Chinese, Arabs spur investment in Africa

INVESTMENT BRINGS CHALLENGES

While rising foreign investment could help curb poverty in Africa, large capital inflows also test African governments' ability to ensure transparency, control inflation and the exchange rate, Bio-Tchane said.

"Designing policies to respond to these pressure may present some authorities with real challenges," the former Benin finance minister said. "Countries have made great progress but now face the equally difficult test of sustaining or even accelerating growth."

Many companies operating in Africa complain that unreliable utilities, lack of skilled labour, labyrinthine bureaucracy and corruption remain major obstacles to doing business. Bio-Tchane said Ghana and Kenya had made recent strides in improving their business environment, but elsewhere much remained to be done.

While West African countries such as Ivory Coast and Nigeria had made progress in developing their domestic debt markets, most sub-Saharan Africa financial exchanges were hampered by a lack of legal security and were unable to finance investment.

"The South African stock market is large and dynamic, and markets in Nigeria, Botswana and Kenya have real potential to provide opportunities for small investors," he said.

"We're still years away, but what needs to be done has been clearly identified."

Among the required reforms, Bio-Tchane cited a reduction in state ownership of the banking sector and an improvement in access to credit through stronger legal guarantees.

"People want to invest in Africa and Africa needs investment so you have pressure from two sides for change."