Week 8 part 2

Moyo in her chapter explains foreign direct investment into Africa, or for countries in general for that matter. Moyo wrote that FDI is not nearly at the capacity of what it should be able to supply. Moyo explains that this is due to the fact that Africa’s labour does not appeal to other more rich countries (99). Moyo uses the example of the Japanese car markets investing in Eastern Europe because of cheap labour costs.

“Yet Africa, which should be on this basis be the prime target for FDI, continues to be broadly ignored,” Moyo wrote (99).

Moyo poses the question as to why, “…given Africa’s level of development, is it that most of the capital flows have by-passed the most needy of continents” (99).

Since the writing of Sachs’ and Moyo’s books, global flows of FDI have, according to the Overseas Development Institute (ODI) in London, “there are a number of notable trends characterizing the changing nature of private capital flows to Sub-Saharan Africa (SSA).” For example, “Inward foreign direct investment (FDI) flows to SSA increased from less than US$ 15 billion in 2001 to about US$ 37 billion in 2011.” This data was based on the United Nations Conference on Trade and Development (UNCTAD data).

ODI also proposes that FDI is not all that is needed, instead, “…capital flows beyond FDI will also be important for SSA over 2012-13 and into the future.” ODI wrote that significant bond activity specifically in Zambia or equity inflows in Nigeria are two examples of improvement beyond FDI. ODI does warn that, “Although this will affect the more developed SSA countries more than SSA fragile states which will continue to rely on official development assistance (ODA), and increasingly FDI, for some time.”

Moyo said that in order for a country to receive an FDI the labor costs are low, opportunity to invest is high, investable and it is still promising even as the home to some of the poorest countries in the world:

The point that ODI makes about FDI ties back into Moyo’s theory that giving more “aid” will not do any good for a developing country. Which is interesting when Moyo is encouraging Africa to become a more dependent FDI country. She wrote, “…as home to some of the poorest countries in the world, Africa should be FDI’s natural suitor” (99).

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