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Africa is Ready for a New Wave of Foreign Direct Investments
The data is very hard to ignore, says the UNCTAD.
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Struggling with lower vaccination rates, high debt and a lack of quick and efficient strategic response against the pandemic, Africa is in dire need of resources. COVID-19 has certainly multiplied the number of challenges in the region, some problems are very new and others can be traced back to generations.
According to a very recent report by the WhO, the continent is experiencing a sharp 83 percent increase in new COVID-19 cases, all driven by the Delta and Omicron variants. At the same time the organization is registering fewer deaths and much less severe cases when compared to previous waves of the virus.
The critical importance of vaccines is clearer than ever for government officials, businesses and institutions, as they are trying to apply innovative measures to contain the spread of the virus, and attract foreign direct investment opportunities in order to mitigate the higher unemployment rates we are seeing so far.
THE STATUS OF FDI WORLDWIDE
The latest trends monitor by the United Nations Conference on Trade and Development (UNCTAD) showed that in the first half of 2021, global foreign direct investment flows reached an estimated $852 billion dollars, in what is considered a “stronger than expected” result, recovering more than 70% of the losses provoked by the pandemic itself.
Developed economies had the greater success, growing at three times the pace in comparison with the same period of time in 2020. But developing nations were not that far behind, as they managed to increase foreign direct investment flows up to $427 billion in the first half of 2021, an outstanding achievement for economies in South-East Asia and Africa.
Certainly, global investors are extremely interested in working on projects related to infrastructure, all due to the very favorable environment for long-term financing options that we’re experiencing right now. China has been the leader in that specific area, conducting large amounts of money to a vast number of projects being made in the African continent, even through the darkest of COVID times during last year.
NEW CHANCES
While most African economies shrank by 2.1 percent in 2020, the African Economic outlook is projecting a moderate growth of 3.4 percent in 2021, helped by a rebound in commodity prices, higher exports, increased vaccination rates and a resumption of tourism. The perfect storm for an economic miracle? Some experts believe so.
Despite COVID, Africa is now a very different place to what it used to be, it is still the fastest growing region of the past 10 years, and a very good destination for foreign direct investments since it opened to world markets in the latter part of the 20th century.
With new sources of investment, countless emerging industries and sectors have expanded massively since the start of the millenium, and for governments and bilateral institutions in Africa, FDIs are a high priority issue that needs to be looked upon with the most objective longterm vision.
Most FDI flows in Africa have been historically related to manufacturing, services, hard resources, coal and oil, accounting for more than $200 billion in projects related to international interests. Experts in the topic have been very vocal about other business opportunities to capitalize on, such as IT services, renewable energy, communications and logistics, sectors that have enjoyed unprecedented levels of expansion and demand within the continent.
By focusing on certain specific areas of the economy and public life, Africa can certainly improve its current condition and increase the chances of recovery by 2023. one of those fundamental sectors is tourism.
Responsible for more than 7% of the continent’s GDP, tourism plays a crucial role in Africa’s path to total recovery. We’re talking about an industry that contributes more than $160 billion a year, numbers that are extremely hard to ignore. Even more when there’s a growing middle class considering international travel once the COVID storm clears.
AFRICA WILL CHERISH INTERNATIONAL SUPPORT
The pandemic has reframed everything in regards to business opportunities in the continent, opening new ways for investors ready to dive into a new wave of foreign direct investments in Africa. Right now, governments are working around the clock in order to improve the business climate just to attract more international prospects.
Programs like the Enhanced Integrated Framework are outstanding innovative platforms aimed to assist investment promotion agencies, fostering and improving the scope of foreign direct investment in the region. Africa needs more of this, opening opportunities for investors and talents from all corners of the world is the best option, and more than any other continent it will embrace those splendid opportunities for years to come.
European Investment Bank on the pandemic and challenges ahead
The SARS-CoV-2 virus has exposed how inadequately prepared the world is for pandemics. But the shortcomings it has revealed are not just related to scientific and medical matters such as surveillance, containment, testing, tracing and treatment protocols. They also highlight market failures in the health and life sciences sector’s relationship with key elements of pandemic preparedness, response, and recovery, and the vital role that public financing and public financial institutions can play in addressing these.
