Saturday, July 15, 2017

{UAH} AFRICA NEEDS FDI MECHANISMS THAT PREVENT PLUNDER.

With the increasing sophistication of economic exploitation and modernized plunder in Africa, the continents governments barely have the will, knowledge, and expertise necessary to confront and contain the scourge. When it comes to Foreign Direct Investment, most African countries are willing to bend over backwards and accept anything rather than exercising sound policies that curb the exploitation from the onset, and thereby allow their countries and citizens to thrive economically.
In Gulf countries like Saudi Arabia, Qatar, Kuwait and Dubai, the law requires that the ownership of all incoming foreign businesses should be split 50/50 between the foreign investor and a local entrepreneur. That requirement has been in practice since the 1950's for all foreign businesses be they big or small. While most people think that oil is what makes gulf citizens rich, the reality is that it is such compulsory partnership policies, different banking mechanisms which don't require payment of interest on loans, and the tradition where families offer a business to their young men when they marry, these practices are actually the main catalyst behind the high annual Gross National Income (GNI) per capita of their citizens. People who actually do not get any direct remittances from their countries' oil revenue except in terms of good modern infrastructure, free quality healthcare, and free quality education.
The average GNI per capita in the Gulf countries is that each citizen earns an average $80 to $100,000 US dollars per year. Compared to Africa where the average income is only $600 to $1000 US dollars per year.
Dubai for example, doesn't have natural resources like it's neighbors but is today a global economic hub that is actually more progressive and developed than most other gulf countries who have plenty of oil reserves.
With Africa's similarly vast, but even more diverse natural resources, if we implemented such a compulsory partnership law, we would benefit not only in terms of more jobs for our unemployed youths and the taxes that Foreign companies pay to the state, the biggest benefit would be that 50% of all foreign companies' profits would remain in the country for further reinvestment because of the partnership with local businessmen.
This means that up to 70% of all the money generated by foreign companies will remain in the country's economy. That is where the economic miracle is.
With more capital in our economy and banking system, we will greatly improve our development pace, our general standards of living, and our economic growth rates.
Meanwhile, such partnerships require joint oversight, and the two partners both share the business risk. Basically if the company does well, we thrive together. If not, we equally share the loss together.
It is therefore a fairer policy than most greedy foreign plunderers would want us to believe. As of now 100% of profits of foreign companies leave the continent. Yet that is really where the big amounts are.
The Honest accounts 2017 report indicated that 101 companies listed on the London Stock Exchange control $1 trillion worth of resources in Africa.
A compulsory 50/50 partnership for foreign investment is the one policy that could easily change that discrepancy to the benefit of both sides.
With Africa today loosing immensely in terms of outflow of capital from our economies, these partnerships are the only genuine win-win situation that we can implement ourselves.
Such policies ensure that we have more control over markets where our resources are sold, more control over our own economies, and more control over our own prosperity.
This policy requires a major mobilization of African countries to unite under such proven best practices. The financial sector, starting with the Central Banks, are an important backbone supporting such policies that require proficient local businessmen and women.
We therefore need to start implementing bolder, smarter policies that are in our long term best national interests.

By Hussein Lumumba Amin
15/07/2017

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