Tanzania recorded the highest Foreign Direct Investments (FDI) in 2013 within the East African Community, according to a new report released by the United Nations Conference on Trade and Development (UNCTAD).
Tanzania’s inflows stood at $1.872 billion followed by Uganda at $1.146 billion and Ethiopia at $953 million.
The World Investment Report 2014 put Kenya’s share of FDI inflows at $514 million, up from $259 million in 2012, which is a 98 per cent increase. The total amount that came into the East African region was $6.2 billion, with Rwanda and Burundi receiving $111 million and $7 million respectively.
“Kenya is developing as a favoured business hub, not only for oil and gas exploration in the sub-region but also for industrial production and transport. The country is set to develop further as a regional hub for energy, services and manufacturing over the next decade,” notes the report.
Industrialisation Secretary Adan Mohammed said that Kenya intends to increase its FDI to $1 billion this year, with the hope that the sale of publicly-held companies and the recent award of power generation contracts within the geothermal sector will attract international investors.
“With the recent contractual agreements within the power generation sector, we expect private funding for power generation to increase FDI flows in the current fiscal year,” said Mr Mohamed.
Kenya is keen to ensure improved power generation, which will serve as a platform for economic growth, with the Energy Ministry already in the process of procuring contractors to build a 700MW natural gas-powered plant and a 960MW coal-fired facility.
Recently, three firms were awarded the tenders for phase one of the Menengai geothermal project. The three firms — Sosian Energy, Ormat and Quantum — will construct the 35MW plant under a build-own-operate model.
Kenya currently has 1,664MW of capacity against a demand of about 1,410MW and growing. The government plans to add 7,200MW to the country’s power output at a cost of $15 billion by 2017, to fasten economic growth.
Last year, Kenya saw some of the biggest buyouts of local firms by foreign investors.
They include Kenya Data Networks and Swift Global that were bought by Liquid Telecom; Fina Bank was bought out through a 70 per cent stake by Nigeria’s Guaranty Trust Bank; Interconsumer products was bought out by Paris-based Loreal; and Mercantile Insurance was bought out by Moroccan firm Saham.
The year also saw Citadel buy out TransCentury from Rift Valley Railways and multibillion projects like Garden City Mall take off.
Recently, the United Arab Emirates-based Al-Futtaim Group secured 100 per cent stake in Kenyan vehicle retailer CMC Holdings.
“East African economies are becoming more attractive to Arabian Gulf investors because of their fast economic growth and a growing middle class,” said Marwan Shehadeh, the Al-Futtaim Group director for corporate development.
Robert Bunyi, an analyst at Mavuno Capital said that the entry of multinationals into the East African market will raise local competition which is good for consumers.
“The deals and acquisitions are a reflection of the dynamism and confidence in regional economies,” said Mr Bunyi.
In Tanzania, the top FDI sources featured UK at 23 per cent, India and Kenya at 15 per cent, the Netherlands, China and the US at 10 per cent, South Africa at 7 per cent, Canada at 5 per cent and Germany at 3 per cent.
Recently discovered gas reserves in Tanzania are propelling investor interest, with the country also competing with Mali for the position of Africa’s third-largest gold producer. But underdeveloped infrastructure has made the country a high-cost location for doing business.
The executive director of Tanzania Investment Centre Juliet Kairuki, said that the latest figures demonstrate the success of government’s investment policies and measures to make Tanzania an attractive investment destination.
“We have put in place a variety of investment incentives which are available to both foreign and domestic investors,” said Ms Kairuki.
In 2013, Dangote Cement, Africa’s largest Cement manufacturer began constructing a $500 million cement plant in Mtwara, Tanzania. African Barrick Gold and BG Group that have their parent companies based in the UK are some of the companies investing in the country’s mining and energy sectors.
Uganda’s FDI range has been boosted by Tullow Oil announcement of its plan to invest $2.0 billion in putting up a refinery in Uganda. With Uganda’s oil deposits expected to be in place for more than two decades, it can expect heavy investments from UK’s Tullow Oil, China’s CNOOC and France’s Total Company.
READ: FDI into Uganda up 24pc
Uganda’s oil fields
The country’s solid GDP growth, a rapidly expanding population and low per capita consumption are some of its appealing factors. Recently, SAB Miller opened its second brewery in Uganda in 2013. Oil fields and the agricultural sector in Uganda are attracting significant investor attention.
Rwanda has seen robust economic growth in the past decade with its GDP forecast to grow 7.5 per cent this year and 7.0 per cent in 2015. The country is ranked 32nd in the World Bank’s Doing Business rankings 2014, and third in sub-Saharan Africa for its friendly business environment.
Last year, Rwanda’s’ FDI inflows grew by 6.3 per cent, making it one of the top 10 nations favoured by investors in Africa. The country’s financial services, mining, and telecom sectors attracted the highest number of FDIs. This year, Rwanda targets to raise $1.1 billion from FDI inflows.
Rwanda’s investment opportunities lie in the tourism, transport, logistics, Information and information, communication technology (ICT) and education sectors.
In 2012, Kenya topped the list of the origin of Rwanda’s foreign capital inflows with $66.7 million followed by Switzerland and South Africa with $47.1 million and $46.4 million respectively.
According to Ernest and Young’s, Attractiveness Africa 2014 report, discoveries of natural resources and ongoing market integration through the EAC are key reasons why the region’s FDI is growing.
“A number of countries including Kenya, Mozambique, Tanzania and Uganda are becoming more prominent on investors’ radar. The quests for better transport infrastructure and reliable energy are also driving this growth, thereby boosting infrastructural developments in the East African region,” the report notes.