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Africa in focus

Africa in the news: FDI inflows to Africa are down, Pretoria sees riots over mayoral candidate, and African leaders consider the yuan as a reserve currency

UNCTAD’s World Investment Report shows decline in foreign direct investment inflows towards sub-Saharan Africa

This week, the United Nations Conference on Trade and Development (UNCTAD) released its annual World Investment Report. The reports find that in 2015, FDI flows increased by 38 percent, its highest level since the 2008 financial crisis. In addition, inflows to developed economies doubled between 2014 and 2015, and FDI inflows toward developing nations increased by 9 percent—reaching a new high of $765 billion. While developing Asia remained the largest FDI-receiving region in the world, FDI flows toward Latin American and Africa stagnated.

FDI flows towards sub-Saharan Africa, on the other hand, declined by 7 percent. The report states that
the decline was accentuated by a decrease in flows towards western and central Africa. In South Africa,
foreign investment dropped to a 10-year low. The report cites the drop of commodity prices as the
cause for a decline in FDI flows towards the continent and predicts that FDI flows will moderately
increase in 2016 as African countries have been implementing liberalization measures and privatizing
state-owned enterprises.

In other investment news, this week, infrastructure investors launched a $3.3 billion joint venture to
create a large pan-African energy company in the aim to bring a solution to the continents power
shortages. The venture is said to supply 30 million people with electricity.

South Africa’s ANC announces its mayoral candidate for Pretoria, prompting unrest

On Monday, June 20, South Africa’s ruling African National Congress (ANC) party announced its nomineefor mayor of the Tshwane municipality (which includes Pretoria) in the upcoming local elections
scheduled for August 3. Thoko Didiza, senior party member and former cabinet minister, won the ANC
candidacy in Tshwane, while the current mayor, Kgosientso Ramokgopa, who enjoys popular support in
his municipality, was not selected by the party to run. Many of Tshwane’s local ANC party members and
supporters felt sidelined by the decision, which, they argued, undermined local preferences for the
current mayor to run again. Although Mayor Ramokgopa endorsed Didiza as the ANC candidate, angry
residents still took to the streets, and in the ensuing violence, foreign-owned businesses were looted,
vehicles were burned and stoned, about 200 people were arrested, and five people were killed. While
the ANC’s decision may have served as a catalyst for the unrest, some analysts argue that the violent
protests were an acute manifestation of growing public dissatisfaction and disillusionment with the ANC
over the country’s worsening economic and political situation. Already, pollsters are predicting a potential upheaval in support in favor of an opposition party on August 3 for the ANC in Pretoria, which
has historically been a stronghold for the ruling party.

As calm began to return in areas of Tshwane on Thursday, Didiza reiterated her desire to lead themunicipality, stating: “I’ve never and still do not feel foreign in Tshwane. Even with the latest incidences,
which I don’t believe reflect the feelings of the community of Tshwane. And I therefore don’t feel in any
way alienated. I feel a part of that community.”

Group of east and southern African central bank governors support adding the Chinese yuan to the IMF’s basket of reserve currencies

On Monday, June 21, 14 southern and east African central bank governors met in Dar-es- Salaam to
discuss the potential impact of including the Chinese renminbi (also known as the yuan) into the basket
of reserve currencies of the International Monetary Fund (IMF). Last year the IMF board had announced
adding the yuan to its Special Drawing Rights (SDR) basket and officially accepting it this fall. The basket
currently includes the U.S. dollar, the euro, the Japanese yen, the British pound, and the Swiss franc.

The renminbi is becoming increasingly important for sub-Saharan Africa. It is Africa’s biggest trading
partner—growing by a factor of 10 over the previous decade. Now, Chinese trade value with Africa is
likely to hit $300 billion soon, and China is aiming for $400 billion by 2020. Governor of the Central Bank
of Tanzania, Professor Benno Ndulu, remarked that this decision is particularly relevant to his country.
“Greater renminbi usage in bilateral transactions will provide further impetus for trade and investment
links between China and the region resulting in benefits for both sides,” he said. Tanzania’s central bank,
he added, has been using the yuan as reserve for two years, and it now represents 5 percent of
Tanzania’s foreign reserve. The dollar still remains supreme in the east African country, standing at 60
percent of its foreign reserve.

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