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African Capacity Building Foundation

Capacity building for the promotion of trade and investment in Africa - challenges and strategies

Soumana Sako, George Kararach

African Capacity Building Foundation

June 2007

SARPN acknowledges African Capacity Building Foundation as a source of this document: www.acbf-pact.org
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Summary

The lack of capacity has hindered Africa from exploiting the investment and trade opportunities offered by the global economy. Most of the constraints and challenges are linked to ineffective policies, poor management systems and frameworks, weak governance, conflicts, HIV/AIDS and the heavy external debt, among others. Despite Africa’s efforts to lifting some of the developmental constraints, African governments should strive to increase their awareness and build their capacity towards the promotion of trade and investments in Africa, and thus ensure their effective participation in the world economy. Following the commitments made to developing countries– dubbed the Doha Development Agenda (DDA) - the promise of additional assistance to developing countries to help them participate, negotiate and implement WTO agreements has not been backed by adequate resources. Given the experience of Africa over the last halfcentury, it is clear that trade reform and openness alone is not sufficient to sustain economic growth and poverty reduction. The WTO and its associated rules and procedures have defined the framework for trade and investment promotion in Africa, as is the case for the ‘Singapore issues’, in terms of investment protection, competition policy, transparency in government procurement and trade facilitation. Several African countries have ratified the Agreement on Trade and Related Investment Measures (TRIMs), which prohibits governments from requiring foreign investors to use locally produced inputs. Many of these governments have also negotiated bilateral investment treaties (BITs), which they are required to implement or else penalized, failure to do so. Given the challenges and causes of inadequate capacity to promote trade and investments in Africa, the continent should devise creative responses to address the capacity issues. Africa needs first and foremost to build and sustain its capacity. Building capacity does not constitute an end in itself but a means for achieving overall socioeconomic development.

Introduction

Africa has made significant strides in lifting some of the constraints hindering its efforts in achieving sustainable development and reducing abject poverty. Most of the constraints and challenges are linked to ineffective policies, poor management systems and frameworks, weak governance, conflicts, HIV/AIDS and the heavy external debt, among others (Sako and Ogiogio, 2002)1. All these factors are affecting the patterns of trade and investments in Africa– for example, HIV/AIDS is affecting the quality of labour required for trade and investment activities and is eroding available financial resources. In this regard, African governments have become increasingly aware of the importance of developing capacity to promote trade and attract investments for Africa to participate more effectively in the world economy and reap the full benefits of globalisation. To this end, a range of policies have been developed and adopted with a view of improving countries’ capacities to expand their trading and investment horizons. Thus, all capacity building initiatives in this respect should be linked to the trade and investment policies and priorities of African countries.

The purpose of this paper is to highlight the major capacity constraints and challenges facing Africa as it seeks to expand its trade opportunities as well as attract greater volumes of good quality foreign direct investments. In addition, it puts forward a set of strategies and recommendations to address these challenges.


Footnote:
  1. Also see Land and Ndorukwigira (2001) for detailed discussions of the various issues affecting capacity building in Africa.


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