By: Wonderr K. Freeman, CFCS

The current Liberian government is on the move – seeking investors. So far, the President, Mr. Joseph Boakai, has been to the USA, Guinea Bissau, and South Korea. First off was the US-Africa Business Summit held in Dallas-Fort Worth, Texas, from May 6-9, 2024. I heard Mr. President tagged along a very high-powered delegation to the conference and gave a very powerful speech. Quite impressive! More recently, in early June 2024, our President again took another even more impressive high-powered delegation to Seoul, South Korea, and gave one of the most powerful speeches ever given by an African president – again with the hope of wooing investors to Liberia. And, of course, the “noisy minority” has started small talk about the cost-benefit effects of all these “jumbo-sized” “high-powered” delegations and powerful speeches. Well, Mr. Boakai, on his return from Seoul, pushed back against the ‘cost-benefit” tabulators, retorting that this was a multinational conference intended to improve business relations between South Korea and Africa and not necessarily pre-arranged commercial deals to be signed. However, there is a much bigger question to be asked: Should a poor country like Liberia regularly take high-power delegations to conferences, ostensibly splurging millions of USD, where the outcome is uncertain? Is this a prudent use of the Liberia people’s money?

This article is intended to delve a little deeper into the nitty-gritty of wooing investors. Whether or not powerful speeches and high-powered delegations can do the trick? After all, while there may not be a direct link between attending investment-related conferences and clinching specific investment deals, it goes without saying that back-to-back forays abroad with multiple high-powered delegations and signing no deals raises relevant and legit questions about what constitutes the most prudent use of Liberia’s limited resources,  and, equally, whether or not “powerful speeches” and “high-powered delegations” are the best approaches to attracting foreign investments. To get a grip on this topic, it is important to know, for example, which countries are the top destinations for foreign direct investments (FDI inflows) and why. What strategies are they using to attract the most investments to their respective countries? Are they also traveling abroad with large, high-powered delegations and giving powerful speeches? Do they treat wooing investors as an event, a series of events, or a defined government policy – over the medium to long term?  More importantly, it is important to take note of FDI inflows in Liberia over the years – from Ellen Sirleaf’s presidency to the George Weah’s presidency. After all, the current President’s success or failure will, in large part, be measured against his predecessors, whom he’s long criticized, as “squandering opportunities” in the case of Ellen, and as “sheer ignoramus” in the case of Mr. Weah. Of course, Mr. Boakai must top both predecessors, given his lofty promises of how “majestically” Liberia would be transformed under his leadership. On the campaign trail, he famously boasted that Liberia would be a “different country under me,” thereby implying that Liberia would be so improved that everyone would easily recognize how improved the country is – under “Rescue-1”. Five months into his presidency, he is yet to match his words with deeds. In fact, if we want to be more truthful, quite the opposite is the case, with even more business-as-usual and, in some instances, far worse than business as usual is obtaining.

Africa’s Top Investment Destinations

As a whole, Africa still struggles to attract meaningful foreign investments. Of the US$1.3 trillion of global FDI inflows documented by UNCTAD for the year 2022, only 3.5% flowed into Africa (i.e., US$45 billion)[1]. Over the past five years, Africa has struggled to garner even 5% of global FDI inflows. Having said that, it is still worth finding out who the major players in Africa are when it comes to FDI (inflows). Now, when it comes to attracting investments on the continent, there are not many surprises. The top guns are South Africa, Egypt, Ethiopia, Mozambique, and Congo Brazzaville, rounding up the top five (using average annual figures [2017-2022])[2]. Ghana misses out on the top five spots just by “inches,” ahead of supposedly economic powerhouses like Morrocco, Nigeria, and Congo (DR). So, I’d like to know what powerful speeches these countries are making to the outside world. And what sort of powerful African-sized delegations are they taking abroad to woo investors? Table A [below] shows the top-performing African countries per year – averaging 2017-2022. At least fifteen countries are in the billion-dollar club (attracting at least a billion US dollars in new investments each year) – with West Africa’s representatives being Ghana, Nigeria, Senegal, and Cote d’Ivoire. Table B shows where Liberia ranks – seemingly in competition with Malawi, Seychelles, and Cabo Verde and seizing the 39^th position.

When it comes to attracting foreign investments, there are no easy answers. Population alone does not explain it. If that were the case, South Africa, with a population of just around 50m, won’t be atop the list, and Nigeria, with its 229m people, won’t be in position number 8. And little Gabon, with no more than 2.5m people won’t be in position number 11, ahead of Uganda and Tanzania that have populations of 47m and 65m, respectively.  So, there’s got to be more going on than just population and/or the presence and absence of oil and minerals, for example. Senegal, with no oil and no minerals, breaks through the top 10. So, what is really going on in the high-stakes game of wooing foreign investments? Why are some African countries getting it right (e.g., Ghana, Senegal) and some countries struggling (e.g., Liberia, Guinea-Bissau)? Not long ago, our President, Mr. Boakai hopped on a private jet to Bissau to discuss investments; whereas, Guinea Bissau ranks so poorly at #45.  These countries that are atop this FDI A-list, are their presidents equally glob-trotting? Or are the size and composition of their delegations so impressive that foreign investors have no option but to open their investment wallets? Below is a ranking of who’s who when it comes to FDI inflow to Africa.

