African countries are no exception to this trend. Due to fact that most African countries experience a shortage of capital for investment purposes, they are well aware of the fact that FDI flows can bridge this gap. The stimulation of FDI activities can enhance job creation, the transfer of technology, export performance and broaden the tax base, which are all important sources for economic growth and development in these countries. African countries therefore participate in the increased competition between developing countries to attract FDI in order either to enter into or to consolidate their position within an increasing globalised world economy. However, the share that African countries have received of total FDI flows to developing countries has dropped substantially over the past two decades despite widespread moves to liberalise foreign regimes and offer attractive incentives.

The aim of this paper is firstly to analyse the recent trends in FDI flows to developing countries, with particular reference to African countries. This will be followed by a discussion of the possible determinants of these flows. The paper will conclude with policy options and future prospects of FDI flows to African countries.

TRENDS IN FDI FLOWS TO AFRICA

FDI flows to developing countries[2] have come a long way since the 1970s. Although it increased in absolute terms from an average of $8.5 billion in the 1970s to an average of $14 billion in the 1980s, these flows were very erratic and subject to a number of fluctuations. Since 1990 a considerable increase in FDI flows to developing countries has been experienced. Despite the Asian financial crisis in 1997, which caused a marginal decrease in FDI flows to developing countries in 1998, FDI flows to this group of countries increased from $26.7 billion in 1990 to approximately $183.8 billion in 1998 (IFC, 1997:98; UNCTAD, 1999:367). This represents an average annual increase of approximately 26 per cent per annum.

Since the late 1980s the increase in FDI flows to developing countries has led to an intensified competition between developed and developing countries to attract FDI. Developing countries have increased their share in world FDI flows from a mere 21 per cent in 1988 to approximately 42 per cent in 1997 (Brewer, in Oxelheim, 1993:192; UNCTAD, 1998:361). However, the turbulence in the financial markets during the second half of 1997 caused a reversal in the 1998 trend. With the exception of Latin America and the Caribbean, where FDI flows increased in 1998, FDI flows to the other developing regions declined to a share of approximately 29 per cent of total world flows (UNCTAD, 1999:477).

The regional distribution of FDI flows to developing countries since 1970 is shown in Table 1. Up until the middle eighties Latin America and the Caribbean were the largest recipients of FDI flows. Since the latter half of the eighties the situation has been reversed and countries in Asia and the Pacific are currently the largest recipients. These two developing regions are jointly receiving approximately 85 per cent of FDI flows to developing countries. Central and Eastern Europe - where FDI flows started to increase since the early 1990s after the overthrow of totalitarian regimes - and Africa are competing for the remaining 15 per cent.

Region	1970	1977	1985	1993	1997	1998
Africa	31.2	14.5	23.5	4.0	4.9	4.5
Asia and the Pacific	13.0	19.7	31.8	64.4	49.6	46.3
Latin America and the Caribbean	52.5	64.8	43.2	23.4	35.4	39.0
Central and Eastern Europe	3.3	1.0	1.5	8.2	10.1	10.2
Total	100.0	100.0	100.0	100.0	100.0	100.0

In Table 1 the declining trend in African countries' share in FDI flows to developing countries is also evident. While Africa was the second largest recipient of FDI flows during the early seventies, its share has declined ever since. Although an upsurge was experienced in 1985, this was of a temporary nature and due to once-off flows to countries like Nigeria, Cameroon and Libya. During the period 1993 to 1998 African countries received on average a mere 4.7 per cent of total FDI flows to developing regions.

Despite the declining trend in Africa's share in FDI flows to developing countries, flows to this part of the world increased in absolute terms over the past nearly three decades. During the 1970s FDI flows averaged $1.9 billion, in comparison with $2.3 billion in the 1980s and $5.1 in the 1990s (see Figure 1). The annual increase since 1990 amounted to an average of 20.6 per cent per annum. FDI flows to Africa declined to $8.3 billion in 1998 from a record $9.4 billion registered in 1997. This decrease can largely be accounted for by a decrease of flows to South Africa, which experienced record privatisation-led inflows during 1997. Although Africa benefited from an increase in FDI flows since the early 1990s, growth in these inflows to the region was considerably less than the growth in FDI flows to other developing regions.

