ECA Media Advisory

Addis Ababa, 18 April 2007 (ECA): The Economic Commission for Africa will convene a regional meeting on financing investment in Africa in Zanzibar, United Republic of Tanzania on 24-25 April 2007 .

The theme of the meeting is “Capital Flows and the Development of African Economies: Towards an Action Plan for Financing Investment in Africa” .

Discussions will focus on the following issues: capital market development, especially through regional integration; measures to support investment in Africa, including improving the investment climate; and recent trends in other financing instruments, such as options for SMEs, venture capital and pension funds in Africa.

Leaders of African stock exchanges and capital market authorities, as well as delegates from national governments, venture capital firms and the wider private sector, research institutions and specialists from the African Union Commission (AUC), the Trade Finance and Economic Development Division of ECA, the New Partnership for the Africa's Development (NEPAD), and Africa's regional economic communities (RECs) will participate in the conference.

The meeting aims to formulate an action plan targeting all stakeholders, which outlines concrete steps to promote the development of instruments and mechanisms for financing investment in Africa; and to promote partnerships between key regional partners (including the AUC, ECA and the RECS) on how to advance this important agenda.

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Background

African countries need to mobilize both domestic and external resources in order to accelerate economic growth, reduce poverty, and make progress towards meeting all the Millennium Development Goals. However, as a consequence of low domestic savings in addition to inadequate external capital flows, investment ratios in sub-Saharan countries remain at lower levels than in other developing regions. Overcoming this financing gap is a major challenge for African policymakers, and in response, governments need to consider various instruments and mechanisms for attracting all forms of domestic and foreign investment.

Foreign investment in Africa has increased in recent years in response to the commodity boom and the overall improvement in economic conditions and political climate on the continent. Private equity/venture capital and portfolio investment are also on the rise in a number of African countries. At the same time, domestic resource mobilization in most African countries remains insufficient. To tackle this challenge, governments need to promote the development of the banking system and capital markets.

In this context, the development of capital markets, including bond markets and stock exchanges, can play an important role in increasing both the quantity and productivity of investment. There are currently 21 stock exchanges in Africa. However, illiquidity, lack of integration with regional and global markets, and a range of capacity and technology constraints characterize these markets. The regional integration of capital markets in Africa offers a solution to this situation, especially for the smaller economies.

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