Mass vaccination is essentially a public good. Vaccines are not big money spinners compared to other popular types of medication such as treatments for chronic diseases. Vaccines are usually sold by corporations at low volumes and for little profit. This is because most vaccines are generally needed only once in a lifetime, or sometimes once a year, whereas medicines for chronic illnesses, such as heart disease, are used more frequently and can be sold in greater volumes.
As a result, despite the threat that transmissible diseases pose to public health, the development of new vaccines has been limited in recent years by a shortage of investment. high development costs, low returns on investment, and all the business challenges involved in the development and production of vaccines, have forced some biopharmaceutical companies to leave the field altogether.
USING EVERYTHING IN THE TOOLBOX
When it became clear that the coronavirus would be a big crisis, the European Investment Bank decided to use all the financing tools at its disposal to support the science and technologies that could help. We did not focus on one company or one technology. We reached out to traditional vaccine developers and to new ones, such as BioNTech in Germany, which created one of the leading mRNA vaccines. Messenger RNA (mRNA) is a novel technology that can pave the way for vaccines to treat many other illnesses, including cancer, flu, and malaria.
The BioNTech financing is one example among dozens that show how venture debt from a public bank is important in helping companies in the infectious disease sector get to the later stages of clinical development. The private sector is reluctant to invest in such activities because companies are often startups, small and medium enterprises (SMEs), or have a limited track record. The eventual success of any innovation is also hard to predict, which creates an uncertain risk/return profile for the investment.
The European Union was behind the curve in life sciences research when the pandemic began, but we are catching up as we learn to accept more and higher risk. European investors tend to be more risk averse, and often lack the deep pockets or risk appetite to support the long development cycles of new products or treatments. European life science and biotech enterprises may attract funds for early-stage development projects via various highly competitive EC instruments and national funding programs; however, that funding can easily run out before they get to clinical trials. The result is that European enterprises often have no other option than to start looking for money from the United States, or more recently, China. The EIB is working harder today to support more innovative, early-stage companies with promising projects that other investors don’t have the risk appetite to support. We were one of the first banks to invest in BioNTech’s mRNA vaccines, signing a €100 million agreement with the company in June 2020, only few months after the first COVID-19 cases reported in EU. This bold decision has proven successful, as BioNTech, together with Pfizer, delivered one of the first vaccines against COVID-19.
LENDING IN THE PUBLIC INTEREST
Not every project the Bank has supported during the COVID-19 crisis has been successful. however, in such difficult and dynamic times with a lot of uncertainty for the health of people and the consequences for the economy, we did not have the privilege to hope that one solution would work for everyone, or the luxury of investing a lot of time choosing and supporting only the best ones. Instead, we took bold and sometimes very risky decisions with the public interest in mind.
Many vaccines are now available and rolled out worldwide. They are doing a good job around the world and nevertheless, we have not stopped looking for new success stories. In October 2021, the Bank approved a €45 million loan to help the Spanish pharmaceutical company hipra manufacture its COVID-19 vaccine. This vaccine, which is still in the trial phase, is based on the traditional “recombinant protein” technology used by several other pharmaceutical companies. hipra’s vaccine has been modified to be more effective against the COVID-19 variants. It can also be stored in a standard refrigerator, so it could be helpful in developing countries and remote areas, where it can be hard to supply the special freezers needed for mRNA vaccines.
TESTING TIMES FOR TESTING
When the coronavirus pandemic hit, people in many countries simply could not get tested to find out if they had the virus. Why did it take so long to ramp up testing capacity? The answer is both technical and financial. Many diagnostics firms simply were not prepared to begin testing for a new pathogen like SARS-Cov-2. Tests for new pathogens are not created overnight. While some firms, including EIB clients such as Mobidiag, Scope Fluidics and Biosurfit, had already developed tests for similar viruses and were able to quickly adapt their tests for the pandemic, the complex nature of biotech development means that it typically takes much longer to develop tests for new pathogens, validate their accuracy, secure regulatory approval and begin production. Funding was also a major problem. Loans to the biotech sector are often earmarked for specific development plans. Using funds to develop new projects or test for new pathogens requires the consent of investors, a process that typically takes several months.
