Foreign direct investment in East Africa increased by 4.2 per cent in 2016, as partner states remained optimistic about increased foreign inflows as a result of viable reserves of minerals, oil and gas in the region.
A draft trade and investment report seen by The EastAfrican shows FDI into the region increased to $7.5 billion from $7.2 billion in 2015, with the majority of inflows coming from China.
The overall investment inflows in the region were in the manufacturing and construction sectors.
According to the report dated August, FDI in the construction and manufacturing sectors amounted to $843 million and $722 million respectively.
However, the value of this investment declined to $991.9 million in 2016 from $1.3 billion in 2015.
Investments in the manufacturing and finance sectors contributed about 20,439 and 8,809 jobs in the region respectively, while investments in construction and wholesale and retail contributed about 5,782 and 4,118 jobs respectively.
According to the report, the increase was driven by more FDI inflows into Burundi, Tanzania and Uganda but the growth in FDI inflows into Kenya and Rwanda declined.
Inflows to Burundi increased more than 10 times due to an end to the civil conflict that allowed business to resume.
Inflows into Tanzania reflected continued investments in the extractives sector, specifically in gas production, while increased investment in Uganda was related to the infrastructure and extractives sectors.
FDI inflows into Kenya were mainly driven by infrastructure, manufacturing, communications and information technology, transport and logistics.
Levels still low
According to the report, the level of FDI into the region is still low despite the creation of more conducive investment climates by partner states.
The value of intra-EAC investment increased by 6.9 per cent to $254.1 million in 2016 from $237.8 million in 2015, and the number of projects registered increased by 50.9 per cent to 86 projects in 2016 from 57 projects in 2015.
Burundi attracted 33.7 per cent of all projects in 2016 while Uganda, Tanzania and Rwanda attracted 29.1 per cent, 17.4 per cent and 11.6 per cent of all projects registered respectively.
Intra-EAC investments in Kenya declined despite investment reforms and a supportive domestic environment.