Figure 1: FDI flows to Africa, 1970-1998 ($ billion)
Sources: IFC, 1997: 97, 98 UNCTAD, 1999: 477

The distribution of FDI inflows by industry for the developing regions is shown in Table 2. From the table it is evident that, in comparison with other developing regions, Africa is the largest recipient of primary inflows. Asia dominates the secondary sector, especially manufacturing, and Latin American countries the tertiary sector or service industries. During 1997 15.3 per cent of FDI flows to Africa was concentrated in the primary sector, 60 per cent of which was invested in mining, quarrying and petroleum and approximately 40 per cent in agriculture. The 32 per cent share of Africa's FDI inflows to the manufacturing sector is concentrated in the following industries: 60 per cent in the textile, clothing and leather industry and the remaining 40 per cent in industries such as food, wood, chemicals, non-metallic mineral products and other unspecified manufacturing. From the approximate 42 per cent FDI inflows in the service sector, 53 per cent is concentrated in finance, whereas the remaining services are concentrated in trade, transport, real estate, construction and various public services. Although a definite shift from the primary sector to manufacturing and services is discernible during 1997, the sectoral contribution of FDI stock for the period 1989 to 1996 still emphasised the dominant role of the primary sector in Africa.

A feature of FDI flows to African countries is the fact that they are highly concentrated in a few countries. The top ten African country recipients of FDI for the

periods 1987 to 1992 and 1993 to 1998, respectively, are ranked in Table 3. The

Sector		Region
	Africa	Asia	Latin America
Primary Manufacturing Services Unspecified	15.3 32.1 41.8 10.1	2.8 59.5 35.8 1.9	9.4 24.2 56.6 9.7

table shows that Nigeria and Egypt have been the largest recipients of FDI since 1987. The only other three countries that appear in the list on the top ten since 1987 are Morocco, Angola and Tunisia. During the period 1987 to 1992 the top ten recipient countries accounted for 89 per cent of FDI flows to Africa. For the period 1993 to 1998 this group of countries accounted for 78 per cent of total FDI flows to Africa. Despite this decline in the share of the top ten group of countries, a large number of especially sub-Saharan countries are still largely bypassed by foreign investors. Newcomers to the top ten lists since 1993 are South Africa, Algeria, Côte d'Ivoire, Zimbabwe and Uganda. Although FDI flows to Zimbabwe are still very volatile, flows to Uganda and Côte d'Ivoire started taking off in 1993 and those in South Africa and Algeria in 1994.

Another characteristic of FDI flows to Africa is the high concentration of these flows in the oil-exporting group of countries namely Algeria, Egypt, Libyan Arab Jamahiriya, Tunisia, Angola, Cameroon, Congo, Equatorial Guinea, Gabon and Nigeria. Despite the fact that FDI flows to oil-exporting countries like Algeria, Cameroon, Congo, Equatorial Guinea and Gabon have been erratic over the past decade, they remain significant. Where the oil-exporting African countries accounted for on average 75 per cent of FDI flows to the continent for the period 1987 to 1993, their share declined to an average of approximately 50 per cent during the period 1994 to 1998. However, during 1998 the share of these countries already increased again to 59 per cent (UNCTAD, 1998; UNCTAD, 1999). An aspect that should be taken into account is the fact that not all the FDI flows to the oil-exporting countries are focused on the oil industries. An example in this regard is the significant increase in FDI flows to Egypt during 1998 that was directly due to increased flows into the manufacturing sector (UNCTAD, 1999:46).

