Ebook: Investment and Risk in Africa

Until recently Africa has been an unambiguously capital-hostile environment. During 1960 to 1990 the return on capital in Africa was on average around a third below that elsewhere.1 Because the returns on capital were low there was little private investment. However, during the 1990s some African governments have reformed policies sufficiently that returns are now probably quite high: there is evidence that the return on FDI is now higher in Africa than in other developing areas.2 Despite these improved returns, private investment has remained low. Whereas in other developing areas it is currently averaging 18 per cent of GDP, in Africa even by 1994 it was only 10 per cent, little changed from the 1980s.