While the UN Conference for Trade and Development (Unctad) is predicting that foreign direct investment (FDI) flows to Africa will contract by 25 to 40% this year, it is also predicting that Covid-19 will have a long-term impact well beyond 2020 – depending on the duration and severity of the pandemic.
To mitigate the impact of Covid-19 on FDI, a rethink of many investment policy and related areas will be necessary, according to Talkmore Chidede, a researcher at tralac.
“Covid-19 has exposed Africa’s need for more essential medical supplies. Governments should rethink attracting more investments into the pharmaceutical industry by supporting research and innovation. Strengthening intellectual property rights would be an important complementary initiative.”
He says several African countries have relevant experience to share from the HIV-AIDS pandemic, when they developed their pharmaceutical industries.
He points out that the pandemic has already provided a significant push for digital economic development”. “Governments need more investment in information and communication technology industries to thrive in a 21st century digital economy. Adapting the policy and regulatory frameworks to support these developments has to be a priority – protection of personal information and cybersecurity should be on this agenda.”
Investments in infrastructure both hard and soft is vital for long-term economic development plans, he adds – and investment policies should focus on attracting FDI into critical infrastructure (roads, ports).
It’s also time to seriously address Africa’s overreliance on commodities. “Countries should attract FDI that contributes to the diversification of the economy across sectors – agriculture, industry and services. Promoting investment in domestic value addition, can increase participation in global value chains.”