East Africa

Uganda Is the Top FDI Sharer in East Africa

In 2022, Kenya, Tanzania, and Uganda brought in about $13.3 billion in foreign direct investment (FDI), which aided in the creation of thousands of new jobs in those countries.

According to Ernst & Young’s most recent investment report, Uganda generated the biggest amount of employment in East Africa, $10.2 billion, and 6,300 jobs.

Kenya had a 117 percent rise in investment inflows year over year, bringing in $2 billion in capital investment and creating 7,819 employment. The majority of the investment went into the transportation and warehousing, business services, and technology sectors.

FDIs increased by 133% in Tanzania to levels seen prior to the COVID-19 outbreak, with 21 projects valued at $1.3 billion and generating 4,566 employment.

Intracom, a company located in Burundi, made significant investments in Tanzania. Intracom plans to build an integrated cement plant worth $250 million in the Kigoma region to sell cement to the Lake Tanganyika region, which includes Tanzania, Burundi, Rwanda, and the Democratic Republic of the Congo (DRC). Two geothermal drilling projects in Tanzania are also being considered for investment by Kenya’s Electricity Generating Company (KenGen).

Additionally, Tanzania Electric Supply Company Ltd. (Tanesco) and UAE-based Masdar have inked a contract for the development of two gigawatt-scale renewable energy projects.

With two significant investments in the oil and gas industry, France was the leading investor in the nation. Kenya also made investments in the country’s consumer industry.

There was no data available for South Sudan, Rwanda, or Burundi, but in Ethiopia, foreign direct investment (FDI) has decreased dramatically over the last three years, from 34 projects in 2019.

The number of foreign direct investment projects that Addis Ababa received in 2021 and 2022 was just five and six, respectively.

The study, A Pivot to Growth, states that Uganda earned the most money from French investments in the oil and gas sector, but Kenya is by far the region’s greatest destination in terms of the number of projects.

After struggling to draw in capital since the start of the Covid-19 pandemic and recovering more slowly than other regions due to its delayed vaccine rollout and consequently its inability to reopen its 54 national economies, Africa emerged as a top investment destination hub for international investors in 2022.

The research states that while though 2022 was the first obvious indication of the continent’s return to the investment scene, much work needs to be done to guarantee that its investment attractiveness increases in order to maintain the pace.

Tightening monetary policy and a rising dollar, which are global effects of central banks trying to control inflation, have a big influence on the continent.

According to the paper, “growth slows as interest rates climb, and there is danger that certain nations may still slip into recession following large hikes in interest rates.”

“There are several negative effects of these high interest rates on growth and investment throughout Africa. First off, governmental debt in Africa has increased to its greatest point in over ten years.

According to the report, six significant African economies—Nigeria, Ghana, Ethiopia, Kenya, Zambia, and Mozambique—had an average of 77 percent of GDP in national debt, with South Africa following closely behind. Depreciating currencies are a problem for many countries in addition to high and rising rates of inflation.

The research states that increased interest rates “increasing the cost of funding fresh investment for investors, both within and beyond the continent, which might exert a strain on investor appetite.”

“Moreover, investors had less chances due to slower growth, particularly during the period when Africa was still recuperating from the pandemic’s effects.”

With very few exceptions, central banks throughout Africa are raising interest rates.

The goal of these rate increases—which have seen South Africa’s central bank lift interest rates 500 basis points higher than those of Nigeria and Egypt—is to control inflation, regulate currency exchange rates, and promote economic stability.

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