Country	1987-1992	Country	1993-1998
Nigeria Egypt Morocco Liberia Angola Tunisia Zambia Swaziland Gabon Botswana	845 806 203 201 178 160 102 62 56 47	Nigeria Egypt South Africa Morocco Tunisia Angola Algeria Côte d'Ivoire Zimbabwe Uganda	1 503 825 691 511 431 322 253 194 143 129

Since 1982 the main sources of FDI into Africa have included countries like France, the United Kingdom, the United States, Germany, Japan and the Netherlands. During the period 1992 to 1996 France became the single most important investor in the region (UNCTAD, 1998:165). However, in 1997 the United States shifted to the top of the list with $3.7 billion in FDI outflows to Africa (UNCTAD, 1999:47). An important trend since the early 1990s is the increasing investment of developing Asian countries in Africa. Countries like the Republic of Korea, Malaysia, Taiwan and China are investing in countries such as Egypt, Ghana, Guinea, Mauritius, Seychelles, Uganda, Tanzania, Zimbabwe and South Africa (UNCTAD, 1998:166).

DETERMINANTS OF FDI FLOWS TO AFRICA

In the discussion on the trends of FDI flows to Africa it is evident that, although FDI flows have increased in absolute terms since the seventies and particularly since the early 1990s, the continent's share in FDI flows to developing regions is declining. The situation is aggravated by the fact that these flows are highly concentrated in a small number of countries and to a large extent directed at oil-exporting countries. If African countries want to increase their share of FDI inflows, it is important to establish possible determinants that make Africa less attractive than other regions.

From the substantial amount of literature on FDI it is evident that no strong theoretical foundation exists to guide an empirical analysis of these issues. However, the analytical framework suggested by Dunning (see Dunning, 1988; UNCTAD, 1998:89,130) provides some answers on the geographic distribution of FDI. He identifies three mainstream host country locational-specific determinants, namely the national policy framework, business facilitation and macroeconomic determinants. The basic principles of these determinants as well as the extent to which African countries comply with these locational-specific determinants will be the focus of the next part.

National policy FDI framework

The national policy framework of FDI includes certain core policy measures such as the rules and regulations regarding entry as well as the structure of the market within which they operate. Supplementary policies include trade and tax policies. Other related policies include the host government's stance on privatisation and the willingness to sign international agreements. Evidence suggests that these FDI policies are a necessary but not sufficient host country determinant of FDI (UNCTAD, 1998:94). There are also indications that the negative effects of restrictive policies are stronger than the positive effects of liberal policies. This has drawn attention to other policies to attract FDI that have not been considered in the past. These policies include macroeconomic and macro-political policies. Macroeconomic policy includes sound monetary and fiscal policies. Policies favourable for domestic investment very often attract FDI (Sweeney, in Oxelheim, 1993:71). As regards macro-political policies, evidence suggests that a stable political environment is conducive to FDI. Although studies of the relationship between country instability and FDI flows have yielded mixed results, there are indications that even brief periods of governmental instability can cause interruptions in FDI flows. (See Lucas, 1993:402).

As regards the national policy FDI framework in African countries, mixed results are obtained when analysing various related factors in different countries. The list of factors or determinants include:

. Poor macroeconomic policies. These are an important reason for Africa's poor economic performance and slow growth pattern (Collier and Gunning, 1999:101). A number of African countries have embarked upon policy changes and are showing a trend towards increased macroeconomic stability. Nonetheless, the degree of stability varies significantly between countries. The average inflation rate for Africa for the 1980s amounted to 16.1 per cent. However, the inflation rate nearly doubled during the 1990s to approximately 31 per cent on average (African Development Bank, 1998:214). Although the high inflation rate may be an indication of an unstable macroeconomic environment, there are 25 countries that succeeded in maintaining an average inflation rate below 12 per cent during the 1990s (African Development Bank, 1998:214). A commitment to fiscal discipline can send a positive message to foreign investors on the resolve of government to maintain macroeconomic stability. In contrast with the high fiscal deficits prevailing in Africa during the 1980s, tight budgetary management increasingly characterised the fiscal sector in most African economies in 1997. The budget deficit in Africa for the period 1991 to 1997 averaged 4.9 per cent of GDP (African Development Bank, 1998:215). All indications are that Africa is moving towards greater macroeconomic stability.

