Kenya faulted for FDI drop

Nairobi, Sunday. Foreign direct investment in the East African region dropped last year due to insecurity in Kenya and uncertainty over the South Sudan political crisis, a new report says.

The EY Attractiveness Survey Africa 2015 shows that the value of FDI in the region dropped by 11.6 per cent, from $181 million in 2013 to $160 million last year.

Since 2007, FDI projects in East Africa have grown by 19.9 per cent, the highest rate in Africa.

Rwanda had the biggest drop in FDI in the region during the period under review, followed by Tanzania, Kenya and Uganda. Rwanda had a 21.7 drop, Tanzania 20 per cent and Kenya 12.7 per cent. Uganda saw an 11.5 per cent drop.

In the Horn of Africa, Ethiopia was the greatest beneficiary, with FDI increasing by 47 per cent in 2014. Technology, media and telecommunications, financial services, consumer products and the retail sector were the main areas of investment in the region.

Ajen Sita, chief executive officer at Ernst & Young Africa, said economic growth this year is likely to be at its lowest in five years, “dragged down by the impact of low oil prices on the Nigerian and Angolan economies, the softening of other commodity prices, and South Africa’s sluggish growth.”

But, despite key sub-Saharan African economies like South Africa, Angola, Nigeria, Ghana and Kenya receiving fewer FDI projects than in 2013, the average value of each project across the region almost tripled, from $67.8 million in 2013 to $174.5 million per project in 2014.

Mozambique and Ethiopia were among the star performers, attracting a growing inflow of FDI projects.

Over the longer term, South Africa has been the most popular destination for FDI projects, attracting twice as many over the past five years as any other African country.

The success of regional integration also saw the region attract more FDI and jobs in 2014, with the number of jobs created in East Africa almost doubling.

FDI into Kenya dipped during 2014, after growing by more than 30 per cent annually since 2007. Though it captured 8.5 per cent of the African inflows in 2014, the average project was small, because investors from the UK and Japan — who were Kenya’s largest investors in 2013 — started fewer projects in 2014.

READ: Kenya punching below its weight in battle for FDI

Within the region, Uganda, Tanzania and Rwanda also secured fewer FDI projects.

“Insecurity and conflicts in Kenya and South Sudan have proved to be a concern, but investors are likely to remain interested in the region. Market opportunities, natural resources and accelerating regional integration will continue attracting FDI,” the report says. (NMG)