By BERNA NAMATA

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The European Union's battle for influence in East Africa is taking shape with increasing private investment and funding across the region. This follows a €150 billion ($170 billion) pledge for investment pledge made in February last year at the EU-Africa Summit in Brussels, Belgium.

While Europe maintains that it is not in competition with China for influence on the continent, its priority sectors now include building infrastructure, including rapid bus transit systems, which have been dominated by China. It also targets health, education, and climate change adaptation.

Read: The new scramble for Africa

Head-to-head

The EU’s Global Gateway strategy, which has largely been seen as an answer to China’s Belt and Road Initiative, plans to mobilise up to €300 billion ($331 billion) in public and private investments by 2027, with half of it designated for African countries.

According to analysts at American international affairs think tank, the Atlantic Council, China signed over $303 billion in investments and construction contracts between 2006 and 2020.

“From this perspective, the EU’s €150 billion ($165 billion) over the course of only five years, is certainly significant, especially considering that the investments made by EU member states outside of the Global Gateway initiative should also be added to this amount in totalling the EU’s contributions,” analysts at the Council said.

Last week, more than 100 business leaders from the EU visited Rwanda to explore trade and investment opportunities in the country in the first-ever EU-Rwanda Business Forum.

Rwanda Prime Minister Édouard Ngirente said between 2018 and 2022, EU investments worth over $870 million were registered in Rwanda.

“These investments are transforming the lives of our people through job creation and empowering the private sector, which is a key driver of economic growth,” he said.

Read: Scholz: We support Africa's efforts to build trade, peace

During the forum, I&M Bank Rwanda, the European Commission, the European Union Delegation and FMO, the Dutch entrepreneurial development bank, signed a $10 million Nasira Risk Sharing Facility that will help to support the growth and development of micro, small and medium enterprises in Rwanda.

EU investments in Rwanda, estimated at 32 percent of the country’s total foreign direct investment stock, have been expanding, with the most recent investment being the multimillion-dollar vaccine manufacturing plant by German biotechnology company, BioNTech, which is building its first modular mRNA vaccine manufacturing facility expected to promote sustainable vaccine production and end-to-end supply in Africa.

Koen Doens, EU director-general for International Partnerships, said interest in Africa as an investment destination has picked up in recent years, amid increasing appetite from European investors seeking to diversify their investment portfolios to minimise risk linked to natural disasters such as the Covid-19 pandemic and geopolitical conflict like Russia’s war in Ukraine.

“The global supply chain is reliant on a limited number of countries, which makes it very fragile when challenges happen. This is why we are looking at diversification and see Africa presenting huge opportunities to address these challenges,” said Mr Doens.

Nonetheless, Africa’s limited economic integration, which manifests through weak regional value chains, is a challenge for foreign investors seeking opportunities across the region.

Read: Intra-Africa trade crucial in East Africa’s food security

And for the region to fully benefit from the evolving global investment landscape, analysts say continental coordination and developing regional value chains are critical to increasing Africa’s attractiveness to investors, especially intra-regional ones.

“The key to attracting investment from Europe is developing regional value chains — the figures are very clear if you look at intra-Africa trade — it is extremely limited, it is too low. (Countries) need to do more trading — the continental free trade area is a marvellous endeavour, but it is not just about tariffs or non-tariff barriers; it is looking at integrated value chains,” Mr Doens said.

He underscored the need to address constraints such as intra-African trade costs, limited competitiveness and a fragmented investment landscape that continue to limit the development of regional value chains.

Figures by International Trade Centre (ITC) show that Africa’s footprint in the international market accounts for just 2.3 percent of global exports, with an export basket heavy on primary commodities and natural resources. About 14 per cent of the exports are destined for other African countries, and still, much of this trade is in transformed products.

Value addition to chains

“Europe has got integrated value chains, and this is something that needs to be developed within the East African Community. It is critical. For instance, if you look at Rwanda as a market, it is very small, but if you look at the EAC, then we are talking. So having investor's structure their supply chains across these countries is important. Decisions still need to be made between governments to facilitate that kind of economic integration,” Mr Doens observed.

According to a recent study by ITC, Africa has potential in key value chains — pharmaceuticals, baby food, cotton clothing and automotive — which link at least five African countries from different regions and have the potential to add value, reduce imports, lift trade, and diversify economies.

These value chains could improve food security, health and technical skills.

The EU hopes that the recent signed Economic Partnership Agreement (Epa) with Kenya will rejuvenate ratification of the agreement across the region for the agreement to be fully implemented.

Read: Ruto bypasses EAC barrier to EU trade deal

“We hope this deal (Kenya Epa) creates the right dynamic to move forward as soon as possible with the whole EAC signing up… We think the ball is rolling in the right direction,” Mr Doens said.

As soon as the EU-Kenya Epa enters into force, it will provide duty-free, quota-free EU market access to all exports from Kenya, combined with partial and gradual opening of the Kenyan market to imports from the EU.

“This agreement considers our different stages of development. Kenya’s exports to the EU will be tariff-free from day one, while tariffs on EU exports will be liberalised over time and not on all products. This will create decent jobs and economic growth,” said Valdes Dombrovskis, executive vice-president and EU Commissioner for Trade at the signing in State House, Nairobi.

In February this year, the EU signed a $27 million funding package for TradeMark Africa to facilitate a five-year programme that will boost Kenya’s exports and support the government in creating a conducive business environment.

And last week, Tanzania signed three grant agreements valued at €179.35 million ($195 million) with the EU for its budget support in 2023/24 fiscal year.

President Samia Suluhu, who witnessed the signing ceremony in Dodoma, said: “It will be used to promote policy changes and industry growth in the blue economy, finance for growth, gender equity, green energy, and smart cities, as well as the renovation of rural roads in the southern highlands region.”

In February, the EU announced it would resume development funding to the Burundi government, after more than a decade of sanctions.

Read: Burundi wins big as bloc lifts economic sanctions

Brussels cut off direct assistance to Burundi in 2016 after then-president Pierre Nkurunziza sought a third term, triggering violent political unrest.

The EU latest funding plan for the nation of around 12 million people, includes €55 million ($62.9 million) for inclusive growth, €104 million ($113 million) for human development and basic services, €25 million ($27 million) for good governance and the rule of law, and €7 million ($7.6 million) for civil society for an initial period to 2024.

Additional reporting by Luke Anami