Diagnostics firms needed cash fast and Europe had to come up with new financing facilities to provide those funds. The European Commission set up new sources of funds for small, innovative firms, such as the European Growth Finance Facility. Guarantees provided by the European Fund for Strategic Investments (EFSI) allowed the European Investment Bank to tap the new facility for riskier projects or start-up firms. The temporary measures put in place during the pandemic also enabled us to increase the amount of money we lent directly to projects to up to 90%, substantially above the previous cap of 50%. In addition, the European Investment Bank rapidly expanded the amount of additional funds we could lend to existing clients by applying a simplified procedure to top up existing loans by 20% for COVID-19-related activities.
A VERY COMMON CRISIS
The problems we have faced in the pandemic of how to jump-start research, development and production of pharmaceutical products that private sector investors were reluctant to adequately finance, is fundamentally similar to the problems we face in promoting innovation in general and confronting other challenges, such as climate change. Reaching the EU’s ambitious objective of achieving a carbon neutral economy by 2050 will require sustained long-term investment in green innovation, including in un-proven technologies that are still in their pilot phase.
The European Investment Bank has a strategic focus on critical investment gaps and is committed to supporting the development of promising early-stage technologies from demonstration to commercialisation through a variety of innovation finance tools, equity funds, venture debt and advisory services.
Access to finance is often difficult for innovative companies that have yet to make it big. The EIB has therefore developed climate and environmental finance instruments to address market failures and supports investments that are economically viable, but do not receive sufficient commercial finance due to perceived risks.
In this way, we have been successfully nurturing nascent technologies such as offshore wind farms to commercial competitiveness through technical advice and investment.
About the authors:
Cristina Niculescu Cristina is a senior life science specialist at the European Investment Bank Nadya Velikova is a life science specialist at the European Investment Bank Auvo KAIKKONEN is head of the EIB Regional Representation for China and Mongolia
Rising from dark times to bright aspirations.
Recovery, the greatest goal for the struggling SubSaharan African economies. While in some nations more than 50 percent of the population has been fully vaccinated, in this region only 6 percent are inoculated, the lowest vaccination rate in the world at the moment. A disparity that speaks volumes about the very limited resources in various African countries, funds that can make a difference when it comes to addressing COVID-19 and its many ongoing variants.
Vulnerable to new strains of the virus, this poses a great threat to any future recovery plans. So it’s time for Africa to learn from past mistakes and embrace innovative solutions on all fronts, a mindset that is now wellpositioned but badly executed.
A NEW OUTLOOK
Despite all the aggressive challenges, we saw outstanding examples at the start of the year; like South Africa, in which private consumption, commercial and industrial sectors showed a “faster-than expected” recovery, fostering feelings of hope that were already lost in the difficulties of the year.
But there are lots of hurdles ahead, the Delta variant derailed most of the projections, and the authorities had to raise lockdown measures to levels of higher restriction for the whole population. on the other hand, the government doubled down on the Temporary Employee/ Employer Relief Scheme, negotiating wages leading to more positive directions.
In the case of Rwanda, the government is trying every measure within reach to boost the pace of immunization as industrial production dropped to 14 percent. “We totally understand that vaccines do not provide a hundred percent immunity against COVID, but it helps to prevent the severe symptoms in groundbreaking ways”, said the health minister. With more than 10 million doses administered to 30 percent of Rwanda’s population, the country has one of the highest vaccination rates in the continent, walking steadily to the path of faster recovery.
POSITIVE OUTCOMES
According to experts at the World Bank, the Sub-Saharan African economy will emerge from recession to levels of growth at 3.3 percent in 2021, all due to serious ongoing expansions within the industrial and services sector. Tremendous gains in private consumption are also expected as foreign investment will play a leading role in satisfying new demands.
A rapid pace of vaccination is needed at this very moment in order to foster any possibilities of major recovery. Those efforts are the main reason why some developed nations are enjoying high levels of growth, openness and success against the different variants of COVID-19 throughout 2021.
Ghana has managed to keep the virus from spreading lately, while providing the necessary support to the most affected households. Its exports in agriculture and heavy industry brought crucial gains to the country at the start of 2021, as it managed to serve the international demand with outstanding performance.
