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African countries aren't getting as much as they should from foreign direct investment – The Conversation Africa

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Economic growth is driven by a number of factors. These include foreign direct investment, national savings, household spending, fiscal and monetary policies. Since the late 1980s African governments have fully embraced foreign direct investment as a major driver of growth.

One of the avenues through which countries have sought to attract more foreign direct investment has been investment summits. These are hosted jointly with developed countries. They include the Africa-China Investment Summit, Africa-UK Investment Summit and the Africa-US Investment Summit.

Despite these efforts, data shows that Africa has not been a major recipient of these flows. In fact, it attracts a lot less than other developing countries.

There’s a bigger problem too – the impact on economic growth of the foreign direct investment the continent attracts is lower than other comparable parts of the world. In our research we set out to understand why. To do this, we looked at the financial services sector which is underdeveloped in most African countries.

The search

We examined data from 45 countries between 1980 and 2016. The variables we looked at included economic growth, foreign direct investment, financial sector development, human capital, government expenditure and gross fixed capital formation.

The countries were selected based on data availability. They comprised several countries from all the regional blocs, including six countries from Northern Africa.

Overall, the countinent’s financial sector is under-developed compared to other emerging economies, with the exception of South Africa which is relatively well-developed. The countries’ financial sectors are bank-based, thus providing limited space for the equity (capital) markets.

We sought to examine the relationship among three factors: foreign direct investment, economic growth, and financial sector development. Financial sector development measures a country’s financial institutions to make financial services available to citizens. It also includes the provision of finance to businesses.

There has been a lot of economic literature on the impact of foreign direct investment on economic growth. And there have been many studies on the linkages between foreign direct investment, financial sectors and economic growth. But less has been done on the extent to which Africa’s financial sector is a conduit through which foreign direct investment drives economic growth.

Research findings on the impact of foreign direct investment on a country’s economic growth are mixed. This implies that the extent of the impact is determined by other factors and characteristics of a country’s economy.

That’s why we chose to look at how the financial sector, in particular its stage of development, can moderate the impact of foreign direct investment on economic growth.

What attracts foreign direct investment

For the most part, foreign direct investment inflows to Africa have generally been attributed to five factors. These are regulations (ease of doing business), the general investment climate, broader economic reforms, information communication and technology development, and improvements in infrastructure.

Foreign direct investment plays an important role in economic development. It provides financial resources, technological spillovers and improvement in human capital. These are all critical factors that can spur Africa’s economic development by addressing infrastructural deficits and reducing unemployment.

The effect of foreign direct investment on economic growth is well documented globally. Funds from foreign investors are channelled through a country’s financial system before being allocated to the targeted beneficiary of the investment.

In Africa’s case we found that the continent’s underdeveloped financial sector has dampened the impact of foreign direct investment on economic growth.

To measure financial sector development we calculated credit provided by the financial sector to the private sector as a percentage of GDP. On this measure, Africa’s financial sector fails to allocate financial resources effectively and efficiently to the productive sectors of the economy.

When the financial sector does allocate resources, it invests in risky projects. The net effect is that it hurts economic growth and therefore fails to support foreign direct investment.

What’s to be done

Foreign direct investment inflows to Africa are increasing, albeit marginally. What our study shows is that African governments need to spend more effort on maximising the impact of foreign direct investment on economic growth. This is over and above current efforts to gain a bigger share of global foreign direct investment flows. Failure to raise the impact of foreign direct investment on economic growth will mean that African countries will not fully benefit from higher inflows.

Improving the performance of the financial sector should be one of the major preoccupations of African policymakers. This should include regulators improving their supervisory roles. And they should strengthen the financial sector’s ability to allocate resources effectively to the productive sectors of the economy. Improvements in corporate governance and risk management strategies would also help.

This article was co-authored with Abraham Mensah Acquah. He holds BA (Integrated Business Studies) and a Master of Commerce degree in Banking and Finance from the School of Business and Law, University for Development Studies, Wa, Ghana.

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Investment advisors worry U.S. response to coronavirus is too little too late – National Post

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NEW YORK — Investment-advisors are increasingly worried that U.S. authorities are not be doing enough to prevent a widespread outbreak of coronavirus in the country, potentially adding further downside to already-battered markets.

