World Bank pushes investors to Africa



27th September, 2001.

World Bank vice-president Peter Woicke speaks to BBC News Online's Stefan Armbruster about his hopes for more investment in Africa. The global economic downturn is expected to largely bypass Africa because of its minimal exposure to the international financial system, but the World Bank hopes to change this. The Bank's vice-president Peter Woicke told BBC News Online he thinks it is "unfortunate" that Africa will not be affected because it shows how little foreign confidence or investment there is in the continent. But he feels recent moves by South Africa and Nigeria to broker a deal in Zimbabwe over land reforms should act as a signal that things are changing. Political instability aside, Mr Woicke blames lobbying by Western environmental groups as the "key question" affecting foreign investment in Africa's big infrastructure projects.

Opening up Africa

"I say unfortunately because foreign direct investment (FDI) in Africa is so low," said Mr Woicke. Apart from the investment in mineral and labour resources in South Africa - where the currency and stock markets are at historic lows - international finance has largely shunned Africa. "I would rather say that Africa would suffer from the economic downturn because it has already received quite a bit of FDI," he said. To this end the World Bank's International Finance Corporation (IFC) has made opening up Africa its priority by developing the financial markets, promoting privatisations and building business friendly infrastructure to attract foreign capital. "Our priority is frontier countries and we have more than double our exposure (in Africa in the past three years)," Mr Woicke said.

Leading where?

Mr Woicke said that a key development in early September when the Presidents of South Africa and Nigeria brokered a deal with Zimbabwe over land reforms. "The situation in Zimbabwe had become so bad that leaders in Africa realised it reflected badly on the whole continent," Mr Woicke said. "I think the bigger impact of the whole thing is that it shows African leadership and that Africa can help itself." For the IFC, which is the largest underwriter of private sector investment in Africa, South Africa and Nigeria hold the key to economic activity on the continent.

Testing Nigeria

Nigeria is the test bed for the IFC's policy of developing small and medium-sized businesses to underpin the national economy, by underwriting $180m in loans by local banks. Mr Woicke believes this will lead to the creation of up to 200 strong domestic manufacturing and service companies, mainly related to the foreign dominated oil industry. He hopes they will generate profits that can be reinvested in the local financial sector to make the country immune from swings by international financial markets as it opens up to the global economy. Mr Woicke said that Nigeria should not qualify for forgiveness on its $30bn in foreign debt because greater tax revenues would then be generated by the new businesses. "If the country can work a bit more efficiently in the petroleum sector it would easily be able to service the debt... though I believe the government doesn't totally agree with me on that," he said.

Natural gas

The tension between the interests of African people and the Western environmental lobby are seen by Mr Woicke as the other main issue affecting foreign investment. "I think that is the key question we have to deal with over the next few years," said Mr Woicke. A number of non-government organisations (NGOs) have demanded that the World Bank and IFC stop funding any mining projects or dams. "That is fine with me if they can tell me how we can provide electricity and clean water for these people in another way. "But that answer I haven't received yet," he said referring to Uganda's attempts to dam the Nile. NGOs oppose the project because it will flood one of the country's great beauty spots. "Uganda has a huge electricity problem. In Kampala the hospitals have no regular electricity and neither do the schools," Mr Woicke said. He is critical of the position taken by the NGOs, some of whom he says have never been to the areas they claim to be protecting. "I was speaking to the head of one very big NGO who was criticising the dam and I asked whether she'd been to Uganda and she said 'No' because they have Ebola," he recalls.

Oil pipeline

The IFC's other great project in Africa is the $3.7bn, 1,070km Chad-Cameroon oil pipeline, which is being developed together with the world's largest oil company Exxon. But the efforts of the environmental lobby have not been without some success. The pipeline has been re-routed through less environmentally sensitive areas and has seen greater involvement of the local workforce after objections from NGOs.