As oil prices surged, the same happened to Chad, Gabon and Cameroon, nations that benefited greatly from petroleum exports and the digitalization of tax and custom processes, generating more public revenue that can then be used by governments in the ambitious task of containing COVID within their borders.
RESTRUCTURING DEBT
The levels of public debt in Africa have increased in record breaking ways, but the scenario was very similar preCOVID. On average, gross debt will climb up to 71 percent of the GDP across the region during 2021, a difference of 30 points in less than 10 years. here’s when $9 billion dollars in Eurobonds come into place, with Ghana being the largest issuer of them all at $3 billion.
There’s no lie, the pandemic has been a catalyst of vulnerability in the region, more than any other factor in the last 5 years; governments and businesses know this and are working to overturn this whole situation.
one of the most critical assignments is to improve and restructure debt and the transparency of handling it, according to experts at the World Bank this will be an integral step in trying to close the wide gaps of execution and reporting. While progress is slow we can see how bilateral agreements are functioning as planned, steering the wheel towards reconstruction just like Chad did last June.
NIGERIAN LEADERSHIP IS KEY
When its economy grew at 5 percent during Q2 of 2021, Nigeria managed to defy expectations and surprise many skeptics. This is not only a great example of resilience and outstanding management to other African nations but also the world, as the agriculture sector grew 6.7 percent, and the service sector had an impressive boost of 9.27 percent.
The main factor behind all these impressive achievements is the integration and aggressive adoption of digital technologies to boost productivity, fostering employment opportunities for young women as the workforce gets more diversified with talent.
Recent reports indicate that economic activity in Africa will surely strengthen as more countries find innovative ways to combat the pandemic. With projections that range from 2.3 to 3.4 percent, the international community will surely have their eyes fixated upon any possible scenario for 2022, as demand for products and services will rise in parallel with peculiar investment opportunities. The ones who are willing to face the risks are taking action right now.
5 ways for sustainably minded companies to build a post-pandemic work model
By Shankar Raman
COVID-19 has transformed the very nature of the employee-employer relationship, accelerating trends that were already in play and calling into question many things we took for granted before the pandemic – such as being required to work on-site. Many employees are fundamentally reconsidering what they want from their careers and how they want to work. And millions are quitting their jobs. Employers are not only trying to determine how to support the individual needs of a diverse workforce but also are reconsidering many of the basics of how work gets done today.
how organizations balance business sustainability with supporting employee needs is key as we create a new post-pandemic normal. here, we delve into how the way work is getting done is evolving and businesses’ increasing focus on diversity, equity and inclusion (DEI), as well as environmental, social and governance (ESG) issues. Not all of these trends may impact organizations equally, but it’s important for employers to take note as they start planning for a sustainable work model in the wake of COVID-19.
1. HYBRID WORK MODEL
Most employees want to come back to the office in some form. over the course of the pandemic when most people worked remotely, there seemed to be an uptick in productivity. however, people are increasingly feeling disconnected from their colleagues and workplace, and they want to return to work, typically two or three days a week, according to our 2020 Global Benefits Attitudes Survey. For example, our survey of employees found that almost four in 10 employees (38%) would prefer a mixed on-site/work-from-home experience.
We suggest employers consider preparing hybrid working models to address employee demands. The best way to plan is to first understand the needs of different employee segments and the type of work that’s being done. A proactive hybrid work strategy will enable employers to rethink how and where work gets done while continuing to focus on the employee experience. This will strengthen employee engagement and enhance productivity.
2. NEW PRIORITY FOR THE OFFICE SPACE
Before the pandemic, more often than not the primary purpose of the office was to serve as a quiet space to do individual work, and secondarily as a place to collaborate and communicate with colleagues. What’s becoming clearer, is that the office or workplace will evolve and centre more around collaboration, rather than the traditional quiet environment of individual work. our Flexible Work and Rewards Survey 2021 found that over a third of employers expect budget reductions in real estate (36%). Almost every organization is planning to retain at least some office space for collaboration.
And what is also becoming increasingly clear is that remote work is good when workers are doing traditional transactional work or even incremental innovation. But doing innovative or transformational work remotely is proving difficult because it requires frequent collaboration. So employers are going to need in-office collaboration to drive transformative innovation through constructive conflict.
