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Friday, 5 July 2013

Investment Pledges

Ministry of Commerce revealed last month that Zambia recorded Foreign Direct Investments (FDI) inflows estimated at US$1.6 billion in 2012 up from the US$1.1 billion recorded in 2011 (Source: Times of Zambia). The figures are largely based on approved projects in 2012.

Despite the 2012 increase, the figure is still lower than the FDI flows in 2010 which were valued at US$1.7 billion. So essentially we are just rebounding from the political uncertainty that characterised 2011 due to the elections.

But here is what is important. In February 2013 the Times of Zambia report that Zambia had attracted “US$10bn worth of investment pledges in 2012”, the highest ever recorded pledges in a single year. We were also told that the figure exceeded “the $4bn investment pledges made in 2011”.

We were also told the 2012 pledges amounted to “31, 000 worth of employment pledges”. In short the $4bn pledges in 2011 only translated in $1.6bn worth of investment the next year. Indeed it is possible that the $1.6bn was actually based on pledges based on successive previous years.

It goes without saying that we should be very careful of what we read in newspapers about these investment pledges. When the dust has settled the US$10bn promises and the jobs that are supposed to come with them usually only 30% of that ever materialises.

The $10bn will never enter the economy! Of course the larger the pledges the better, all things being equal! On the other hand the larger the promise the more likely the fail! I suppose one always has to scrutinise who is making the promises!

Chola Mukanga | Economist | Writer
Copyright © Zambian Economist 2013

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