FDI inflows into Kenya, Tanzania, Uganda, Ethiopia, Rwanda and Burundi fell from $6.25 billion (Sh677 billion) in 2019 to $5.09 billion (Sh551 billion) last year, data from the World Investment Report 2021 by the United Nations Conference on Trade and Development (UNCTAD) shows. PHOTO | POOL Foreign direct investment (FDI) inflows into Eastern Africa dropped by a fifth last year compared to 2019, marking a third straight year of decline that was exacerbated by the Covid-19 pandemic that restricted international capital flows.
FDI inflows into Kenya, Tanzania, Uganda, Ethiopia, Rwanda and Burundi fell from $6.25 billion (Sh677 billion) in 2019 to $5.09 billion (Sh551 billion) last year, data from the World Investment Report 2021 by the United Nations Conference on Trade and Development (UNCTAD) shows.
While Covid-19 helped accelerate the decline last year—FDI inflows declined by nine percent in 2018 and 2019— there were policy bottlenecks and heightened political risk in some countries that made it more difficult for investors to establish a presence.
This was despite the region being seen as one of the investment hotspots in Africa, helped by economies that are among the fastest growing on the continent. East African economies are also less dependent on natural resources compared to western and southern Africa and are therefore less prone to economic shocks when commodity prices fluctuate.
FDI inflows to Kenya fell to $717 million (Sh77.6 billion) in 2020 compared to $1.09 billion (Sh118 billion) in 2019, and over the three-year period from 2017 declined by $687 million (Sh74.3 billion).
The drop in Kenya last year was attributed to new local ownership rules meant to protect local industries and firms, and a slowdown in mergers and acquisitions after outbreak of Covid-19.
“Kenya introduced local participation requirements in various industries, including insurance, telecommunication and ICT services,” said UNCTAD.
Rwanda, Uganda and Ethiopia also recorded drops in FDI last year, while Tanzania and Burundi bucked the trend with modest increases.
The pandemic severely hit FDI flows globally as multinational corporations and bilateral partners took a breather to assess the unprecedented crisis, while owners of capital also fled to the safety of developed economies like the US. Greenfield investments in industry and new infrastructure investment projects in developing countries were the most affected, according to the UNCTAD report.
“The crisis has rolled back progress made in bridging the investment gap achieved following the adoption of the sustainable development goals (SDGs). This demands a renewed commitment and a big push […]
