Speech
Investing in Africa - Speech by International Development Minister Shriti
Vadera at the City of London Corporation and DFID Rwanda and Tanzania's investment
symposium, 06 November 2007
Rwanda
country page |
Tanzania country page
06 November 2007
 Honourable
Ministers, distinguished ladies and gentlemen, I would like to start by thanking
Michael Snyder whose brainchild this event is. He recognised that certain
countries in Africa represent significant opportunities for investors, but also
that we need to support their efforts to achieve our international goals to
reduce poverty. So I would like to welcome to London some of the key architects
of Africa’s reform.
In particular I would like to acknowledge the leadership provided by
President Kagame – one of the outstanding reformers in Africa, the Honourable
Minister Ngasongwa and Dr Kaberuka, President of the African Development Bank and
former Finance Minister for Rwanda.
Reasons for optimism
I am also delighted to see Nkosano Moyo, whose Actis team has invested over
US$1.5 billion in 19 African countries and achieved an annual return of over
25%.
Too often our perceptions of Africa are coloured by the disproportionate news
coverage of crisis in an ever smaller number of countries. It is a sad fact that
wars, famines and isolated cases of sky high inflation make better news stories
than political and economic stability and steady growth. There are reasons to be
more optimistic than in several decades. Africa’s average growth – at 5% for the
past five years – is higher than at any time since the 1970s. In 2008 average
growth is projected to be an impressive 6.8%. Democracy is taking root across
the continent, and conflicts are declining. Macroeconomic stability is evident
almost everywhere.
The media and we are perhaps not discriminating enough between different
countries.
I am not going to pretend that all countries present equally attractive
investment opportunities. Rewards do exist for those investors who take the time
to differentiate between countries and seek out the reformers.
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Improving the business environment
I recognise challenges remain even in reformed countries, especially on
governance and economic reform.
Two countries that have shown their commitment to reform and improving their
business climate are Rwanda and Tanzania. Over the last ten years Rwanda has
grown by 7.4% per year and Tanzania 5.4% in real terms. Adult literacy rates at
65% and 69% respectively are higher than India’s and with increasing numbers of
the diaspora returning and bringing new skills and business ideas, the human
resource base in many countries continues to strengthen.
In May, President Kagame launched a major initiative to improve the business
environment through streamlining business registration, establishing commercial
courts to speed up the resolution of commercial disputes and introducing
legislation to reduce the documentation needed for trade. Customs warehouses are
being privatised and competition has led to prices for storage dropping by 40%.
Rwanda clearly recognises that trade liberalisation is fundamental for
development.
In Tanzania the economic problems of earlier decades have been superseded by
sound macro-economic management. In just the last two years, it has jumped ten
places in the global survey ranking  Doing Business. This is based on difficult
reforms in tax, commercial courts and the regulation of business – fees for
starting a business have halved. And Tanzania has already been successful in
reducing the length of time it takes for imports to cross borders by 25% in one
year.
In Africa there are some sectors that still lend themselves more easily to
investment and with high prices. Natural resources remain the traditional sector
attracting the most investment.
Exceptional improvements in tax and customs administration and public
expenditure management have both reinforced development partner confidence in
the authorities’ commitment to reform, and increased the effectiveness of
government expenditures.
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DFID: Promoting growth in Africa
In 2006 Tanzania had the highest inflows of Foreign Direct Investment in East
Africa at $377 million. UK investors provided the largest share.
The British Government is also supporting Tanzania’s growth through
programmes to improve the investment climate, including financial sector reform
and tax modernisation.
DFID is committed to developing long term partnerships with countries like
Rwanda and Tanzania that have a commitment to grow and promote investment to
create jobs and improve incomes. Our programmes in
Tanzania currently exceed £120
million a year and in Rwanda it is
£46 million a year.
Telecommunications have also been an amazing success story and illustrate
Africa’s growth potential. Africa has been the fastest-growing mobile market in
the world, averaging 50% growth per year since 2000. There will be 270
million subscribers by the end of this year. Another 270 million are expected by
2011.
An innovative example of the potential of mobile phones to transform lives is
the pilot that DFID funded with Vodafone which uses mobile phones to reduce the
cost of transferring money in Kenya. There are now 600,000 customers and a trial
is already underway to use this technology to enable international remittances
to be sent from the UK to Kenya. Tanzania and Rwanda are potential future
markets.
Poor infrastructure is a critical barrier to accelerating growth and poverty
reduction, but it should also be seen as an area of opportunity. Annual
investment in African infrastructure (power, water and transport) needs to be
around £10 billion over the next ten years.
In addition to high financial returns, there is empirical evidence of high
economic returns to well-implemented infrastructure investments. In Mozambique,
infrastructure investment reduced trade and transport costs by 15% and produced
a 5% increase in national income.
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Increasing trade in African and world markets
Domestic African markets are also growing rapidly. In June this year Rwanda,
with Burundi, joined the East African Community Customs Union. Investors in
Rwanda and Tanzania now have access to a market of 124 million people - almost
as big as Nigeria. By 2010 there will be a full common market in East Africa.
The East African Community is already delivering results. It has reduced the
costs of doing business by 5%, increased trade between its members by 25% and
improved business confidence by 40%.
And we have also seen that Africa can produce goods and services for export
markets. All East African Community countries benefit from duty free access to
EU markets.
I want to tackle head-on the issue about the climate impacts of flying
produce from Africa. In the UK 91% of fruit and 38% of the vegetables are
imported. But greenhouse gas emissions from air-freighted fruit and vegetables
from Africa account for less than 0.1% of UK’s emissions.
Focusing on the miles travelled misses the point about emissions of the whole
cycle of production. Independent research shows that Kenyan roses use less than
a fifth of the energy to produce and transport to the UK than Dutch roses.
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The private sector: Vital for poverty reduction
DFID is committed to developing long term partnerships with reforming
countries like Rwanda and Tanzania. Our programmes in Tanzania currently exceed
£120 million a year and in Rwanda is £46 million a year.
But I am here as Minister responsible for reducing poverty in Africa not
because of the amount DFID spends to assist in poverty reduction. The purpose of
aid is to no longer require it. We recognise that it is only through the private
sector led investment and growth that we will achieve lasting poverty reduction.
So in a shift of emphasis in our approach to development, DFID has said we
will support analytical work by countries on the barriers to growth, help create
the right climate for business investment and, with other donors, finance growth
strategies including investing in infrastructure and skills.
Perhaps for the first time we all have a sense of optimism in Africa.
In countries like Rwanda and Tanzania there is political commitment to
continue with reforms and we will remain their partners to support these
reforms. But there is no need, to this audience, to emphasise the role of the
private sector – you are the wealth creators and in the end, the ones who can
reduce poverty.
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