Their criticisms include the number of people so far tested by the U.S. Centers for Disease Control and Prevention (CDC), which some say is too small, the possible difficulties of imposing lockdowns on U.S. cities and concerns that the White House could bungle containment efforts.

The worries have magnified the uncertainty that has accompanied the coronavirus outbreak over the last several weeks, as investors scramble to adjust their portfolios to price in the virus’ potential for damage to the global economy and assess its further impact on asset prices.

The CDC states on its website that “as of Feb. 24, CDC teams are working with the Department of Homeland Security at 11 airports where all flights from China are being directed to screen travelers returning to the United States, and to refer them to U.S. health departments for oversight of self-monitoring.”

U.S. Health and Human Services (HHS) Secretary Alex Azar said as of Thursday morning the CDC had tested 3,625 specimens for the fast-moving virus.

For some investors and analysts, those assurances ring hollow.

“Much of what we’ve seen about this virus has shaken confidence in governments,” said James Bianco, head of Chicago-based advisory firm Bianco Research.

His list includes doubts over China’s accuracy in counting cases, criticism over Japan’s handling of a cruise ship quarantine at one of its ports, and the comparatively small number of people that U.S. authorities have so far tested.

Worries over the growing number of cases outside China sent the S&P 500 into intraday correction territory on Thursday morning. Stocks took an earlier hit on Wednesday after health officials in Nassau County, New York, said they were monitoring 83 people who visited China and may have come in contact with the coronavirus. Governor Andrew Cuomo said the state has had no confirmed cases so far.

On Wednesday evening, U.S. President Donald Trump told Americans that the risk from coronavirus remained “very low,” and appointed Vice President Mike Pence to run the U.S. response to the looming global health crisis.

Bianco said he fears many investors are still complacent about how quickly the number of cases could multiply in the United States, as it has in countries such as Iran, Italy and South Korea.

He is advising his clients to tread lightly until the full extent of the outbreak is known.

“I would rather risk a lost opportunity by being out of the market or underweight and finding out that this is not a big deal, than being fully invested and worrying that this will get worse,” Bianco said.

‘TREMENDOUS AMOUNT OF RISK’

Others are concerned over the consequences if the United States were forced to implement a lockdown similar to the one imposed by Chinese authorities on Hubei Province, the epicenter of the coronavirus outbreak.

Wuhan, Hubei’s capital, imposed strict controls on movement of residents, then eased them, then later announced that the relaxation had been revoked. Such measures could be more difficult to enforce in the United States.

“Those of us sitting here in Hong Kong looking at financial markets think there is a tremendous amount of risk in the system,” said Simon Powell, equity strategist at Jefferies in Hong Kong.

Powell is particularly worried that there could be spread of the virus from people from countries outside China which were not subject to travel restrictions coming into the United States. He is particularly concerned about the outbreak in Iran.

Iran said on Thursday that its coronavirus death toll had risen to 26, by far the highest number outside China. The death rate among confirmed cases of the virus has been running at around 10% in Iran compared to around 3% elsewhere.

Powell also thinks that a Trump government is unlikely to choose reduced economic activity , writing in a recent research note that “our base case hypothesis is that a Trump government is unlikely to choose reduced economic activity, and supply chain disruption, so spread of the virus, if it were to emerge in the US, would be more likely.”

Others have pointed to what they believe are shortcomings in the CDC’s approach.

“The initial response from the U.S. has been targeted to mount a response to confirmed high-risk or infected cases, not directed to a more generalized public health containment,” said Wouter Jongbloed, head of policy and risk analysis at New York-based Exante Data.

With coronavirus having spread well outside China, CDC testing was “likely insufficiently effective in preventing a potential outbreak in the U.S.,” Jongbloed said. (Reporting by Megan Davies; Additional reporting by Ira Iosebashvili; Editing by Daniel Wallis)

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Pro-Biden super PAC plans Super Tuesday investment as former vice president starts a comeback – CNBC

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Democratic presidential hopeful and former Vice President Joe Biden in Las Vegas, Nevada on February 22, 2020.

