African union Expert Group on the harmonization of Industrial Investment

July 10th, 2009

 

By Mohammed Legally-Cole

 

The Expert Group Meeting (EGM) on the harmonization of Industrial Investment policy of Africa, under the auspices of the African Union (AU), in collaboration with the United Nations Industrial Development Organization (UNIDO) was on Wednesday 8 July 2009, converged at the headquarters of the African Union Commission in Addis Ababa, Ethiopia, to brainstorm on the industrial policies in Africa.

 

This Expert Group Meeting (EGM) is aimed at promoting regional and continental integration through the enhancement of investment climate within AU Member States to create a favorable condition for industrial investors by putting in place a harmonized set of investment policies. The Experts held a two-day deliberate on the means for achieving a coordinated approach that will lead to the evolvement of harmonized continental and regional investment policies and strategies that will attract dedicated channels of finance for industrial development. They discussed strategies that will mobilize funds to support the Plan of Action for the Accelerated Industrial Development of Africa as a means for addressing the challenges posed by the present financial crisis. 

 

This Expert Group Meeting serves as a forum to share views on strategies that will be adopted by financial institutions to encourage dialogue among member states of the African Union on the role and contribution of investment promotion in the industrialization and development of African economies.

 

In his opening statement, the Deputy Chairman of the African Union Commission (AUC) His Excellency Mr Erastus Mwencha said that “this meeting is being held at a time when the Global Financial Crisis has begun to affect the inflow of investment resources to African industries”, noted that “ As a result of the financial crisis, the continent has suffered dramatic decline in the inflow of foreign direct investment and trade finance in many industrial sectors and African extractive industries, which have experienced a boom in foreign investment in the past decades, have also suffered a declined due to the crisis.” And in addition, foreign bank lending and trade financing to African Small and Medium-size Enterprises (SMEs) are being reduced as a result of the current risk aversion policies of banks.”

 

Mr Mwencha also said stated that “In the current crisis, Africa is the least recipient of Global Investment Resources as compared with other regions of the world. The cumulative effect of the current crisis on Africa’s trade and industrial investment is a decline in economic growth and in the rate of unemployment and poverty levels.”

 

He therefore said that it is now time for Africa to rethink it industrial investment strategy and harmonize its policies so as to make the continent an attractive place for industrial investment. He further explained that it is evident that strong and conducive investment policies are a key of sustainable industrial growth and development in the continent.

Mr Erastus Mwencha however explained further that for decades, many countries have very little industrial investments due mainly to the continued existence of distorted and incoherent national industrial investment policies, adding that “The continent’s rich natural and mineral resources remain largely un-tapped due to factors that relates to inappropriate national policies, poor infrastructure and limited technology in the region.

 

He told the participants and delegates at the meeting that “Africa has been particularly vulnerable to external trade shocks due to its heavy reliance on the exports of unprocessed raw materials and the key to minimizing this vulnerability is the diversification of national economies, the development of national and regional markets, the strengthening of South-South Cooperation, and building of capacities for the enhancement of industrial competitiveness and greater value addition to raw materials in the continent, further said that “ In addition, strengthening of regional integration and the building of infrastructure, human capital and appropriate technology must be given high priority.”

He also said: “for the people of Africa to enjoy a decent socio-economic living in the global world, our industries needs to e robust and well developed to be competitive.”

 

“Despite the numerous constraints faced by many African industries over the years, a good number of African countries achieved remarkable economic growth, which can be attributed to the adoption of sound macroeconomic management as well as commodity prices in the international markets. The persistent industrial supply-side constraints faced by the continent are due to the lack of industrial investment capacities, inadequate entrepreneurship, poor infrastructure and energy supply, limited industrial skills, and low income for the majority of the African population”, Mr Erastus Mwencha explained.

 

“In addressing this situation, the continent needs to put great emphasis on creating a conducive and coherent policy environment that could generate skills, promote investment in the critical industrial sectors, stimulate industrial productivity, provide infrastructure and energy, reduce the cost of doing business and introduce appropriate standards to enable African industrial products to compete in the international markets”, Me Mwencha adviced.

 

The Deputy Chairman of the African Union Commission Mr Mwencha explained further that “It is extremely important for the investment policies of all African countries to be streamlined and aligned with national development goals and priorities so that they can respond positively to the specific challenges posed by their economies. We are here to identify the best policy practices that meet these challenges and to ensure that industrial investment policies become a positive and sustainable force in the development process of all Member States. One of the key policy tasks is to create a friendly institutional environment that enables Member States to address their industrial investment challenges, especially in the current global financial crisis. This meeting should draw on the lessons of the continent’s past successes and failures, so as to exercise collective learning aimed at sharing best practices.”

 

In recognition of the importance of the industries to the continent’s socio-economic development, Mr Mwencha noted that “African leaders have renewed their determination and commitment to Africa’s industrialization process”, adding further added that “This is evidenced by their dedication of the theme: “The Industrialization of Africa” to the 10^th Ordinary Session of the African Union Assembly of Heads of State and Government, which was held in Addis Ababa, Ethiopia, in February 2008 in which they adopted and endorsed the “Plan of Action for the accelerated industrial development of Africa”, which has formed the basis for the continent’s Industrialization drive.”

 

In addition, Mr Erastus Mwencha concluded, the Commission of the African Union is fast-tracking the establishment of the African regional financial institutions such as African Investment Bank, the African Central Bank and the African Monetary Fund to address some of the difficulties faced by the continent’s industrial sector.

 

The meeting brought together African stakeholders at the country and regional levels to agree on a set of activities over the next four years 2009-2012 that will drive Africa’s industrialization agenda.

 

Participants at the meetings includes the following: Representatives from the United Nations Industrial Development Organization (UNIDO); Ministries of Industries/Investments of Member States; Regional Economic Communities (RECs); Investment Promotion Agencies; Private Sector associations; Private sector Chief Executive Officers (CEOs); Financial institutions; The NEPAD Secretariat; UN Economic Commission for Africa (ECA); The African Development Bank (ADB); The World Bank; African Research Institutions and other interested partners.