Investment with a human face: is the foreign direct investment going into Africa currently the right sort of investment? Can it help raise the general economic standards in African countries or does it have little or no impact? Neil Ford discusses the ideas of an Irish businessman who says investors need to change their perspective and help themselves by helping Africa.

Author:Ford, Neil

Many explanations have been given for sub-Saharan Africa's failure as a region to take off economically. Colonialism, the harsh environment and the impact of the Cold War have all been cited but fail to adequately explain why other developing regions have made far more progress when they have had to deal with many of the same problems.

Today the lack of basic infrastructure in many African countries is widely credited with being the biggest single factor inhibiting foreign investment and the growth of domestic companies. Now, a leading Irish businessman thinks that he has the answer to how the continent's power, water and transport infrastructure can be improved.

Since independence, state owned utilities have largely been given the responsibility of providing electricity, water and other key services to African citizens. In this, by and large, states have failed to deliver the goods.

The cause of this failure is a lack of finance on the one hand and a combination of a lack of expertise, enthusiasm and government support on the other, although it is difficult to determine which came first. In general, services in many parts of the continent are worse today than they were 40 years ago.

Over the past 10 to 15 years, the IMF and other key financial institutions have identified transferring the management of such infrastructure to private sector companies as the answer to this conundrum. It was felt that a more commercial attitude and the greater access to capital resources that the private, foreign firms could bring would help to improve the situation in almost every sector. They pointed to the success of the mobile telecoms industry, which has almost entirely been developed by the private sector, as an example of what could be achieved in even the poorest countries.

Whether through outright privatisation or fixed term contracts, foreign companies took over the provision of key services in many countries, often with direct donor support. Some have succeeded but there have been many failures and some accusations that services to the poor were being cut. In more recent years, public-private partnerships (PPPs) have become more attractive and could provide part of the solution but there is still far too little investment in African infrastructure. Asked to give the annual lecture to the UK's Confederation of British Industry (CBI) in mid-January, the chairman of Reuters, Niall FitzGerald chose to focus his presentation on the opportunities and...

To continue reading