TWO years ago, when Dubai World said it would invest $230 million in Rwandan tourism, officials here rejoiced.

Among the many projects the company trumpeted were a sprawling luxury hotel on the 18-hole golf course here and an ecolodge in the Akagera National Park, a swampy grassland further northeast where herds of elephants and water buffalo roam.

In an interview at his offices in Kigali last fall, Rwanda’s president, Paul Kagame, cited the Dubai investment as one of many that his small east African country had managed to attract in its effort to reduce its dependence on aid in favor of private investments.

But just last month, Dubai World ratcheted back its ambitious investment plans, its coffers strained by the global financial crisis. The company says it will go forward with only two of the eight projects it had planned in Rwanda, and the Kigali hotel and Akagera ecolodge didn’t make the cut.

"The scaling back of foreign investments like Dubai World certainly impacts the things that the government of Rwanda wants to do in terms of raising the standards of living for all Rwandans,” said Clare Akamanzi, an executive with the Rwanda Development Board.

"It was a major deal for us because tourism is a big part of our economy, and investments in that sector are what we need.”

When the credit crisis erupted in September, many experts thought that Africa would be spared the financial turmoil of the American and European financial systems, because African banks had almost none of their assets tied up in the global subprime market.

But it has recently become clear that Africa is being hit hard. The World Bank estimates that its economies will grow an average of 3 percent this year, compared with an annual average of 6 percent from 2004 to 2008.

"The crisis could not have come at a worse time,” said Jose Gijon, chief Africa economist at the Organization of Economic Cooperation and Development, based in Paris.

"Before the meltdown, many African countries had made significant progress in attracting foreign investment and private capital, and this could derail those efforts.”

Many investment projects have either been delayed or cancelled as credit has dried up, according to the African Development Bank. A project in Tunisia between British Gas and ETAP, the Tunisian national oil company, fell apart because the financing did not materialize. And Congo, which expected $2.4 billion in foreign investment this year, now anticipates about $600 million.

Continentwide figures for foreign direct investment so far this year are not available. But in the sub-Saharan African countries, the International Monetary Fund estimates, foreign direct investment will drop roughly 18 percent in 2009 from about $30 billion in 2008.

"The decline in investment will reduce the ability of African governments to fund health, education, infrastructure and nutrition programs,” said Léonce Ndikumana, director of the development research department at the African Development Bank.

Organizations like the development bank have stepped up their efforts to limit the impact of the credit crisis. But many fear that the moves will not be enough. The World Bank said recently that international financial institutions by themselves could not currently cover the shortfall in capital and investments to emerging-market countries.

According to the Organization for Economic Cooperation and Development, the amount of private investment going to Africa had begun to outpace aid. M. Nathaniel Barnes, Liberia’s ambassador to the United States and the country’s former finance minister, says that while foreign aid is still crucial for African countries, it usually focuses on humanitarian issues like emergency food and shelter or medical supplies.

In contrast, he said, foreign investment provides long-term sustainability and growth.

"Instead of talking to Usaid, I’d rather be talking to a company like Nike,” Mr. Barnes said. "Having a partner like that means jobs and economic growth, and you just don’t get that from aid.”

Not everyone sees foreign investment as the way to solve the many problems facing African countries. While acknowledging that foreign direct investments have contributed to sustained growth, Emira Woods, a native of Liberia and co-director of Foreign Policy in Focus, a publication at the Institute for Policy Studies in Washington, says the benefits do not always trickle down to the local populations. She notes that significant numbers of people are still trapped in poverty in countries like Nigeria and Angola, two of the top recipients of investments.

Most of the foreign direct investment in those countries is in "extractive industries” like oil, gas, or metals, she says, rather than in infrastructure. "Minerals and goods are put on a ship or plane and sent out of the country so the people there don’t really benefit,” she said.

"It’s hard to find good examples where foreign direct investment is leading to real concrete development.”
PRIVATE investors were just starting to take notice of the economically poor but resource-rich continent when the global financial crisis hit.

In 2007, more than $53 billion in foreign direct investments flowed into Africa, up from $9 billion in 2000, according to the United Nations Conference on Trade and Development. The estimate for 2008 is more than $72 billion. And according to a United Nations report, investments in Africa had the highest rate of return of all developing regions in 2006 and 2007.

"For the most part, these are new markets that need everything, and there is little or no competition,” said Bruce J. Wrobel, the president of Sithe Global, an energy company that is based in New York and controlled by the Blackstone Group.
Despite the economic gloom, some investors remain optimistic about Africa.

Emerging Capital Partners, a private equity firm based in Washington, announced last week that it was spending more than $26 million to buy controlling stakes in two North African construction companies. In the spring, it bought a minority stake in a Moroccan outsourcing and call-center company and invested $47 million in an insurance company based in Ivory Coast. Over all, the company has $1.6 billion invested across the continent.

"We still think the investment climate in Africa is good,” said Thomas R. Gibian, the firm’s chief executive. "We’re looking long term, and the financial crisis has not deterred us from good investments.”

According to Africa Investor magazine, $12.8 billion in foreign investment flowed into Africa in February and March, even as the financial crisis worsened.
China, which has become a major investor and trading partner for Africa, continues to invest.

The China-Africa Development Fund, which has invested nearly $400 million in projects in Africa, said it planned to raise an additional $2 billion by November. African groups are also continuing to pump money into projects ranging from telecommunications to new oil fields.

The Chinese investments, as well as the bullish attitude of American private equity investors like Mr. Gibian and Mr. Wrobel, give many on the continent hope that it will endure the financial crisis and perhaps be in a better position to attract foreign investments when global markets recover.

"There is still a growing appetite for good investments,” said Hubert Danso, the founder and vice chairman of Africa Investor, an international trade and development firm in Johannesburg. "Africa is still open for business.”

Mr. Kagame and his team continue to aggressively court investors and have met with some success. In May, officials were the hosts of a two-day conference here to showcase investment opportunities in real estate and construction. It attracted 354 investors, and two have already committed to deals.

Also in recent months, ContourGlobal, a company based in New York, announced that it was building a $325 million methane extraction plant on Lake Kivu. And Starbucks opened a farmer support center in Kigali.

"We need to encourage private investment,” Mr. Kagame said. "In the end, that’s what going to decide our future.”

New York Times