A new UNCTAD Policy Brief argues that enhancing the contribution of investment to the growth and development process in Africa will require three complementary policy measures: boosting the level and rate of investment; improving the productivity of new and existing investment; and ensuring that investment goes to strategic sectors deemed crucial for economic transformation and the realization of national develop-ment goals.

Achieving the African Union’s vision of an integrated, prosperous and peaceful Africa that can serve as a pole of global growth in the twenty-first century requires broadening the sources of growth on the continent to lay the foundation for sustained growth and poverty reduction.

For this to happen, however, it is necessary to enhance the contribution of investment to the growth process. This can be done by boosting the level and rate of investment, improving its productivity and ensuring that it goes to strategic sectors of the economy. Further, the international community has a key role to play – that of complementing the efforts of national Governments.

This policy brief outlines some of the key messages and recommendations of the UNCTAD Economic Development in Africa Report 2014: Catalysing Investment for Transformative Growth in Africa.

Investment and diversification of the sources of growth

Broadening the sources of growth in Africa will require enhancing the contribution of investment to the growth process on both the demand and supply sides of the economy. On the demand side this is necessary to obtain a more balanced role for consumption and investment in the growth process; on the supply side it is needed to foster transformative growth because investment has been identified as one of the main drivers of structural transformation. In this paper, “investment” refers to total investment in the economy, which includes public and private investment.

Private investment in turn consists of investment by local and foreign investors. The focus on total investment is important because all components of investment matter for growth and development. Government policy should therefore be geared toward exploiting the complementarities among the various components, rather than promoting one component at the expense of another. Crucially, how can African countries catalyse investment for transformative growth and development?

Key points:

• Concerted actions are needed at the national and international levels to stimulate investment in Africa.

• It is necessary to enhance the contribution of investment to the growth process on both the demand and supply sides of the economy.

• Government policy should be geared toward exploiting the complementarities between local and foreign investment.