EAC records drop in foreign direct investment

Sunday August 05 2018

Foreign direct investment (FDI) to East Africa declined by 25.3 per cent to $6.6 billion last year, down from $8.8 billion in 2016. PHOTO | FILE


East Africa’s foreign direct investments inflows declined by 25.3 per cent to $6.6 billion last year, down from $8.8 billion in 2016, largely due to the failure by EAC member states to promote the region as a single investment destination.

There has been a lack of transparency in investment promotion at the regional level due to differences in the implementation of tax exemptions and incentives among member countries.

According to the highlights of the EAC trade report (2017) seen by The EastAfrican, Kenya recorded the highest decline in FDI inflows — a drop by 60.6 per cent to $717.7 million, down from $1.8 billion.

It was followed by Uganda, whose FDI fell by 14.2 per cent to $1.3 billion from $1.5 billion. Tanzania recorded a seven per cent drop in FDI to $3.3 billion from $4.8 billion in the same period.

However, inflows to Burundi increased to $146 million from $65.1 million, while in Rwanda FDI grew to $1.2 billion from $600.1 million in the same period.

South Sudan has experienced negative FDI flows for the past three years.


Investment sources

Despite this decline in FDI, China, India and the UK continued to be the major sources of investment in the EAC, with inflows amounting to $781 million, $500.9 million and $438.9 million in 2017 respectively.

According to the report, overall investment inflows into the EAC were concentrated in the manufacturing, construction and energy sectors at $3.1 billion, $795.6 million and $3.5 billion in 2017 respectively.

According to the report, the number of jobs created as a result of FDI inflows went up by 73 per cent to 111,316 jobs in 2017 from 64,334 in 2016.

Inflows to Uganda contributing the highest number of jobs at 45,728, accounting for 41.1 per cent of the total jobs created that year.

Uganda was followed by Tanzania with 22,895 (20.1 per cent) of total jobs created through FDI, and Rwanda with 20,756 jobs.

Inflows into Kenya created 19,976 jobs, accounting for 18 per cent of total jobs created, while Burundi created 1,961 jobs.

The EAC Secretariat said although measures to attract FDI have been put in place, the level of inflows into the region remains low.


The low level has been blamed on the lack of effective markets due to low per capita income as well as structural and institutional challenges that have made the EAC less attractive to investors.

EAC’s total intra-regional investments also decreased by 22.3 per cent to $ 197 million in 2017, down from $254.1 million in 2016.

Uganda was the largest recipient of intra-regional investments last year, at $71.3 million, followed by Rwanda at $66.6 million, Tanzania at $33.8 million and Kenya at $25.2 million.

Burundi did not register any investments from the other partner states.

Intra-regional projects

the number of projects in the EAC registered from the intra-regional investments dropped by 29.7 per cent to 64 in 2017, from 91 projects in 2016.

Uganda registered 42.2 per cent of all projects while Tanzania, Rwanda and Kenya had 39.1 per cent, 15.6 per cent and 3.1 per cent respectively of all projects arising from intra-EAC investments in 2017 respectively.

According to the report, EAC exports in 2017 declined by 9.3 per cent to $ 14.7 billion in 2017 from $16.2 billion in 2016 despite the growth in global import demand for goods from developing countries.

The bulk of EAC exports were destined to the EAC, EU and Comesa, amounting to $2.8 billion, $2.3 billion and $2 billion, respectively.

EAC imports grew by 19.5 per cent to $ 32.2 billion in 2017, from $26.9 billion in 2016, worsening the region's trade balance by $6.7 billion.

This was largely due to imports from the EU, which accounted for about 12.9 per cent of the region's imports.

The growth in imports was also attributed to the rise in global crude oil prices that could have increased the import bill for petroleum products.