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East Africa Experienced the Highest Growth in Africa in 2018

In 2018, East Africa attracted inflows of USD 4 billion, investment was channeled to diverse industries with the manufacturing, chemicals, hospitality and oil and gas being the main attraction for foreign investors.

Nairobi cityscape capital city of Kenya, East Africa

The growth trajectory of Foreign Direct Investment (FDI) to the continent is now on an increase. Though Foreign Direct Investment (FDI) into Africa remains small by global standards, but as a proportion to the average Gross domestic product (GDP) of the countries in the region, it is significant, according to EY Africa Attractiveness report 2019.

The report, presented at the World Economic Forum (WEF) meeting in Cape Town, South Africa, revealed that many African countries face an unprecedented set of economic challenges that should be addressed urgently for creating an enabling business environment.

The report says that East Africa will out-pace the other regions in growth parameters, leading to an uneven growth for the continent. The continent’s growth was 3.8 per cent in 2018, with Sub-Saharan Africa lagging behind at 2.6 per cent. As against the public perception that China is the largest investor in the continent, the study reveals that the US and Western Europe are Africa’s largest investors. Referring to the FDI flows to the individual countries, the report says that the flow is generally influenced by the degree of business friendly policies of the economies.

The EY report mirrors a previous one by the African Development Bank (AfDB) that predicted that economic growth across Eastern Africa will remain at a robust 5.9 percent in 2019, making it a promising investment and manufacturing destination.

The region had an average growth of 7.0 percent whereas its peers; West Africa, North Africa, South Africa struggled with 3.2 percent, 4.1 percent, and 2.6 percent respectively.

However, Sub Saharan growth remained slower at 2.6 and this was attributed to the many challenges faced by three of its largest economies, Angola, South Africa, and Nigeria.

Rwanda, Ethiopia, and Uganda were ranked amongst the top 10 fastest growing economies globally while the majority of the East African countries’ growth stood at 5 percent per annum.

“East Africa’s growth remains world-leading. Kenya, along with neighboring Tanzania, Uganda, Rwanda, and Ethiopia are all growing well above 5% per annum,” the report noted.

Kenya is forecast to continue growing at these rates over the next five years, supported by a more stable political climate, and a focused approach on agriculture and horticulture exports. Simultaneously, it continues its focus on raising attractiveness in the innovation and technology space, vying to become one of Africa’s major tech-hubs, the report noted.

The East African region has already established itself as a hub with a diverse economy and investment-driven growth, the ease of doing business in the region has triggered many investors to establish their businesses in the area.

Giving the quantum of investment received by respective economies, the study points out that that South Africa only attracted US$5m in FDI, placing it behind Egypt (US$12m), Algeria (US$9m), Nigeria (US$8m), Ethiopia (US$7m) and even Zimbabwe (US$6m). Technology-focused FDI, in Africa, is rising steadily as the pace of digital transformation picks up. The study also pitches for Africa adopting digital transformation technologies, such as intelligent automation, cloud-based software deployment and data storage to scale up its technology value chain. It also calls for private-public partnership for investing in digital infrastructure, such as 5G data networks, WIFI platforms and Cloud data centres.

The EY report mirrors a previous one by the African Development Bank (AfDB) that predicted that economic growth across Eastern Africa will remain at a robust 5.9 percent in 2019, making it a promising investment and manufacturing destination.

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