Economic Development in Africa report 2014

Catalysing Investment for Transformative Growth in Africa

image of Economic Development in Africa report 2014
The Economic Development in Africa Report 2014 addresses the current state of development in Africa. Over the past decade, African countries have had relatively good economic growth performance. But average investment rates on the continent remain low relative to what is considered necessary to achieve national development goals and relative to the average rate for developing countries. These facts suggest that Africa’s recent growth may be fragile and that it is unlikely to be sustained in the medium to long term if current trends continue. The key question, then, is how can African Governments catalyse investment for sustained and transformative growth? This report addresses that question

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Understanding the determinants of investment in Africa

Designing appropriate strategies for catalysing and stimulating investment in Africa requires a good understanding of the key determinants or drivers of investment in African countries. This would make it possible to tailor policy interventions to unlock specific constraints facing investment in given countries on the one hand and to harness the drivers of investment on the other hand. Evidence-based policy design also enables us to establish a hierarchy of interventions given that resources are limited and not all desirable interventions can be undertaken at the same time. It also permits us to determine the factors that can be influenced or mitigated by policy as opposed to those that are completely out of reach of the policymaker. Against this backdrop, this chapter identifies and discusses the key constraints and determinants of investment in Africa based on insights from economic theory as well as empirical work. For ease of exposition, we will discuss the constraints and determinants of investment in Africa under five categories: poor access to credit and the high cost of finance; low domestic savings; risk and uncertainty; inequality and the level of aggregate demand; and the policy and investment environment.

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