. Non-competitive marginal corporate tax structure in most African countries. Most developing countries with exceptional high inflows of FDI such as China, Singapore, Brazil and Hungary have a marginal corporate tax rate of 30 per cent and below (Loots, 1999:17). A small number of African countries such as Nigeria, Botswana and South Africa comply with these criteria (World Bank, 1999:222, 223). Even Egypt, which has been a frontrunner regarding FDI inflows since the late 1980s, has a marginal corporate tax rate of 40 per cent (World Bank, 1999:222).

. Another important factor influencing FDI flows to a country relates to trade policy. In most African countries there is a general trend towards more open trade regimes. Evidence shows that countries like Tunisia, Egypt, Mauritius and Morocco managed to attract FDI in industries such as textiles and apparel by offering special incentives (UNCTAD, 1998:181). The setting up of export processing zones (EPZ) that are particularly targeted at investors in efficiency-seeking, export-oriented industries has been embarked upon in a number of countries such as Egypt, with 11 EPZs, Ghana (6), Cote d'Ivoire (1), Kenya (15), Madagascar (1), Mauritius, Namibia (3), Senegal (1), Togo (1), Tunisia and Zimbabwe (7) (UNCTAD, 1999:452-454). Despite the fact that these initiatives are fairly new and shortcomings in important areas still exist, they can act as a future stimulus for FDI flows to these countries.

. With respect to privatisation initiatives it is important to note that during the 1980s Africa took the lead among developing regions with the strongest privatisation efforts. However, since the early 1990s, privatisation of state assets has proceeded very slowly. Private assets in privatisation initiatives in African countries have not always been made available to foreign investors, and when this is taken into account, the conclusion can be drawn that privatisation programmes have not had a significant influence on FDI flows to Africa up until the middle 1990s (UN, 1995:46). The only exceptions seem to be South Africa, where privatisation-related FDI dominated FDI inflows during the period 1994 to 1997, Mozambique, Ghana and Uganda (UNCTAD, 1998:183; UNCTAD, 1999:47). According to a wide range of literature on the determinants of FDI, privatisation initiatives can broaden the scope of and create new initiatives for FDI (UNCTAD, 1998:92; Lall, 1998:109; Brewer, in Oxelheim, 1993:186). The UN (1995:48) referred to research, done by Sader, that indicates that one dollar revenue through privatisation can generate an additional 38 cents in new FDI inflows. Although privatisation cannot be a sustained source of FDI, the successes in certain Latin American and Eastern European countries in using this mode of entry for foreign investors should stimulate African economies to follow the same route.

. Continuing civil conflicts and political crises in African countries, which influence political stability. Although political risk is frequently thought to influence FDI decisions, the empirical results do not always support this hypothesis in the African context. On the one hand civil strife in countries like Liberia, Rwanda, Somalia, Sudan and in the Democratic Republic of Congo brought FDI in these regions to an immediate standstill (Bhattacharya et. al., 1997:5). Other countries that are emerging from prolonged periods of conflict - Chad, Ethiopia and Uganda - are receiving renewed inflows of FDI. The exceptions to the rule are Mozambique and Angola, which were able to attract considerable FDI inflows during periods of political instability (UN, 1995: 38). Since the end of civil war in Mozambique in 1993, FDI flows have increased substantially. However, despite the civil war in Angola, the country succeeded in being the sixth biggest recipient of FDI inflows on the continent during the period 1993 to 1998. The explanation for the high FDI flows to Angola is, firstly, that they are natural resource driven and secondly, that they have to a large extent gone into offshore petroleum and natural gas exploration and production (UNCTAD, 1999:46). If this factor is taken into account, it can be concluded that political stability, especially as Singh and Jun (1995:20) noted in the case of high-FDI countries, is significant in explaining FDI decisions.

