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Wednesday, 10 May 2017

Kenya Still Leads on Foreign Investment in East Africa

According to EY’s 2016 Africa attractiveness program 2017, staying the course, despite a relative slow down, Sub-Saharan Africa remains one of the fastest growing regions in the world. Most East African economies continued to grow strongly in 2016, with Kenya, Tanzania, Uganda, Rwanda and Ethiopia all among the fastest growing on the continent. Kenya, which is East Africa’s anchor economy (and SSA’s fourth largest), saw investment flag in 2016 after a bumper year in 2015. FDI projects were down 57.9%, while capital investment declined by 55.5%. However, if we take a longer-term perspective, FDI into Kenya has tended to ebb and flow year-on-year, similar to the experience of Nigeria. Additionally, Kenya had a strong 2015, mainly driven by a surge in projects from the UK. These understandably slowed in 2016, as the UK copes with uncertainty following the vote to leave the EU. Our confidence in Kenya’s investment prospects remains firm, underscored by the country’s strong ranking as the second most attractive FDI destination on the AAI 2017. Although there were year-on-year declines in FDI flows into East African markets generally, both Tanzania and Uganda are highly placed on the AAI 2017, ranking fifth and sixth in terms of FDI attractiveness respectively. Recent oil and gas discoveries in these countries have put them even more firmly on the investor map, although Tanzania has also benefited from a strong growth over the last decade, driven by increased investment in infrastructure and services. Rwanda, despite a loss of three places on the AAI 2017, has Africa’s second-best business environment, according to the World Bank’s Ease of Doing Business Index 2017. Ethiopia, where FDI levels echoed impressive GDP growth in previous years, saw its FDI projects almost halve in 2016, owing to political instability and drought. However, the country aims to build its manufacturing hub to drive employment growth. This, combined with its agricultural base and a very large consumer market, has the potential to be a major driver for future FDI flows.

Source: Rawandaeye