The United Nations Human Settlements Programme (UN-Habitat) says Foreign firms and investors in African cities can play a critical role in the region’s development.
This is according to a report that examined the impact of foreign direct investment (FDI) on Africa.
The report titled, “The State of African Cities 2018: The Geography of African Investment,” explored how Africa could finance its development by attracting FDI to cities.
In her foreword to the report, the UN-Habitat Executive Director, Maimunah Mohd Sharif urged African governments to connect FDI to sustainable urbanization by strengthening their urban policies, financial and legal systems.
The report also focused on four industrial sectors: manufacturing, services, high-tech and primary resources.
According to the report, high-tech has the highest FDI growth rate in Africa, while manufacturing FDI has the largest share of investment more importantly in terms of employment generation, with both sectors reducing income inequality if local skills are used.
The report however, warned against potential negative impacts of FDI, which includes:
“Its potential for crowding-out local businesses; its tendency to be consumption-, not production-driven; its focus on production for non-African markets; and its adverse effect on wage equality and the development of indigenous skills in certain sectors,” it stated.