UK and international firms should see Africa as a place where they can make a profit, not just do charitable work – according to new research from Overseas Development Institute (ODI).
The London-based think tank has produced figures that show the rate of profit on investment for firms investing in Africa is higher than many other parts of the world.
The report is published ahead of Monday’s UK Africa investment summit that hopes to be a model for British trade policy after the country leaves the European Union.
ODI looks specifically at investment by UK firms in Ghana, Kenya, Nigeria and South Africa and concludes that a young population, growing middle class, and planned industrial growth makes the continent a great place to do business.
This assessment is based on interviews with executives of many British firms operating in these countries.
Max Mendez-Parra, joint author of the report and a senior research fellow at the Overseas Development Institute, said :”Financial, insurance, business and professional services – including specialist software – are essential to manufacturing, an area that Africa needs and wants to develop.
“UK firms have a strong comparative advantage and expertise in these fields and African consumers hold British products in high regard.”
However extra regulations, high levels of corruption, and the security environment are among the barriers limiting investments in Africa.
The paper –published today (January 17) – reveals that last year the rate of return on all inward foreign direct investment in developing African countries was 6.5%, which is higher than the rate in developing Latin America and the Caribbean , 6.2%, and ‘so-called’ developed economies, 6%.
Max Mendez-Parra said: “Africa presents a business opportunity for UK and other foreign investors targeting a place with a growing market base and higher returns.
“These investments are a win-win for the UK and Africa: creating jobs, growing economies and helping fight poverty across the continent, alongside traditional aid.”
The research paper is called “Africa and the United Kingdom Challenges and opportunities to expand UK investments” and has been funded by the UK’s Department for International Development.