On 20 January, prime minister Boris Johnson will open the UK-Africa Investment Summit gathering political leaders and businesses from the UK and 20 African countries.
Why is the summit taking place?
The summit is being labelled as a major milestone in international relations and is expected to “forge partnerships across Africa that turbocharge national economies, create thousands of jobs, and enrich lives all over the continent, while building a relationship of mutual prosperity” according to Peter Estland, the former Lord Mayor of the City of London.
This is part of the UK government’s wider ambition to re-assert its global role post-Brexit. They want to become the biggest investor in Africa, providing quality investment through CDC, UK Export Finance and the City of London.
In 2018, Africa as a continent saw foreign direct investment (FDI) rise at a faster rate than flows to all other developing countries put together, with investments rising to US$46 billion, an increase of 11% on the previous year. On the other hand, Africa receives less than 4% of total global FDI.
Areas of focus
Alok Sharma frames foreign investment as the “catalyst for prosperity” based on the idea that increased financial flows leads to greater economic growth, which results in more development and less poverty. In other words, there is a shift in focus from state-building and the systemic causes of under-development, poverty and inequality to re-framing the global development challenges as mostly economic.
However, in reality high volumes of FDI do not necessarily guarantee sustainable development and direct improvements for the poor.
If private sector investment is to occupy a more prominent place in the current thinking of policy-makers solving international development challenges, then we need to be clear about the potential consequences.
At its worst, FDI can undermine sustainable development and increase inequality, resulting in exploitative working conditions, privatisation of public services, violence against human rights defenders, environmental damage and climate damage, tax avoidance by multi-nationals, and a lack of corporate transparency and accountability.
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In order to achieve genuine progress in fighting poverty and inequality in Africa we need to look beyond investment. If the UK is to stand out among the top investors in Africa, it should focus on investment that is sustainable, transparent, socially responsible, ethical and serving the needs of the poorest.
What should the summit priorities be?
1. Given that the UK-Africa Investment Summit will be largely funded by official development assistance (ODA), it must make the economic development and welfare of developing countries its main priority.
It also has to be aligned with UK development objectives on poverty reduction, gender equality, the Sustainable Development Goals (SDGs) and climate.
2. It is important that investment facilitated by ODA goes to the places of greatest need. FDI flows into Africa are unevenly distributed. In 2018, half of all FDI went to five countries (South Africa, Morocco, Ethiopia, Egypt and Congo), whilst many of the poorest countries were left behind.
Investment also tends to be concentrated in a few selected sectors, including extractives like oil and gas, telecommunications, financial services, and real estate, which may have limited direct benefit to the poorest communities.
We need investment in areas that have the highest development impact, such as manufacturing, infrastructure, local entrepreneurship and publicly provided, accessible education and health services.
3. Trade and investment initiatives must be delivered in an accountable, socially responsible and transparent way respecting various international standards and principles, which are at the core of sustainable economic development. The UK needs to take into account:
- The highest standards of corporate accountability based on the UN Guiding Principles on Business and Human Rights (UNGPs), the UK Modern Slavery Act and other human rights due diligence laws holding UK businesses accountable on their operations.
- ‘Do No Harm’ principles, including undertaking robust human rights and environmental impact assessments, with sufficient time built in to ensure the findings can inform negotiation and decision-making processes. This must include investments made via financial intermediaries.
- The need to transition into fossil fuel free development.
- Respecting national legislation and the public interest of developing countries, which protect the environment, human rights, domestic industries and the livelihoods of communities.
- Fair and transparent tax payment strategies and compliance with anti-tax avoidance rules.
4. Trade and investment must put the interests of the people at the centre by prioritising the creation of decent jobs, especially for the poorest and for women. Responsible investment also means gaining social license from the stakeholders impacted by the business through meaningful, inclusive and deliberative engagement with civil society, trade unions and both local and national governments.
The Summit provides an opportunity to revitalise partnerships between the UK and African nations generating greater development outcomes that can ensure the most vulnerable people are helped.