Business facilitation

Business facilitation includes proactive measures to facilitate the business that foreign investors undertake in host economies. These include the promotion efforts and investment incentives of foreign direct investors, reducing corruption and improving administrative efficiency (the so-called hassle-costs), after-investment services and the provision of social amenities that can contribute to the quality of life of personnel.

Almost all countries in Africa have recently made efforts to improve the business environment for foreign investors. This include initiatives such as the reduction in bureaucratic "red tape" and state interference in private business, improvement in investment facilitation and the establishment of investment promotion agencies. According to a ranking of the best investment promotion agencies in Africa, Uganda's agency for investment promotion came first on the list (UNCTAD, 1998:184). However, these measures with respect to business facilitation are neither sufficient nor necessary for FDI to take place and can only play a supporting role. Examples in other regions in this regard are Brazil in the 1970s and 1990s and Indonesia in the 1980s where FDI took place in the absence of promotional techniques and incentives (UNCTAD, 1998:106).

The exception in this case is the presence of corruption in countries. According to the Africa Competitiveness Report 1998, corruption constitutes one of the most important factors influencing FDI decisions in Africa (UNCTAD, 1998:184). In this respect the 1998 Corruption Perceptions Index (published by Transparency International) reveals that, although Africa as a region has significantly expanded its anti-corruption programme, countries like Cameroon, Kenya, Nigeria, Tanzania and Uganda are classified as being among the 15 per cent most corrupt countries covered in the survey (E-Prodder mail). In contrast, countries like Botswana, Mauritius, Namibia and South Africa were classified as being in the upper half of the least corrupt countries in the survey .

Macroeconomic determinants

The third set of host country determinants are the macroeconomic determinants. These determinants are becoming more important and host countries are increasingly realising the urgency of improving these determinants. These determinants have changed over time in response to the forces of liberalisation and globalisation. The economic determinants can be grouped according to the principal motivations of TNCs. They are:

. Market-driven or market-seeking FDI. The aim of this motive is to penetrate foreign markets. The determinants in this regard are the size of the market (GDP as well as population size), the growth of the market, access to foreign markets and the structure of the market.

. Resource-seeking or factor-driven FDI. This includes the availability of natural resources (raw materials and minerals), the availability of low-cost unskilled labour, the availability of skilled labour and the quality of physical infrastructure.

. Efficiency-seeking FDI is focused on the productivity of labour, the cost of resources, input costs and the participation of regional integration frameworks.

. The markets in Africa, measured in terms of the real GDP, are relatively small. The countries with the largest markets are South Africa, Algeria, Egypt, Libya, Nigeria and Morocco (African Development Bank, 1998:205). The sizes of these markets range from $117 billion to $30 billion. In comparison with top developing country FDI recipients such as China, Mexico, Brazil, Argentina and Indonesia, all with markets larger than $200 billion, African economies do not compare at all.

. Apart from the fact that Africa has relatively small markets, the growth in the markets is also slow. For the period 1980 to 1990 the average annual growth rate for African countries was 3 per cent and for the period 1991 to 1997 a mere 2.5 per cent (African Development Bank, 1998:205). If it is taken into account that the average annual growth rate for the period 1990 to 1997 of regions such as East Asia and the Pacific, Latin American and the Caribbean, and South Asia amounted to 9.9 per cent, 3.3 per cent and 5.7 per cent respectively, Africa's growth record is seriously lagging behind those in other regions (World Bank, 1999:211). The slowdown in economic growth over the past two decades contributed to stagnation in per capita income. The average per capita income in Africa - $662 - is less than half of those in other developing regions (African Development Bank 1998:204; World Bank, 1999:191). Evidence in other developing countries such as China, Malaysia, Singapore and Argentina shows that a sustainable long-term economic growth performance attracts FDI (Loots, 1999:12). In this regard Bhattacharya et. al. (1997:5) concluded that small domestic markets with poor growth performances have deterred broader-based FDI in Africa. However, a number of African countries succeeded in sustaining high average economic growth rates for the period 1991 to 1997. It includes countries such as Equatorial Guinea, with an average real economic growth rate of 25.6 per cent per annum, Uganda (6.8 per cent), Mozambique (6 per cent), Sudan (5.6 per cent), Mauritius (5.2 per cent), Botswana (5 per cent), Namibia (4.8 per cent) and Tunisia (4.5 per cent) (African Development Bank, 1998:205). From this list of countries it is only Botswana, Mauritius, Tunisia and Uganda that maintained high and sustainable real economic growth rates since the 1980s.

