions of the ‘horticulture’ sector for select countries in Africa.

Identify countries’ comparative advantages in horticulture vis à vis competing locations.

Analyze the investment climate and attractiveness for horticulture industries in SSA countries.

Objectives

See notes for details

6 of 22




Horticulture sector is defined as....

.....the production and marketing of highly perishable products designed for fresh consumption with relative high value per unit.

7 of 22




African horticulture sector

Worldwide production and trade grown steadily over last decade.

Sub-Saharan Africa’s export value lower than most developing regions, but relative growth is among the highest in the world.

Vegetable and fruit exports rank first in total SSA agricultural exports.

Of total 60% comes from Southern African Customs Union (SACU) – but others entering market.

Increased retail demand and food safety issues shaping supply chain structure.

Medium and large agribusiness play important organizing role in the African horticulture market.

8 of 22




African horticulture sector [cont’d]

FDI in the African horticulture sector increasing as entrepreneurs see climatic and productive advantages.

Growth in demand for high-quality pre-packed vegetables.

Horticulture industry requires labor-intensive activities and lower labor costs - an advantage for Africa.

Potential investors seek countries with good logistics potential, stable supply systems for inputs and packaging materials, and an ability to comply with trade standards.

9 of 22




Horticulture industry investors

Medium to long term investment view

High value on owning land

Prefer politically stable and pro-business environment

Low labor, real estate costs and good infrastructure

Reliable access to land and export markets

Commercialization of production

Economies of scale

10 of 22




FDI competitiveness in SSA horticulture industry

11 of 22




Top six site selection factors in horticulture FDI

Quality factors (in order of importance)1. Access to markets and supplies2. General business environment3. Availability of real estate/arable land

Cost factors (in order of importance)1. Wage levels2. Cost of real estate3. Cost of transport

12 of 22




Hypothetical horticulture firm – Operating parameters

Employment: 640 (12 managers, 13 professionals, 16 technicians, 160 skilled, 439 unskilled)

Power consumption: 250 thousand kilowatt hours/year at 200 KVA

Water consumption: 355,000 m3 /year

Property: 100 Ha

Factory: Construction of 15,000 m2 – depreciated over 20 yrs

Market: Europe

13 of 22




Comparison of operating costs in horticulture

Source: Snapshot Mali

14 of 22




Comparison of quality operating conditions in horticulture

Source: Snapshot MaliSource: Snapshot Mali

15 of 22




Cost of agricultural land (US$ per m2)


16 of 22




Cost of airfreight to amsterdam (US$ per kg)


17 of 22




Quality conditions vs. operating costs (excluding transportation)


18 of 22




SWOT analysis

Strengths Weaknesses

Opportunities Threats

19 of 22




Conclusions and recommendations

Enterprise benchmarking analysis is conducted to compare the operating costs and conditions associated with selected industries in a each country in order to identify industries with a strong competitive position relative to competing locations.

SWOT analysis is useful to identify each country’s strengths, weaknesses, opportunities and threats as a destination for investment in selected industries.

By using ‘enterprise benchmarking analysis’ investment promotion intermediaries (IPIs) are able to identify their countrys’ comparative advantage and develop sector-specific strategies to improve the investment climate and attractiveness of priority sectors.

20 of 22




Further readings

Snapshot of Africa, 2006. Benchmarking FDI Competitiveness in Sub-Saharan African Countries, World Bank Group, Washington, D.C., USA.

Broadman, H., 2007. Africa’s Silk Road: China and India’s New Economic Frontier, The World Bank, Washington, D.C., USA.

21 of 22




Links to Module 3 : Sessions 1-8

Session 1: Investment in agriculture & rural development

Session 2: Environment for private investment in agriculture & rural development

Session 3: Sources and uses of financial resources

Session 4: Strategies for increasing farm financing resources

Session 5: Risk mitigation in agricultural investment

Session 6: Sector-wide approaches (SWAps)

Session 7: Socio-economic & livelihood analysis

FAO Policy learning programme

Module 3: Investment and Resource Management

FAO Policy learning programmeCapacity Building Programme on Policies and Strategies for Agricultural and Rural Development



22 of 22




T h a n k y o u !

Documents

Session 2: Environment for Private Investment in ...FAO Policy Learning Programme Module 3: Investment and Resource Management Session 2: Environ ment for private inves tmen i n ag