FDI and City competitiveness within the Southern African Development Community (SADC)

Lusaka is the capital city of Zambia which is urbanising at a fast rate. The population of Lusaka has increased from 1,391,329 in 2000 to 2,198,996 in 2010 at a growth rate of 4.7% (Central Statistical Office, 2011). Zambia’s urban system is dominated by Lusaka, which hosts 32% of the total urban population in the country (UN-HABITAT, 2008). The poverty levels in the city have been steadily increasing over the last two decades mainly due to the high levels of population growth, which are not matched by economic growth and improved service delivery (Lusaka City Council. 2008). The economy of Lusaka city only provides formal employment to about 9% of the labour force (UNHABITAT, 2008). Therefore, one of the biggest challenges for Zambia in general and Lusaka in particular is to attract more investments for economic growth and poverty reduction. It is generally evident from theory that to a greater extent, the world-wide urban networks provide crucial resources for the development of cities, while city systems form a set of resources or locational attributes for Multinational Corporations (MNCs). It is against this background that this study has been conducted with the overall objective of investigating the current Foreign Direct Investments (FDIs) and networks of cities in the Southern Africa Development Community (SADC) region and how Lusaka city can improve its competitive performance for attracting FDI. The study is quantitative and has analysed the FDI markets.com database (2003-2012) through excel, UCINET software and SPSS. Overall, the study shows that, though modest, the number of FDI flows into SADC has been growing at 11.52% growth rate with the top 5 growing sectors being financial services, metals, software IT services, business services and communication. The closest 5 competitors to Lusaka in terms of attracting FDI to sectors are Windhoek (Namibia), Kinshasa (Congo DR), Lubango (Angola), Harare (Zimbabwe) and Lobito (Angola) in that descending order. Lusaka occupies the 12th position among the top 20 SADC cities in attracting FDI dominated by 7 South African cities. Furthermore, market size is the most important location factor for attracting FDI in the SADC region. In view of the above, Lusaka can learn a lot from its competitors, especially Windhoek, in terms of policies, programmes and projects attracting FDI, which Lusaka City Council can then include in its integrated strategic and marketing plans. In order to expand the market, Lusaka should pursue job creation policies to continue growing the middle class who are critical for the domestic market. In addition, SADC countries (Zambia inclusive) need to aggressively continue pursuing policies for greater regional integration to expand the market size and provide an important stepping stone to more diversified, inclusive and sustained growth to member states. Improving Lusaka’s competitiveness will also require continued commitment to prudent macroeconomic policy at national level, investing in infrastructure development, human resource development, information communication technology (ICT) and information management systems. Other measures include promotion of gender equity and equality, the rule of law and professional management of both public and private business. Last but not least, targeted marketing and branding of Lusaka city as a prime investment destination, in particular sectors and activities, is crucial for FDI attraction.