3. ACCELERATION OF DIGITALIZATION
The use of collaborative tools such as Teams and Zoom reflects the acceleration of digitalization. But we’re also seeing an increase in investments in areas such as augmented reality (AR), virtual reality (VR), data and analytics, blockchain and cryptocurrency.
Now, since many are working remotely, we’re leaving a much larger digital “footprint”. The data created can help us drive better decision-making. Companies that use AI-based tools to drive better employee experiences and ensure more personalized experiences will see better results.
Organizations are beginning to use automation and network analysis. The beauty of Teams, Zoom or other collaborative tools is that hR can use data generated from these tools to assess how much time and with whom employees are collaborating, giving a better understanding of networks within an organization and how collaboration is being enabled.
We also expect that digitalization will lead to the development of new business models within existing companies, increased adoption of blockchain and the proliferation of new payment mechanisms, including cryptocurrency. 4. DEI SENSITIVITY
The pandemic has had different impacts and driven distinct experiences among various employee groups – women, people in caregiving roles, people of colour, working parents, lower-income groups etc. Profound questions related to DEI have come to the forefront. As employers start planning for new ways of working, they could unwittingly create inequities on multiple dimensions: pay, benefits and career prospects.
Organizations should monitor the impact of their policies on groups that could be at risk of being treated in an inequitable manner or be impacted by unconscious bias in the workplace. They will also need to prepare managers to be aware of these issues, ensure that they lead in an inclusive way and be aware enough to change flexible working policies that result in inadvertent bias. Employers should be reviewing their rewards offering, and understanding the preferences and impacts of current benefit provisions on different worker cohorts to identify areas for improvement.
5. THE ESG IMPERATIVE
ESG is increasingly becoming a boardroom conversation, with climate change as a central topic. With the recent Intergovernmental Panel on Climate Change report providing dire warnings about the impact of global warming, companies are becoming more conscious about their carbon footprints. Many have announced that they are going to drive toward net-zero carbon emissions.
From our perspective, as companies move to a hybrid work environment, they have to consciously make choices and adopt a strategy toward reducing their carbon footprints and achieving their netzero ambitions. This could have profound effects on companies’ business models and value chains.
Climate change is also becoming an important narrative of the employee value proposition. Increasingly employees are asking questions such as: What are you doing about climate change? Do you have an active policy? An employer’s answers might impact prospective employee decisions regarding whether they join the organization or not – especially important amid competitive labour markets and many employees quitting their jobs. Similarly, answers to those questions can help retain employees too.
In addition, organizations will come under greater scrutiny in terms of corporate governance and social practices. They will need to take a proactive approach to ESG and increasingly report on ESG metrics that reflect their strategies. In the longer run, successful companies will embed ESG into their business strategies.
A resilient, fast-growing economy, Turkey offers business-friendly policies, agile talent pool and global market access at the nexus of Europe, Asia and Africa to attract sustainable FDI.
Adapting itself to the challenges and transformations in the world economy and emerging as a post-pandemic supply demand hub in the global value chain (GVC), Turkey has been one of the fastest recovering economies in the world in the aftermath of the Covid-19 outbreak, expanding 7.4 percent y-o-y in the third quarter of 2021. For year-end 2021, Turkey’s GDP growth is projected to accelerate and reach double-digit numbers.
Turkey’s resilient economy has been a favorite target of investors during the pandemic, as it was over the last 18 years. Turkey continued to attract greenfield and expansion investments along with merger & acquisition projects in various sectors, also witnessing a rise in interest of financial investors, successful funding of startups and exits with lucrative returns. In the last year, the Turkish entrepreneurship sector has seen 5 unicorns, including an IPO in NASDAQ.
As the economy is recovering from the pandemic, the quality of economic growth is also increasing in Turkey with significant contributions from net exports to the Euro Area as external demand firmed. Turkey has developed a strong and diversified export capabilities so that products manufactured in Turkey have been making their way to the international markets in a broader scope and scale in terms of the volume and variety. Besides the European Union, which is still having a dominant role, other regions of the world, specifically United States, Middle East and African countries are now counted among Turkey’s top export destinations. In 2020, despite the interruptions in the global supply chains and serious disruptions in manufacturing, Turkey scored USD 170 billion exports, while yearly exports reached USD 221 billion in November 2021, the highest amount in the Republic’s history.
