2022 has been a mixed bag of fortunes for the East African Community (EAC) as economies in the region implemented different policy interventions and post-Covid recovery strategies. This is after a somewhat robust recovery in 2021 following a major dip in 2020 when the Covid-19 pandemic brought most sectors to a near halt. The tourism and logistics sectors were among the hardest hit sectors with the pandemic also affecting the real estate sector, finance, construction, events management, ICT, manufacturing and consultancy. The region is however on the road to recovery with reopening of economies propping GDP growth which has averaged four per cent (4%) in 2022.Going into 2023, average growth is projected at 4.7 per cent with top performers seen to be Kenya, Rwanda, Tanzania and Uganda, albeit the impact of the ongoing Russia-Ukraine war and the realities of stagflation and recession remaining a threat.
But what is expected of the bloc’s seven member States?
Regional
Economic Communities (
RECs
) forum in Washington DC, on December 12
/photo EAC
Economy of Kenya in 2023
There are high hopes for the region’s economic power house and the hub for multinationals operating in the region in 2023. This is especially after peacefully navigating a dicey general election in August 2022, which saw the country’s deputy president of 10 years, Dr. William Ruto, sworn in as president for the next five years. While the country experienced a slow-down in investments and a sizable capital flight weeks to the general elections the economic activity quickly bounced back despite rising inflation.2023 will be a year to watch as the new administration embarks on a mission to strengthen the economy further, with a pledge to push through investment friendly policies being among the key priorities for the government. Kenya’s growth is however projected to decelerate with growth projected at 5.2per cent in 2023,down from 5.5 per cent in 2022.
The lowered expectation is pegged on the high inflation rate, food insecurity, high fuel prices and drought effects.
“While Kenya’s economy has been resilient, the multiple recent shocks show the urgency of improving social protection mechanisms to cushion the most vulnerable households,” said WorldBank Country Director, Keith Hansen.
Nevertheless, the economy is expected to provide a wide range of investment opportunities as the new administration puts in place policies targeted at growth. The agricultural sector is among the areas investors keen on value addition can put their money in.
The new government is keen on agro-processing and value addition with the aim of reversing the country’s current state as a net exporter of raw materials.
Investors will be eyeing value-addition opportunities in tea, coffee, fish, avocados and other agricultural sub-sectors. Manufacturing and industrial growth is another focus area as the government banks on the private sector to support job creation.
The country has a number of tax incentives for those seeking to invest in Special Economic Zones and automotive industry.
Other areas to watch will be real estate sector, textile industry, renewable energy, tourism, e-Sports and gaming, government bonds and the Nairobi Securities Exchange (NSE) as the government plans to list some of the state parastatals. Logistics, transport, and trade will continue to attract interest from investors.
Economy of Tanzania in 2023
Tanzania has been one of Africa’s fastest growing economies with nearly seven per cent annual national GDP growth since 2000.
But like other economies, it has also paid the price of the Covid-19 pandemic with the country’s GDP growing at 4.8 per cent in 2020 and 4.9 per cent in 2021 supported by the global economic recovery.
Growth is projected at 5 per cent in 2022 and 5.6 per cent in 2023, due to improved performance in tourism, the reopening of trade corridors, and accelerated rollout of vaccines, the African development Bank (AfDB) notes. The country’s inflation however remains vulnerable with high energy prices foreseen as a result of the Russia–Ukraine conflict.
The fiscal deficit isexpected to narrow to 2.87per centdue to better revenue performance andwill be financed by domestic and external borrowing.
Tanzania’s current account deficit is also projected to narrow to 2.6 per cent in 2023 from four per cent as merchandise exports and tourism receipts stabilize. With the government pushing for investment friendly policies, a predictable tax environment, and monetary policies, analysts expect the country to continue attracting investors.
Like Kenya, agriculture is one area investors can look into as the country seeks to reverse downsides caused by both internal and external factors.
The coffee, cotton, tea and cashew nut sub-sectors are some of the potential areas for investment mainly in value addition.
While agriculture is the backbone of the economy, Tanzania is rich in minerals with the mining sector a key driver of the country’s economic growth.
