Thursday, September 22, 2005

Africans gain little from outside investment

The BBC reports that African nations are gaining little benefit from foreign direct investment, according to a United Nations report.

Tens of billions of dollars have been invested into Africa's oil and mining industries but with little benefit to ordinary residents of the world's poorest continent. These extraction industries generate low tax revenues and often carry devastating environmental consequences, notes the BBC. The much-touted spillover effect, that direct investment creates broad growth and jobs, has been negligible.

Both Tanzania and Ghana receive as little as 5% of the value of their gold exports, noted the UN document.

The Angola Press Agency noted that although oil and diamond extraction accounts for 57 percent of the nation's gross domestic product, it employs 1 percent of the country's manpower.

The UN report also called governments to encourage companies to do their value-adding (such as diamond processing or oil refining) on the continent rather than abroad.

However, governments need to create conditions to foster this additional investment by fighting corruption and improving security conditions.


Update: Of course if governments insisted on basic environmental standards for these industries, it would not only preserve agricultural production, public health and general quality of life, but enhance internal stability and security.

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