. Access to foreign markets, which is measured by the average export-GDP ratio. While this ratio for Africa is about 22 per cent, performances vary considerably between the export-oriented countries. Countries such as Angola, Botswana, Congo, Equatorial Guinea, Gabon, Mauritius, Namibia and Swaziland registered ratios in excess of 40 per cent for 1997 (African Development Bank, 1998:11). In this regard African countries are comparable to other regions. Only regions such as East Asia and the Pacific (28 per cent) and Developing Europe and Central Asia (31 per cent) scored higher ratios on average than Africa.

As for resource-seeking FDI, the current stance of Africa is as follows:

. FDI to African countries is to a large extent still natural resource driven. This trend is evident if the 40 per cent share of the primary sector for the period 1989 to 1996 is taken into account (UNCTAD, 1998:166, 171). However, a definite shift away from the primary sector is evident - see Table 2 - but it is still too early to establish whether this will be a long-term trend. The fact that most of the top ten countries mentioned in Table 3 are countries with economies dominated by either oil or mineral resources, highlights the fact that natural resource endowments explain much of the FDI inflows into these countries.

. As for the physical infrastructure, the UN (1995:38) concluded that in general it is of poor and deteriorating quality - especially as regards telecommunication and transportation infrastructure - and there is a general lack of capital to improve it. Furthermore, the institutional and financial infrastructure is also inadequate in most African countries. Although the lack of infrastructure is often seen as a deterrent to FDI inflows, Lall (1998:108) remarked on a relative new form of FDI, namely that of investment in infrastructure. Due to the fact that many African countries have limited resources for investment in infrastructure, this gap could be filled by foreign investors.

. As regards the labour market in Africa, it is characterised by a lack of skills, or low levels of skills and productivity, as well as relatively high wage costs (UN, 1995:39). Mixed results were obtained in various studies regarding the importance of this determinant in FDI decisions. In a study on the determinants of the top ten developing country recipients of FDI, Loots (1999:14) concluded that the availability of either low-cost unskilled labour or of a highly skilled labour force seems to be a strong determinant of FDI. Lall (1998:109) concluded that the significance of low labour costs in attracting FDI might be declining due to the trend towards capital-intensiveness in export-oriented FDI in particular. According to Lall, the main industry still seeking cheap labour is the low-end garment industry. However, Lall (1998:110) also remarked that wages per se would remain an important competitive consideration.

As for efficiency-seeking FDI, Africa is also less attractive than other developing regions due to the following factors:

. The general low levels of skills in the labour force cannot contribute to timely and cost-effective production and delivery of goods and services. The general low level of skills in the labour force, coupled with the low levels of productivity and unreliable infrastructure, increases relative production costs and weakens the attractiveness of Africa as an investment location.

. Africa has not succeeded so far in establishing strong regional integration frameworks. The existing regional groupings, namely the East African Corporation (EAC) agreement, the Economic Community of West African States (ECOWAS), the Southern African Customs Unions (SACU) and the Southern African Development Community (SADC) are still in the planning and policy phases. Apart from a number of initiatives such as the $67 million digital transmission project by the EAC, the Maputo Corridor in SADC and negotiations between SACU and the European Union, a lot of work still needs to be done to strengthen the process of regional integration in Africa (African Development Bank 1998:22-26). Due to the fact that Africa has relatively small markets, the process of regional integration can overcome this barrier by attracting FDI to service regions rather than individual countries. In this regard evidence in the Asian and Latin American regions suggests that regional integration will be a major explanatory factor of future FDI patterns (Loots, 1999:12).

