n Journal of Public Administration - NEPAD : an opportunity for small and medium enterprises and entrepreneurs in Africa : viewpoint




One of the features of NEPAD is to accord high priority to the role of private investment and trade. With regard to private investment, NEPAD stipulates the following;

  • NEPAD focuses on debt reduction and Official Development Assistance (ODA) as complementary external resources required in the short to medium term, and addresses private capital flows as a longer-term concern.
  • The basic principle of improved governance is a requirement for increased capital flows, so that participation in the Economic and Political Governance Initiatives is a prerequisite for participation in the Capital Flows Initiative.
These two points of NEPAD are very relevant. With regard to the inter-relation between economic growth and private investment, the World Bank statistically illustrates in its report that, whereas African growth reached a peak of 5,5% in 1973, the ratio of investment in terms of GDP remained at just under the 30% level. Since 1973, African economic growth has been declining over time, until in 1994 it bottomed with growth of only 1%. Parallel to this trend in economic growth, the investment GDP ratio was reduced to 5% in 1994. However, the trend was then reversed to some extent. In 1997 economic growth climbed back to 3,5%, while the investment GDP ratio reached 19%. It is estimated that a rate of 7% annual growth is essential for the sustainable development of Africa and to attain this, the investment GDP ration should be at least 30%. This means that Africa needs additional Foreign Direct Investment (FDI) flows from outside amounting to as much as 11 to 12% of GDP annually to fill the gap between the targeted 30% and the current 18-19% level of GDP. This needed FDI flow amounts to a figure of US$64 billion.


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