East Africa weathers storm to record growth in FDI

Saturday July 08 2023
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Women work at the Chinese clothing company G&H Garments in Kigali, Rwanda. PHOTO | AFP


East African countries defied economic turbulence occasioned by the Russia-Ukraine war, inflationary pressures to post a 17 percent growth in foreign direct investment inflows (FDI).

Global FDI fell by 12 percent to $1.29 trillion in 2022, from $1.48 trillion recorded in 2021, a result of the multiple crises witnessed last year, which caused many investment plans to bet put on hold across the globe.

According to latest statistics from the United Nations Conference on Trade and Development (UNCTAD) statistics, investment inflows into Africa were impacted by the difficult economic environment that characterised a better part of last year.

Read: East Africa slowly finds its economic feet

The worst affected region was Southern Africa, where investment inflows dropped sixfold to $7 billion in 2022, while the Central and West African regions posted a decline of seven and 35 percent respectively.

But investments from foreigners into East Africa proved resilient despite the economic woes, rising from the $4.9 billion recorded in 2021 to $5.8 billion last year. South Sudan posted the largest increase in FDI inflows, which rose 80 percent to $121 million, nearly double the $67.5 million it received in 2021.


Kenya recorded the second-largest growth in inflows, which rose by 64 percent to $759 million, from $463 million in 2021. Uganda and Burundi followed closely with a 39 percent and 30 percent increase respectively.

The Democratic Republic of Congo is the only country that posted a drop in investment inflows, having attracted $1.85 billion in a tough 2022, a one percent decrease from the $1.87 billion in 2021. Kinshasa, however, remains the leading FDI destination in the region, while Burundi has maintained the position as the least attractive country to foreign investors.

Last year, Burundi only got $12.88 million in FDI, a slight rise from the $9.93 million recorded in 2021.

Despite the growth in the region’s investments, UNCTAD says the most important sectors for the continent, and other developing countries, continued to be starved of investments, with some even recording a drop.

Read: Why EA countries need concessional funding

“At the sectoral level, strong growth in some sectors – such as semiconductors in response to chip shortages – is accompanied by weak performance in other industries that are important for the build-up of productive capacity in developing countries,” said Rebeca Grynspan, UNCTAD’s Secretary-General.

“And while some SDG-investment sectors – notably renewable energy – attract significant international investment, others – such as water and sanitation, agrifood systems or health and education – do less well.”