OPINION: Role of locals in attracting, retaining investments

Sunday September 13 2020



Honest Ngowi

Honest Ngowi 

By Honest Prosper Ngowi

A conducive business environment and investment climate are very important in attracting and retaining businesses and investments in a locality. This is true at all levels, including smallest level in a country such as a village. More often than not, we have tended to look at investment climate at macro level and forget micro level aspects. This piece is on the roles of local communities as business environment and investment climate factor in attracting and retaining investments.

Investment climate

Investment climate include a number of variables that affect and influence investments positively or negatively depending on their status. Businesses and investments of all kinds and sizes need friendly, attractive and conducive business environment and investment climate at all stages.

The climate and environment are very important for not only attracting but also retaining investments and business in virtually all sectors of the economy and across geography.

They are important in giving captains and titans of the industry the confidence needed to commit their normally colossal, long-term, borrowed and risky capital.

Variables

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There are many variables that constitute business environment. These include predictability and stability of policy, legal and regulatory frameworks; quantity and quality of infrastructure of all kinds both hard and soft; availability, accessibility, reliability and affordability of utilities such as water and power; fiscal matters especially number and rates of taxes; quantity and quality of skills and talents in the labour force; availability and access to finance especially long term finance; easiness of getting construction permits; business premises especially land; cross border trade issues including tariff and non-tariff barriers (NTBs); protecting minority investors; dealing with day to day businesses and investments operations; enforcing contracts; and labour market regulations including work permits especially for foreigners.

Local communities

Local communities in the context of this piece imply people living in a geographical location where an investment is located.

More specifically, it means people living in that particular village or street where an investment of any kind is located.

It can be a village in Mkuranga, Kibiti, Kilombero, Kagera, Mpanda, Kilimanjaro or anywhere else.

The investment can be a farm, a factory, a mining, a hotel, education institution or any other kind of investment of any size.

Leadership of a local community especially government and political leaders but also individuals have huge roles and responsibilities in attracting and retaining investments in their localities.

Gains for local communities

All other factors remaining constant, investments have huge and diverge potential roles to play for local communities where such investments are located.

The roles include direct and indirect jobs creation to sons and daughters of that community; direct and indirect revenues to the central and local governments and by extension to the local community; technology transfer; Corporate Social Responsibilities (CSRs) of various kinds and sizes including health and educational facilities, water infrastructure, school meals, village government offices construction and rehabilitation and much more along these lines.

Shortly said, there are many potentially positive trickle-down and multiplier effects for communities where investments are located.

Frustrating investors

Investors, both local and foreign, are not supposed to frustrate local communities. In the same vain, local communities are not supposed to frustrate investors. Local communities can frustrate investors in various ways.

These include but are not limited to sabotaging their investments, raising unrealistic demands, theft, violence, land-based conflicts and much more.

All these are disincentives for corporate chiefs who are already investing in a given locality as well as those who wish to invest there.

Those already on the ground may flag-out to other localities or halt expansion plans.

This will lead to all involved parties including the communities to lose the potential gains listed above.

Land-based conflicts

Land-based investment conflict issues have typically included cases where local communities complain of issues like land grabbing. The literature is not short of supply of such cases.

What are poorly documented and analysed if at all, are cases where local communities have unrealistic land-based demands from investors.

These include demand for 100 percent land development at once instead of doing so gradually. There are possibly cases where local communities do not understand and appreciate the fact that large investments tend to be long term. It is a process and not an event. Communities need to know this fact trough appropriate authorities.

The author is Associate Professor of Economics at Mzumbe University and Principal of Mzumbe University Dar es Salaam Campus

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The author is Associate Professor of Economics at Mzumbe University and Principal of Mzumbe University Dar es Salaam Campus