October 31, 2019
This report from the UK think tank Chatham House looks at the potential of investment partnerships for mutual benefit in Central and Eastern Europe and Sub-Saharan Africa.
Trade between Central and Eastern Europe and sub-Saharan Africa has increased significantly in the last decade and a half. There is a strong case to be made for greater economic re-engagement, especially in terms of investment, that has the potential to support inclusive growth in both regions. There are growing economic links between the economies of Central and Eastern Europe and sub-Saharan Africa in terms of both trade and investment. However, while trade has picked up significantly from pre-EU accession levels, investment has not increased to the same extent. Contrary to common assumption, investment flows are not solely from Central and Eastern Europe to sub-Saharan Africa. In reality, the largest investment flow between the two blocs occurs in the opposite direction – from South Africa into Central and Eastern Europe. Sub-Saharan Africa can benefit from a greater commercial relationship focused on attracting sustainable investment from Central and Eastern Europe.
For this to happen, commercial strategies towards Central and Eastern European countries need to be put in place before strategy can be reinforced by greater diplomatic and informational support. For many sub-Saharan African governments, there is no overall targeted approach to attracting Central and Eastern European investors. A notable exception is South Africa, where departments have been established at provincial government level to specifically target investment from Central and Eastern Europe. Sub-Saharan African governments expect Central and Eastern European private-sector investment to result not only in job creation, but also to bring spillover benefits such as the transfer of skills and knowledge to domestic industries. Each sub-Saharan African country, in accordance with its individual circumstances, will need to adopt a discrete mix of administrative reform (particularly aimed at cutting red tape), as well as infrastructural and other policies that improve the business environment and generate investor confidence.
Much of the private sector in Central and Eastern Europe is somewhat hesitant to invest in sub-Saharan Africa on a greater scale. Many companies are most comfortable operating within their domestic environment; when they invest abroad, it tends to be in the ‘neighbourhood’ with which they are already familiar. Perceptions of risk are often compounded by popular misperceptions and generalizations about sub-Saharan Africa. Central and Eastern European countries stand to gain from a deeper investment relationship. While greater engagement with sub-Saharan Africa has already been pursued by some countries, most of them focus on trade. Institutional support to companies from Central and Eastern Europe (both public and private) has evolved to a degree, but is still not comprehensive. Information for companies interested in investing is either lacking or not shared in an efficient way. And the greatest challenge is ensuring top-level political engagement. EU membership offers clear opportunities for Central and Eastern European countries to invest sustainably and responsibly in sub-Saharan Africa. Not only is financial support forthcoming, through innovative EU financial instruments, but the availability of information relevant to business and the EU’s extensive diplomatic presence in Africa should help to alleviate some of the concerns of Central and Eastern European investors.Read Full Report