From the discussion above it is evident that, although Africa has improved since the early 1990s in a number of criteria that determine the inflow of FDI to the region, a lot still needs to be done in order to make the region more attractive. In conclusion, reference could be made to the current risk rating for African countries, listed in Table 4. The ICRG risk rating is an overall index compiled by the International Country Risk Guide. This guide uses 22 components of risk, classifies these components into political, financial and economic categories and calculates a single risk assessment index, ranging between 0 and 100. A rating below 50 is indicative of very high risk and those above 80 indicate very low risk (World Bank, 1999:243). The country with the lowest risk in Africa is Namibia, followed by Tunisia, South Africa, Morocco and Egypt. The countries ranking between six and eleven have been classified as medium risk countries. It is interesting to note that Namibia, with the lowest risk in Africa, has not received significant inflows of FDI. However, countries like Tunisia, South Africa, Morocco, Egypt and Uganda are all included in the top ten FDI recipient list (see Table 3).

Rank	Country	Risk rating
1 2 3 4 5 6 7 8 9 10 11	Namibia Tunisia South Africa Morocco Egypt Gabon Mali Madagaskar Senegal Malawi Uganda	78.8 73.5 72.0 71.5 70.8 69.3 64.8 64.5 64.5 64.3 63.8

Although the volume and share of FDI flows to developing countries have increased significantly over the past decade, Africa is receiving a declining share of these flows. The growth in FDI flows to African countries since 1990 has been considerably less than the growth in FDI flows to other developing regions. Furthermore, FDI flows to Africa are concentrated in a small number of countries and in a limited number of industries such as oil, gas, metals and other extractive industries.

In analysing the current stance of African countries with respect to the general set of determinants of FDI flows, mixed results were obtained. As regards the national policy framework, advances have been made towards ensuring macroeconomic stability as well as a general trend towards more open trade regimes. However, the corporate tax structure in most African countries still seems to be non-competitive and countries seem to be slow at embarking on privatisation initiatives. Perhaps the most distressing factor on the African continent is the continuing civil conflict and political unrest.

As for business facilitation, almost all countries have recently made efforts to improve the business environment for foreign investors. The exception to this trend, however, is the continuing presence of corruption in a large number of African economies.

The most influential set of FDI determinants is the macroeconomic determinants. In this respect African countries are seriously lagging behind their other developing country counterparts. As for market-seeking FDI, African markets are still relatively small, the long-term growth in the markets is seriously lagging behind those in other regions and average per capita incomes in Africa are less than half of those in other developing regions. With respect to resource-seeking FDI, African countries are still to a large extent natural resource driven. They are also characterised by the poor and deteriorating quality of their physical infrastructure and the low levels of skills in the labour market, both of which factors contribute to the low levels of productivity and relative high production costs prevailing in most African countries. The fact that Africa has not succeeded so far in establishing strong regional integration frameworks contributes to the continent not being attractive for efficiency-seeking FDI.

Although it will always be a difficult task to identify a consistent set of determinants that could guarantee an increased and continuous flow of FDI to all African countries, this broad set of determinants may act as guidelines for possible future policy options. Africa should take cognisance of the fact that the process of globalisation and global integration will continue to drive future FDI flows.

[1] FDI can be defined as an investment made to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor (OECD, 1996:7).

[2] Different classifications of developing countries are used by institutions like the World Bank and the United Nations in their publications. Here I have used the classification of the United Nations. The exceptions are firstly the inclusion of South Africa as a developing country and not as a developed country, and secondly, the inclusion of Central and Eastern Europe in the group of developing countries.

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Paper presented at the African Studies Association of Australasia & the Pacific 22nd Annual & International Conference (Perth, 1999) New African Perspectives: Africa, Australasia, & the Wider World at the end of the twentieth century

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