East African Economy: Thriving amid Increased FDI

The East African economy is flourishing with 8.3% regional annual economic growth in 2013/15. In 2014 FDI in the region increased 11% to $6.8 billion. With a population approaching 300 million East Africa is a dynamic and politically stable area for business. Key investment sectors are services (especially finance), infrastructure and manufacturing.

east african economy

Nearly every East African economy is experiencing significant growth

East African economy is positive in the case of Kenya

Continued growth of 6% is forecast for Kenya

KENYA is the region’s largest and most developed economy. Annual GDP growth has exceeded 6% over the past decade. Medium term growth forecasts project around 6%. Key growth sectors are services (61% of GDP), especially tourism, finance and higher education; infrastructure (boosted by government investment, fast urbanisation); telecommunications (following privatisation of Kenya Posts & Telecommunications), and tea/coffee.

ETHIOPIA,  Africa’s second most populous country (102 million), was Africa’s fastest growing non-oil dependent economy and one of the world’s five fastest growing economies between 1993/2013 (10.8% annual growth). Annual growth between 2016/2021 is forecast at 11%, an expansion rooted in Government-led infrastructure development, manufacturing and exports.  This last has traditionally been dominated by coffee, maize and livestock.  However, significant FDI in textile/clothing production is generating growing exports from this sector.

TANZANIA has also performed well economically, with plus 7% annual growth in 2013/15. The medium term forecast is over 7%, based on infrastructure development (especially gas distribution and gas-fired power station development), tourism, manufacturing and telecommunications (60% of the 52 million population are mobile telephone subscribers).

Coffee dominates the East African economy of Uganda

Coffee continues to dominate Uganda’s economy

UGANDA’s economy, though smaller than Kenya’s and Tanzania’s, is expanding fast (5.6% in 2014/15). Traditional exports continue to be coffee (plus $500 million), tea and fish. The service sector (52% of GDP) is growing fast, especially finance and tourism. The telecommunications sector remains dynamic (over 60% of the population are mobile telephone subscribers). The Government forecasts annual growth of 6.3% in 2016/20. Key drivers will be infrastructure development (new and upgrading), especially in water and sanitation; service sector growth (especially finance and tourism),  FDI and domestic consumption. Notably Uganda will begin its first oil production in 2018 which could have a significant effect on long-term economic growth.

Exports are fundamental in the East African economy of Somalia

Exports are increasingly fundamental to Somalia’s growth

SOMALIA Progress on stabilising and reconstructing national government is being sustained. Much of the economy remains in the informal sector but the formal sector is developing rapidly. Exports including fish, charcoal, bananas and meat/livestock (to the Middle East) are expanding. The Government is implementing its National Development Plan, largely funded by the international aid donor community.  This remains the main source of opportunities for international business.

ERITREA  Economic growth here has been more modest than that of its larger neighbour Ethiopia.  Opportunities for international business are accordingly more limited. The Government is focusing on mining and infrastructure development.

CONCLUSIONS

The regions offers many attractions for business and investment, including sustained medium term high economic growth, political stability, and various programmes of economic reforms aimed at improving the climate for FDI. Tanzania and Kenya, for example, are both seeking to create greater transparency through “open Government partnership” and “road maps” for improvement of their investment and business environments. The opportunities are varied and many.  Infrastructure, finance, tourism, telecommunications and manufacturing are key sectors to watch. The long term trends and prospects are looking positive.

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The recent AU meeting in Addis Ababa, has agreed under the ENERGY AFRICA (EA) initiative,  a 5 year $12 billion affordable off-grid renewable energy investment programme. Ethiopia has already signed up.

Former British diplomat with 36 years’ experience of bilateral relations, commercial promotion and policy advising in Latin America, Europe, Africa and Australasia. Head of British High Commission, Papua New Guinea and Head of the British Embassy in Liberia. David is an experienced networker with a strong track record of promoting UK business in less developed markets.

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