A regional business umbrella body has called upon East Africa’s partner states to harmonise investment incentives and market the region as a single investment destination.
The East African Business Council (EABC) is counting on the six heads of EAC member states to merge marketing of the bloc and attract investors in the various opportunities available. One of the aspects the EABC recommends is harmonising incentives to make it easier for investors to pick the bloc from the rest of the continent.
East Africa has often been referred to as one of the fastest growing trading blocs in Africa. With a population of more than 177.2 million people the region presents a readily available demand for products and services that emerge from the prospective investments. The region also has a combined GDP size of more than US$147.5 billion.
A recent report by South Africa’s Rand Merchant Bank (RMB) states that the region’s economies represent the strongest growth rates over the forecast period. The ramping up of manufacturing is the key reason for this impetus. It does not hurt either, that the region has made recent discoveries of oil and gas — the consequent boost in FDI, focused specifically on infrastructure, supports the region’s forecast growth path. Production is expected to come online in the early 2020s across the region. Once this is effected, East Africa stands to benefit the most especially due to improving business environments and regional integration initiatives.
The report dubbed RMB Investment Attractiveness Rankings ranks Kenya and Rwanda at position four and five respectively of the top ten most investment attractive countries of the region.
The EAC in 2011 signed framework agreements with the USA and China aimed at promoting commodity trade, exchange visits by business people and co-operation in investment among others thus opening up its borders further to international investors.
For Kenya, the above 5% expected growth rates, helped by favourable weather and political reconciliation after 2017’s disputed elections, has propelled Kenya to one spot higher. The economy benefits from diversity as well as a sustained expansion in consumer demand, urbanisation, East African Community (EAC) integration, structural reforms and investment in infrastructure, including an oil pipeline, railways, ports and power generation.
Meanwhile, Rwanda has the second-best business environment in Africa. According to the World Bank’s operating environment scoring, the country has more than doubled the efficiency of its business environment in less than a decade. The government has also invested heavily in its domestic industries, while FDI has increased over the same period. This has pushed Rwanda to being one of the five fastest-growing economies on the continent.
Speaking at a virtual conference on trade and investment opportunities in East Africa beyond COVID-19, Nick Nesbitt, EABC Chair, said that the bloc will have a responsibility to improve the investment climate in East Africa to attract more investments into the region. “Let’s wave the flag of ‘open markets’ and East Africa.” He urged.
Despite being an attractive destination, EAC however continues to grapple with challenges that hinder cross–border trade.
These include the non-tariff barriers (NTBs) choking intra-EAC trade due to different measures on COVID-19 in the region and urged improving regional coordination and harmonization of measures on COVID-19 for economic resilience and growth.
“To ensure growth in the region, there is also a need for simplification of business processes and harmonisation of EAC tax regimes,” added EABC CEO Dr. Peter Mutuku Mathuki.
“The region offers numerous investment opportunities in all sectors and has abundant resources, is strategically located, has sufficient human capital to support new and existing businesses. The level of intra-regional trade and cross-border investments is also on an upward trajectory,” he said.
The bloc’s promising investment sectors
Certain lucrative sectors for investments in the region include: tourism, agriculture and agribusiness, infrastructure, manufacturing, energy, real estate, mining and metals, oil and gas among others.
Speaking during the conference, Martin Muhangi, Deputy Director-General, Uganda Investment Authority (UIA) said that Uganda offers competitive electricity rates, adequate labour and his government has identified 27 potential areas for industrial parks.
“Acquiring an investment license in Tanzania has reduced to 14 days and we are working to reduce this further to seven days,” said John Mnali, Director of Investment Promotions at Tanzania Investment Centre (TIC).
Zanzibar Investment Promotion Agency noted that Zanzibar is not only looking at scaling up tourism but also unlocking the potential of aquacultures such as fish processing and seaweed farming.
Rwanda Development Board noted that the country has effected various incentives to attract investors such as the seven years corporate tax holiday for investors putting up more than US$50 Million in investments.
“Rwanda also offers a one-stop centre for investors with dedicated investment acceleration and aftercare services,” said Zephanie Niyonkuru, Deputy CEO, Rwanda Development Board.
Generation of energy from biogas and renewable resources, processing of minerals and precious metals and establishing motor vehicle assemblies are among other opportunities in the region investors can tap into.
Overview of East Africa’s performance on the continent
According to the RMB report, sixty-three per cent of Africa’s GDP is generated by Egypt, Nigeria, South Africa and Algeria.
“The periodic rebasing of countries’ national accounts could result in a reordering of Africa’s economic hierarchy over the next few years. World Economic Forum asserts a number of changes in the pecking order if countries update their base years to 2013: Egypt could drive Nigeria into second place in nominal terms, Sudan would likely streak past Angola, while Tanzania should just pip Kenya as East Africa’s biggest economy,” the RMB report states.
The bloc however still needs to iron out some issues that might drag it behind if left unresolved. In East Africa, the risks are more pronounced as 20% of the region’s GDP relies on rain-fed agricultural output, putting economies at the mercy of precarious weather patterns. In the past five years, there have been more incidences of drought-related problems compared to ten years ago as climate change takes its toll.
These changes will force countries to adopt new technologies in agricultural production if they want to remain relevant and competitive.