That being said, why do multinationals opt for Turkey as a robust GVC link?
STRONG AND DIVERSE MANUFACTURING CAPABILITIES
Buoyed up by state support, Turkey’s manufacturing base is diverse and robust. According to a World Bank report, Turkey’s manufacturing base has moved up the value chain, having transitioned from limited manufacturing to advanced manufacturing. Turkey’s manufacturing sector has attracted more than USD 40 billion worth of investment over the past 18 years.
DEVELOPED AND TECH-SUPPORTED LOGISTICS INFRASTRUCTURE
Being attached to the fact that logistics is a key to a major role in GVCs, Turkey has made massive investments in transport infrastructure over the past decade and a half to create domestic and international transport links. PROXIMITY TO SOURCE AND DESTINATION MARKETS
With its favorable geostrategic location, multinational companies have already made Turkey their home to run their business in the region by leveraging its location as a manufacturing, exports, R&D and management hub. Better still, Turkey is poised to offer more companies easy access to multiple markets in its immediate vicinity on top of a host of other market advantages.
QUALIFIED LABOR FORCE
Turkey’s domestic labor force has been one of the most dynamic in the region. Besides, the country offers a productive pool of qualified engineers and competent senior managers with international experience.
LIBERAL INVESTMENT CLIMATE WITH AN EXTENSIVE INTERNATIONAL TRADE NETWORKS
having a customs union with the European Union (EU) and free trade agreements in place with over 28 countries, Turkey has a vast commercial network. Businesses functional in Turkey have access to approximately 1 billion potential customers with no custom restrictions or tariffs.
INCENTIVES FOR INTERNATIONAL INVESTMENTS
The incentives have been one of the main instruments to transform Turkey’s economy toward higher added-value services. The incentive system of Turkey is mainly based on tax discounts and tax exemptions. The scope of the incentive is determined according to the qualification of the investment, type of product and the location where the investment will take place. Medium high-tech and high-tech investments, including products listed by the OECD, receives one of the most generous incentives
regardless of location. Priority incentives are provided for investments in priority areas, such as investments in freight and/or passenger transportation by sea, airway or railway, energy efficiency, LNG storage, waste recycling, nuclear energy plant investments and touristic accommodation investments. The main components of the incentive in Turkey are VAT exemption, customs duty exemption, corporate tax reduction, social security premium support, interest rate support on credits, and land allocation support.
TURKEY - AMPLE ROOM FOR GLOBAL INVESTORS
In addition, Turkey’s robust economy has been a favorite target of investors over the last 18 years. Investors worldwide sought safe havens that offered high yields and lower risks in the aftermath of the 2008 Global Financial Crisis. Turkey became one of those countries that piqued the interest of global investors thanks to its impressive growth rates and financial reforms.
A diversified economy, a young population with half under age 32.7, and an entrepreneurial business ecosystem supported by reforms stand out as attractive advantages for international companies looking to increase their commitments in Turkey and to grow their investments in the region using Turkey as a springboard.
Turkey has emerged as a strong regional player with global ambitions to be one of the top 10 economies in the world. According to IMF, in 2020, Turkey recorded the second highest growth among G20 countries, becoming the world’s 11th largest economy in terms of purchasing power parity. In the same period, Turkey was also among the countries with the highest increase in industrial production in the G20. INVESTMENT OFFICE - YOUR RESILIENT PARTNER
Investment Office of the Presidency of the Republic of Turkey promotes Turkey’s investment opportunities to the global business community and for providing assistance to investors before, during, and after their entry into Turkey. Directly reporting to the President of Turkey, the Investment Office is in charge of encouraging investments that further enhance the economic development of Turkey. To this end, the Investment Office supports high-tech, value-added, and employmentgenerating investments with its facilitation and follow-up services during whole processes of relevant investments.
Active on a global scale, the Investment Office operates with a network of local consultants based in a number of locations including China, Germany, Italy, Japan, Malaysia, Qatar, Saudi Arabia, Singapore, South Korea, Spain, the UAE, and USA. The Investment Office offers an extensive range of services to investors through a one-stop-shop approach, ensuring that they obtain optimal results from their investments in Turkey.
