Tanzania and Uganda beat Kenya in foreign direct investments; UN report
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Tanzania and Uganda beat Kenya in foreign direct investments in the race to attract investors according to UNCTAD’s World Investment Report 2022
Tanzania and Uganda beat Kenya in foreign direct investments in the race to attract investors according to UNCTAD’s World Investment Report 2022.
Kenya has reversed a five-year decline in foreign direct investment after signing deals worth Sh107 billion in 2022, but Uganda, Tanzania, and Ethiopia still prevailed in the investor attraction race.
According to the findings of an annual study by the UN Conference on Trade and Development (UNCTAD), foreign direct investment flows into Kenya climbed in 2022 after five straight years of declines due to more deals in renewable energy, but they lagged behind regional rivals.
According to UNCTAD’s World Investment Report 2022, FDIs increased from $463 million in 2017 to $759 million in 2018, or around Sh106.96 billion at the time at the current exchange rate of Sh140.92 to the US dollar.
The 63.93 percent jump in FDI inflows, the second fastest among major economies in Africa after Egypt, was the first expansion since 2017 when the flows rose 23.27 percent to $1.4 billion, according to UNCTAD.
The UN body has not disclosed the specific projects, which attracted foreign investments last year, but has broadly attributed the growth to a “range of policy interventions to mobilize resources and investment within the renewable energy sector”.
Kenya’s renewable energy sector, which accounts for about 90 percent of the country’s power needs, has become a magnet for foreign investors looking for climate change mitigation projects.
The deals have largely been focused on geothermal and wind power projects, with interest in solar energy rising fastest in recent years.
UNCTAD listed Kenya among five countries on the continent — alongside South Africa, Egypt, Nigeria, and Zambia — which accounted for about 40 percent of greenfield projects last year.
Ethiopia, which partially opened up its telecoms sector to foreign investments, continued to control FDIs in Eastern Africa’s region despite the inflows falling 13.83 percent to $3.67 billion (Sh517.18 billion) last year.
“Ethiopia was the largest recipient of FDI in the [Least Development Countries] group, with $3.7 billion – a 14 percent decrease from 2021.”
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Inflows into Uganda were also ahead of Kenya’s despite growing at a slower pace of 38.73 percent to $1.53 billion (Sh215.61 billion).
Uganda’s FDIs were largely driven by the ongoing development of the Lake Albert oil field in a joint venture with China National Offshore Oil Corporation and the Uganda National Oil Company for a forecast $6.5 billion and construction of the 1,440-kilometre crude oil pipeline, which extends to Tanzania, for projected $3.5 billion on completion.
Tanzania’s inflows rose modestly at 7.55 percent to $1.11 billion (Sh146.42 billion) largely on 60 percent growth in greenfield project investments.
The UNCTAD data shows the stock of FDIs in Kenya – total accumulated investments over the years – increased 7.25 percent to $11.23 billion (Sh1.58 trillion) last year from $10.47 billion in the prior year.
The survey largely focuses on greenfield investment in selected industries, project finance in infrastructure, and production activities for large multinationals.
Analysts at Economist Intelligence Unit wrote in a report earlier in the year that Kenya’s renewable energy potential is still a major attraction for international investors.
“The main weaknesses in Kenya’s electricity sector are the parastatal firms responsible for distribution (Kenya Power) and transmission (Ketraco),” an EIU economist wrote in a report published in March.
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