RONDA CHURCHILL

A political action committee backing Joe Biden’s run for president has decided to invest in key Super Tuesday states as they pick up wealthy financiers in the wake of what appears to be a comeback for the former vice president.

In the wake of Biden’s successful debate, and a separate town hall in South Carolina, Unite the Country, a pro-Biden super PAC, has seen a surge in high dollar contributions from donors, one of its leaders told CNBC on Thursday. That’s allowed the organization to invest into delegate rich primary states that are set to take place on Super Tuesday, which is scheduled for March 3. The PAC will first target voters in Alabama and North Carolina with radio and digital ads.

“We’ve done very well in terms of the response with everything that’s happened the last couple of weeks,” Larry Rasky, the group’s treasurer, told CNBC. “I would say things are starting to resonate with donors,” he said, while pointing to Biden’s debate and town hall performances as two reasons why donors are writing big checks to the PAC. Rasky noted that a new poll in the key state of Florida, which shows Biden surging ahead of former New York mayor Mike Bloomberg, also peaked interest from donors.

Bloomberg was, at first, slowly picking up some of Biden’s top fundraisers, but since his sluggish debate performance in Nevada two weeks ago, many of those people have decided to shift back into the former vice president’s corner and give to the super PAC instead, according to a person with direct knowledge of the matter. The PAC has also started to acquire donors who were backing other primary contenders, this person noted.

Rasky would not say how much they are investing into the states or the amount they have raised but noted that they plan to focus more of their resources toward other Super Tuesday states. Contrary to campaigns, super PACs can raise and spend an unlimited amount of money. In January, the pro-Biden PAC raised just over $4 million and spent $3.8 million, according to a Federal Election Commission filing. Their recent fundraising success was on the backs of business executives such as Silicon Valley investor Reid Hoffman, who contributed $500,000 last month, along with Blackstone executive, John McCormick.

The move by the super PAC comes as Biden is looking to pick up his first primary victory in South Carolina and trying to find momentum into next week’s Super Tuesday contests. Sen. Bernie Sanders has become the Democratic primary frontrunner after seeing victories in New Hampshire and Nevada.

The Biden campaign launched a separate six figure ad buy that will include broadcast spots in Alabama, Arkansas, Georgia, North Carolina, Tennessee, Texas and Virginia.

Biden is looking to overtake Sanders while he continues to lead in most polls and in the delegate count. A Real Clear Politics polling average has Biden in second behind Sanders, followed by Bloomberg, Sen. Elizabeth Warren and former mayor Pete Buttigieg.

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Ottawa-based real estate investment group looking to build retail space behind LCBO – mybancroftnow.com

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If you have gone to the LCBO recently, you might have noticed the large sign out front touting the future development of an 8,000 square foot retail space.

Director of Leasing for Properties Group Bruce Barrett’s name and phone number are listed on the sign. He tells the MyBancroftNow.com newsroom the Ottawa-based real estate investment and management firm wants to bring in two, maybe three retailers to occupy the space. “Because of the proximity of our site to the neighbouring tenants of Canadian Tire and the LCBO, there has been a little bit of interest,” he says. Barrett adds that Bancroft being a popular destination for cottagers has also helped build interest in the future retail space.

Barrett says they are looking to bring in “traditional” retail or services, not a restaurant. “Simply because of the structure of the centre,” he explains. “We don’t have the capacity to handle a sit-down restaurant.” He says that’s due to the well and septic system set-up at the lot.

He says they have gotten calls from interested businesses, noting he is in conversation with one group interested in taking up 4,000 square feet for retail space. Barrett isn’t able to name the businesses but says they have talked to national retailers about occupying space on the lot. He says they’re also in talks with some “service-oriented” groups. No calls have come in from any locals looking to set-up shop.

“The ideal plan is two tenants with 4,000 square feet each,” Barrett explains.

“I would love to tell you we have something locked in, but we have nothing at the moment,” he says. Barrett says their goal is to have something starts by 2021, or early 2022. “If we were able to lock down a lease this year, finish our planning and go through those stages and go on to construction it would be an 18-to-22 month curve,” he explains.

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