FREE DAILY EMAIL

Afri ca's enormous wealth remains largely untapped because of the difficulties investors face when trying to set up businesses.

Mind-numbing bureaucracy, corruption, crippled infrastructure and war keep investors away.

A meeting bringing together business leaders and politicians from all over Africa started in Nairobi Wednesday, aimed at creating a better investment climate in Africa - something not done overnight.

"The reforms are a marathon, not a sprint", said Michael Klein, Chief Economist of the International Finance Corporation (IFC), a part of the World Bank, which together with the Financial Times newspaper hosts the meeting.

"We recognize that the key to creating wealth, jobs and economic growth in Africa is to make it easier to start, operate and expand a business. That requires improving the regulatory and physical infrastructure and removing barriers to doing business" he added.

The IFC says many factors contribute to making Africa a "high-risk, high-cost" investment destination.

According to a recent World bank/IFC report, African countries, while being the very countries that most need a vibrant private sector, are among the most heavily regulated in the world.

As examples of bureaucracy in some African countries, the IFC says that while in Uganda it takes 36 days to register a business, in the Democratic Republic of Congo it takes 215 days.

In Botswana, one of IFC's favourites, a contract can be enforced in 56 days while in Ethiopia the same procedure would take almost three years.

Furthermore, the workforce in many countries has been severely hit by HIV/AIDS, the continent's infrastructure and education and indicators have worsened in the last decade, and in many countries, civil unrest and armed conflicts do their part to scare off investors.

Attracting investors from the West is not necessarily the best option, says Francisco Tourreilles, of IFC's infrastructure department.

"The real challenge is to keep African money in Africa. Local capital understands the political environment and the risks much better. Ability to retain local money is crucial," he said.

So far, it is not working very well. IFC figures show 40% of African money is kept outside the continent, making it the biggest capital flight in the world.

Infrastructure, it was stressed by many participants, is what needs immediate attention if the private sector in Africa is to take off.

"Africa will not see a change if the infrastructure challenges are not addresses", said Tourreilles.

Kenya's President Mwai Kibaki, who opened the meeting, agreed, saying the region's roads and ports are the lifelines of East and Central Africa and promising his government would improve the country's infrastructure.

Michael Klein said local entrepreneurs in Africa face some of the worst challenges in the world, but that an expansion of effective infrastructure would benefit them more than major corporations, who operate at a scale which allows them to create their own infrastructure if needed.

Asked which African countries have managed to create a business friendly climate, Klein pointed out Mauritius and Botswana.

"For many years they have steadily worked away at making the business environment more friendly to investors", he said.

"Uganda and Tanzania are two countries in this area which have made major progress. There is social peace, macroeconomic stability and they have gradually reduced a little bit of the red tape", he added.

But Klein warned against believing in overnight successes.

"One needs to keep at it for a long period of time. In many ways it's more important for investors to see that the government is going in the right direction steadily rather than having a flurry of activity at one point and then reversals later on.", he said. - Sapa-dpa

SPONSORED BY

Advanced