TABLE A:        African Countries Ranked by Average Annual Investment (FDI Inflow) – 2017 – 2022

Rank	Country	Ave FDI /Year           2017-2022, in Millions (USD)	Rank	Country	Ave FDI /Year           2017-2022, in Millions (USD
1	South Africa	10,940.74	11	Gabon	1,432.76
2	Egypt	7,822.28	12	Uganda	1,105.31
3	Ethiopia	3,364.43	13	United Rep. of Tanzania	1,035.78
4	Mozambique	2,886.55	14	Côte d’Ivoire	1,034.03
5	Congo, Brazzaville	2,863.01	15	Algeria	1,031.64
6	Ghana	2,443.20	16	Kenya	930.17
7	Morocco	2,298.66	17	Mauritania	902.17
8	Nigeria	1,834.17	18	Cameroon	854.96
9	Congo, Democratic Rep. of	1,634.63	19	Sudan	806.63
10	Senegal	1,586.93	20	Tunisia	797.88

TABLE B:        African Countries Ranked by Average Annual Investment (FDI Inflows) – 2017-2022 – Liberia’s relative position

Rank	Country	Ave FDI /Year           2017-2022, in Millions (USD)
36	Gambia	135.99
37	Malawi	132.11
38	Seychelles	125.37
39	Liberia	111.57 [1]
40	Cabo Verde	107.62

In the case of Liberia, if you factor out year 2017, under President Ellen Johnson-Sirleaf, this average FDI inflow drops from US$111m per year to US$84m per year, which represents the truer reflection of the Performance President George Weah (2018-2022)

FDI Inflows to Liberia 2005-2022

It is clear from the data that Africa’s share of investments is pretty low, at 4% of global FDI inflows. And in Africa, Liberia ranks #39 in terms of investment inflows yearly (6-year average 2017-2022). How has our historical performance been? The graph below shows that, under the Presidency of Mrs. Sirleaf, Liberia attracted close to USD 5 billion in FDI over her two terms (2006-2017). And for Mr. Weah, our celebrity President, who was locally expected to woo all his filthy-rich “millionaire” friends to invest in Liberia, the country attracted much less investment than even under the interim government and the Charles Taylor [NPP] regime. And if any of these Presidents was really expected to master the art of traveling abroad with swagger and style and wooing investors across the board, then that person was Mr. Weah. Frequently traveling in private jets with a delegation size big enough to make Kim Jung-Un jealous, President Weah was supposed to have brought in the most in terms of FDI inflows. Of course, in earnest, it’s simply ludicrous to think that foreign businesspersons are swayed by speeches and jumbo-sized delegations.

Critical Prerequisites to Attracting Foreign Investments.

Okay. So, let’s say that “powerful speeches” and “high-powered delegations” are pretty meaningless in the world of foreign investments and international finance. I admit I was joking. What, then, are the prerequisites to attracting foreign investments? I reckon it would be great to know such because I believe, with said info, someone can whisper in our current President’s ears what these prerequisites are. Maybe, just maybe, he will stay home a bit, save the state precious resources, and focus on making Liberia an attractive destination for FDI. There could easily be two to three dozen determinants of FDI. I will not belabor the point to cover all. But I will round up at least half a dozen, just so my Lib people can understand that “wooing investments” is not a one-off event and probably not even a series of events. It is a deliberate long-term strategy. So, stop picking up your calculator each time your government goes out to an investment conference. Foreign investors don’t give a “hoot” about your “Prezo” speeches. It’s all about the business fundamentals. If these fundamentals are present and good, they will come to your country, even if you don’t attend those “so-called” investment conferences. Here are some fundamentals that I think are determinative or foreign investments, which, when missing, your investment promotion speeches, amount to no more than “blah blah blah”.

1. Viable Market. Is there a market for the product/service? How large is it? Again, lest you forget, a country’s population is not the sole determinant of market size. If this were the case, Nigeria (with its 230m people) would be atop the list of favorable investment destinations instead of sitting at #8. Market size is frequently synonymous with purchasing power, which portends lots of implications for investors’ returns (i.e., return on investment/ROI). That explains why, for example, Gabon [with only 2.5m people] is positioned at #11, well ahead of countries whose populations are in excess of 50m.

• Low Risk Profile. Probably, and almost just as important as market size, is the estimated level of risk. The investor must do a delicate balancing act – between the search for higher returns vis-à-vis there the risk of losing on their investments or even losing their entire investment. Understandably so, that’s where political stability and the rule of law come in. I would conjecture that this is most probably why Ghana, Morocco, and Senegal are in the top 10. In Liberia, and sadly too, both the CDC and the Unity Party governments think that justice and governing by the rule of law (in Liberia) is the responsibility of the Americans. Yeah, they expect justice to be delivered by the Americans – via sanctions. For them, the Liberian government has no such responsibility, or at a bare minimum, they think justice is necessary and applicable when opposition politicians are on the wrong side of the law.

