Lack of transparency causes drop in region's FDI

Wednesday March 29 2017

Kenya and Uganda remained the highest FDI recipients in the region, and among the top 10 in Africa in 2015. PHOTO | TEA GRAPHIC

Despite a decline in FDI into the region in 2015, investors from China and the US injected $2.8 billion into various sectors. PHOTO | TEA GRAPHIC 

By JAMES ANYANZWA

EAST AFRICA’S foreign direct investment inflows declined in 2015 due to failure by member states to promote the region as a single investment destination.

A draft Trade Report (2015) by the EAC Secretariat shows that the level of FDI into the region fell by 16 per cent to $7.2 billion in 2015, from $8.6 billion in 2014, due to cumbersome regulatory and administrative policies that impacted negatively on investment promotion.

Despite the decline, investors from China and the US injected $2.8 billion into various sectors in the region.

According to the report, dated August 2016, EAC member countries have complicated the procedures for registering businesses and procuring business permits.

The report notes that differences in the implementation of tax exemptions and incentives among the partner states have failed to promote transparency in investment promotion at the regional level.

For instance, Rwanda has established special economic zones while Uganda, Tanzania and Kenya operate export processing zones.

“The region is reforming in order to attract investments. However, partner states still practice cumbersome administrative and regulatory practices in regard to registering a business and getting a licence,” the report states.

Investment into the EAC for 2015 accounted for just one per cent of global inflows that year.

Overall foreign investments in the EAC