There could be a sharp decline in foreign direct investments (FDIs) this year as the Covid-19 pandemic continues to ravage economies across the globe.
The latest World Investment Report 2020 by the United Nations Conference on Trade and Development (Unctad) shows that FDIs in East Africa declined by nine per cent to $7.8 billion in 2019, from $9 billion in 2018.
Last year, the region posted mixed fortunes with inflows to Uganda increasing by 20 per cent to $1.3 billion due to continued development of oil fields and an international pipeline, as well as projects in construction, manufacturing and agriculture.
Inflows to Kenya however dropped by 18 per cent to $1.3 billion compared with $1.6 billion in 2018, despite several new projects in information technology and healthcare.
In Tanzania, inflows remained largely unchanged at $1.1 billion. Ethiopia is still the biggest FDI recipient in the region despite recording a decline in 2019 after attracting inflows worth $2.5 billion, from $3.3 billion in 2018. The drop was attributed to instability in certain parts of the country, including regions with industrial parks.
The report forecasts FDI inflows to the continent will fall by 25 to 40 per cent in 2020, exacerbated by low commodity prices. “Although all industries are set to be affected, several services industries including aviation, hospitality, tourism and leisure are hit hard, a trend likely to persist for some time in the future,” said James Zhan, Unctad director of investment and enterprise.
The decrease comes after the continent recorded a 10 per cent decline in FDIs flows to $45 billion in 2019 from $46 billion in 2018.
In Africa, Egypt remained the largest FDI recipient in 2019 with inflows increasing by 11 per cent to $9 billion despite a cumulative 11 per cent decline in the North Africa region to $14 billion.
It was followed by South Africa with FDI of $4.6 billion, a 15 per cent decline from 2018, and Nigeria with a $3.3 billion, a decline of 48.5 per cent driven by a slowdown in investment in the oil and gas industry.