• Good Infrastructure. This point is so obvious that it’s not worth belaboring. If you have a significant infrastructure deficit, obviously, you will perennially struggle to attract foreign investments. Even worse, the lack of infrastructure is even more detrimental to local investments. So, while you are spending 90% of your tax revenues on consumption [as it the case with Liberia] and expecting USAID, CHINA-AID, and EU-AID to fund your infrastructure deficit, you are most unlikely to have better infrastructure. With derelict infrastructure, you are not going to attract even local investors, much less talk of foreign investors.

• Cost of Electricity. This issue is next only to market size and risk. What is the cost of energy? Businesses run on power supply, whether fossil fuel, hydropower, or solar power. Whatever the mix, it must be available all the time and available at a very cheap price too. From light industries to heavy industries, to IT services and beyond, every enterprise wants nonstop power supply at the cheapest possible price. The cost of electricity ranges anywhere from 1¢ per kilowatt/hr (kwh) to 55¢/kwh. Using a generator takes you closer to the max of 55¢/kwh, while other sources [grid] take you closer to the min. Unfortunately, in Liberia, and in much of Africa, pricy power supply and power shortages are the rule, rather than the exception. Power outages cost businesses even more in lost time, lost labor and equipment damage. Industries consuming massive amounts of electricity include manufacturing, mining, construction and agriculture. Ostensibly, you can bet when investors in these industries are weighing their decision to invest; the stability and cost of electricity are definitely key considerations.

• Defined Investment Strategy. Countries that do well in wooing foreign investments don’t do it by guesswork, and they don’t do so opportunistically, either. They have a clear strategy and deliberate policy that they are working with. Investment promotion strategies are wide-ranging and varied. Some put their emphasis on attracting manufacturing firms, and some on agriculture. Others offer investment incentives under tax waivers and/or under special economic zone arrangements. Yet others offer incentives, especially in renewable energy and climate change mitigation ventures. But trying your luck, making speeches, and traveling with jumbo-sized high-powered delegations are not investment strategies. They are a fool’s errand. What is Liberia’s investment strategy? What sectors are our priorities? What are we offering investors to look our way instead of, say, Ghana, Cote d’Ivoire, or Senegal?

• Active Stock Market. While this is mostly the route for foreign portfolio investment (FPI), countries that have formal stock exchanges also tend to do well in attracting FDI. Why? Let’s suppose an investor puts money into foreign securities and receives good returns on her investment. This leaves such an investor with a positive impression of the company first and of the country and economy, by extension. This positive impression does have spillover effects, most certainly. Like nose and mouth, the distance between FPI and FDI is not far. Nearly every country in the top ten list of FDI inflows also has a thriving stock exchange. Could there be a link, a synergy, or some interdependence going on? There are no definitive answers to this question; yet, there is a high degree of anecdotal evidence. The Johannesburg Stock Exchange (JSE) is Africa’s largest, most liquid, and most well-known. But there are many more breaking through the ranks and making it into the big leagues. Business Insider Africa magazine (2022) reports that Ghana, Egypt, Morocco, Tanzania, Nigeria, and Nairobi (all billion-dollar FDI inflow club members) all have thriving stock markets.

Conclusion

My core point in this article is that attracting foreign investors requires an institutional approach. All this ad-hoc knee-jerk approach to investments – running anywhere there is an investment conference – will not get us anywhere. Investors are not in the business of offering free lunch, nor are they Father Christmas. They are certainly not charities. To woo them, a country must have a strategy, and it must make sensible and credible offer(s). You must have your business fundamentals intact. You must understand the economics of attracting foreign investments. If you don’t yet have a viable strategy and a credible offer, then you and your very powerful delegation would be better off staying at home and working on your plans. It will make even better sense to pre-test some of your policies on your local investors; after all, all investors, whether domestic or foreign, want the same thing – an above-average return on the investment(s) against the backdrop of a below-average risk environment. Investors don’t care if your policy is “Papa-na-Come,” “Pro-Poor,” “Think Liberia,” “Love Liberia,” or “AREST”. Investors are in it for the money -literally.

Wonderr K. Freeman is a Liberian Investment Attorney, Political Economist, Accountant, and Certified Financial Crimes Specialist (CFCS) currently based in Minneapolis, USA. Mr. Freeman’s professional interests span the intersection of law and economics, including the political economy of development, economic justice, international trade/investment law, and financial crimes law. He can be reached at [email protected]. He blogs at https://wonderrfreeman.com

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[1] UNCTAD, 2023, World Investment Report, p. 6

[2] UNCTAD, 2023, World Investment Report, annex table 1, p. 196-200