The sector has had a double-digit growth mainly driven by production of gold and gemstones. Other minerals are diamond, an assortment of gemstones, coal, tin, phosphates, nickel, cobalt, copper, gypsum and pouzzolana.
United Kingdom mining company Kabanga Nickel signed a mining deal with the Government for the exploration and mining of what is projected to be the world’s largest nickel deposit project. The multi-billion-dollar nickel deposit project looks to unearth 58 million tonnes of minerals including over 1.52 million tonnes of nickel and unspecified amount of cobalt and copper.
For the government, implementing policies to attract investments, taming inflation, improving access to credit will be the biggest tasks in the post-pandemic era.
Economy of Uganda in 2023
–
Uganda border of Malaba. It is one of the businesses in the East Africa
region
The economy is on a recovery path after the pandemic which led to a contraction of 1.5 per cent in 2020 before recovering to a growth of 6 per cent in2021.
The AfDB projects that the GDP will grow at an average rate of 6.2 per cent in 2023 compared to 4.6 per cent in 2022.This will be driven by the services industry with the hospitality sector significantly contributing to this growth.
“With increased economic activity, domestic revenue is expected to strengthen, underpinning further fiscal consolidation,” AfDB notes.
High imports and a sluggish recovery in tourism will keep the current account deficit wide. Domestic risks such as pressure to ramp up public infrastructure spending amid weak tax revenues and implementation challenges and poor rain patterns could undermine agriculture.
Nevertheless, the “Pearl of Africa” offers investment opportunities in infrastructure, mining, health, agro-value addition, real estate, tourism, energy, ICT, manufacturing, and definitely oil and gas.
The landlocked country is also endowed with various minerals with the sector providing an opportunity for Public–Private Partnerships to exploit resources as well as value addition.
Investment opportunities in minerals subsector include exploitation and value addition of 300million tonnes of iron ore in South Western Uganda, three billion tonnes of rare earth minerals that include alumnus clays, 300 million tonnes of bentonite to be used for production of drilling mud required in oil production and 30 million tonness of glass sand for manufacturing of sheet glass to be used for building purposes.
Other minerals include wolfram, copper, zinc, cobalt, nickel and gold.
“The minerals sector is completely liberalised to enable private sector to investment profitably in the sector,” the Uganda Investment Authority notes.
Agriculture is Uganda’s most important sector and largest source of export earnings, averaging53 per cent per annum and employing an estimated 73 per cent of the population.
Agro-processing will continue to attract interest from investors moving forward. The oil and gas sector remains a major focus area with the construction of the multi-billion East African Crude Oil Pipeline project, being financed by France’s Total Energies and the China National offshore Company, a key investment in 2023. Also known as the Uganda–Tanzania Crude Oil Pipeline, the project has run into an environmental whirlwind which could continue playing out in 2023.
Nevertheless, Uganda continues to offer upstream, mid and downstream investment opportunities. To date, out of the 6.5 billion barrels of oil deposits in the 21 oil and gas discoveries made by the Albertine Graben Refinery Consortium, 1.4 billion barrels is estimated as recoverable. This will be at a planned peak production rate of about 230,000 barrels of oil per day.
As Uganda undertakes licensing rounds, there are hopes of discovering more oil, given that in the previous exploration, Uganda has had an 88 per cent success rate of finding oil, compared to a 25 per cent global average.
Economy of Rwanda in 2023
After contracting by 3.4 per cent in 2020 due to Covid-19, GDP growth peaked at 10 per cent in 2021, buoyed by sustained fiscal stimulus, easing of Covid-19 restrictions, and recovery in global demand.
According to the African Development Bank, growth was driven by expansion in services(12%), industry (13%), and agriculture (6%).GDP per capita recovered from a 5.9 per cent contraction in 2020 to post 7.4per cent growth in2021.
Growth for 2022 however slowed down to an average 6.9 per cent. It is expected to bounce back in 2023 at 7.9 per cent mainly on government support to small and medium enterprises whom will help to support continued economic recovery.
The current account and fiscal deficits are expected to narrow on the back of increased domestic savings from envisaged fiscal consolidation, reforms in commercial agriculture, and services digitisation.
