Case Study Essay Example

384461Case Study

According to a recent survey carried out by global insurance experts in 211 countries, investment in Sub-Saharan countries is still replete with risks due to financial, administrative and political issues. Risk map made by Aon in conjunction with Oxford Analytic, an academic consultancy shows that Kenya, Mozambique, Rwanda, Burundi and Comoros are still not safe for investing of either type due to the above said problems. Though some international trade and investment is occurring in these countries however, this map highlights consistent presence of market risks in Africa, such as Ghana, Gabon, Comoros, and Burundi. Since 2004, the risks on investments have only marginally subsided and no robust positive change has occurred in Burundi and Comoros especially.

While analyzing the risks involved with the investment activity in these two African countries, the important ones are sovereign default, cross border and intra state wars, civil unrest, legal risk, political interference and the ease of getting payments out of a country which are also called the exchange transfers. Global and geo-political risks on the investments such as manufacturing, banking, insurance, infrastructures and imports exports are more vividly manifested in these two countries of Sub-Saharan Africa. Government nationalization and legal interference that is unexpected in other countries are also high investment risk areas in these countries. The World Bank and International Financial Organizations have also not yet considerable satisfaction on the investment climate of these countries.

Business partnering with the people of these countries has also not gained sufficient confidence and trust from the foreign investors. The talent pool amongst the people and its landscape in the countries is very limited.

Number of Diasporas repatriating to these countries from Europe and America is very limited in potential for investments. The strong and extensive networks of such able people who could initiate, support, grow and stabilize business in Comoros are still less in numbers than in Burundi which is still scanty in these basic pre-requisites. The liquidity risk of investments in Burundi is larger than the Comoros. Therefore as investment markets sub-Saharan Africa remains the last frontiers for the global investors and Comoros and Burundi remain the most risk areas for future growth of investments too. Only less than 8% of world’s investment is getting invested in sub-Saharan African countries as FDI, foreign direct investment. Out of this 8 % Comoros and Burundi get the least share. Therefore it is always advised to these countries that they should improve upon their regulatory regimes in their government machineries. Tourism is the most potential area that could be improved upon in these countries for the alleviation of risks on investment in these countries. According to the data gathered from UNCTAD, the following table shows the meager foreign direct investment made in these two poor countries in the past nine years i.e. 2000-2009;

Name of sub-Saharan African countries

Foreign direct investment in hundreds million US $

Therefore in order to improve the investment climate in these countries some basic and fundamental steps need to be taken by the states in the larger interests of their people. The steps include the political stabilization, education of the people, regulatory framework, improving their tourism and investing in the confidence of investors etc.

Sources;

  1. http://data.worldbank.org/about/country-classifications/country-and-lending-groups

  2. Burundi…/Saharan-subwww.fco.gov.uk/en/travel-and-living…/

  3. Comoros…/Saharan-subwww.fco.gov.uk/en/travel-and-living…/

  4.  
    www.UNCTAD.Org