Downside risks include the possibility of subdued external demand and fears of repeated waves of Covid-19 variants, which could undermine consumer and investor confidence, as well as the Russia–Ukraine conflict, which might cause supply disruptions.
South Sudan’s Economy
Conflict and insecurity in South Sudan have remained a major hindrance to the country’s development.
During a recent meeting at the African Union, members of the UN Commission on Human Rights in South Sudan urged African countries and other stakeholders to renew their support for implementation of the peace agreement for South Sudan, whose people face one of the gravest humanitarian crises in the region.
Nevertheless, the country’s growth is projected to rebound to 5.3per cent and 6.5per cent in2021-22 and 2022-23, respectively, due to increased oil export receipts. It will be driven by industry and by private consumption and investment.
Inflation is however rising sharply to 16 per cent in 2022-23, from 5.3 per cent, as a result of drought and higher food prices in the key source markets of Kenya and Uganda, following the Russia–Ukraine conflict. Disruptions to the peace process, fluctuations in oil prices, lingering impact of Covid-19, and climate change effects remain risks to growth.
The government has priority areas for investment which come with tax incentives. They include agriculture and agribusiness, physical infrastructure, social infrastructure, mining, quarrying, energy and electricity, petroleum and gas industries, prospecting of natural resources for economic use, manufacturing, ICT, financial services and tourism and hotel industry development.
Investors should expect duty exemptions in agricultural import-tools, equipment, machinery and tractors, pharmaceutical, animal feeds, seeds–for boosting food and cash crops productions are exempt from any duties and taxes for a period that shall be determined by law.
DR Congo
The newest member of the EAC community is expected to go into the general elections set for December 20, 2023. It is however not clear how the current conflict between government forces and the M23 rebels will play out, with concerns the crisis in eastern Congo could delay elections.
Former Kenya’s President Uhuru Kenyatta who is leading peace talks is however hopeful the groups will strike an agreement to end the perennial conflict.
DRC formally joined the East African Community on April 8, 2022 after the signing of the Treaty of the Accession of the DRC into the EAC in Nairobi, Kenya.
Going into 2023,the country, with more than 90 million people, is expected to play a critical role in the regional bloc, offering investment opportunities and widening intra-EAC trade. The country has 11 major economic transport corridors that facilitate trade flows in the region while connecting with Central Africa, Southern Africa, and a part of East Africa.
The economic outlook is encouraging, AfDB notes, despite the Russia–Ukraine conflict, with GDP growth in 2022–23 reaching 6.4 per cent. This is driven by mining and recovery of non-extractives.
“Priority investments should continue to support internal demand. Improvements to transport and logistical infrastructure are set to support resumption of non-extractive activities, services, and industries, stimulating export and tax revenue,” the continental lender says.
Coordination of public finance and monetary reforms should maintain inflation at around 6.9 percent in 2022–23 and assure exchange rate stability.
The decline in commodity prices, global demand for minerals, the Russia–Ukraine conflict, and security issues could however undermine the outlook.
Sectors where investors can put their money include agriculture, mining, energy, infrastructure, insurance, housing and real estate, forestry, transport and tourism.
Burundi’s Economy in 2023
For Burundi, economic outlook is favorable with projected GDP growth rates of 3.6per centin2022 and 4.6per cent in 2023 owing to the continuing recovery of agriculture and public investment.
Global inflationary pressure intensified by the Russia–Ukraine conflict is however expected to increase the inflation rate to around 9.3 per cent in 2022 before easing to 8.3per cent in 2023.
The rising value of oil product imports is expected to increase the commercial deficit and aggravate the current account deficit.
This is expected to affect foreign exchange reserves but could increase to $430.8 million, covering three months of imports. Public debt is projected to fall to 70.2% of GDP in 2022 and 66.5% in 2023, from 71.9% in2021, on budget consolidation.
However, this outlook could be undermined by low rainfall that decreases agricultural yields. Investment areas in Burundi include the agriculture sector, energy, education, animal and fisheries, health, transport, tourism, ICT and real estate.
