FDIs in East Africa to sharply drop, UN report

Workers at Apparel Manufacturing Group Ltd make facemasks in Kigali during the lockdown. According to a report by the United Nations Conference on Trade and Development (UNCTAD), FDIs in East Africa declined by nine per cent to $7.8 billion in 2019, from $9 billion in 2018. Photo: File

The East African Community (EAC) is likely to see a sharp decline in Foreign Direct Investments (FDIs) this year owing to the current Covid-19 pandemic that continues to ravage economies across the globe.

According to the latest World Investment Report 2020 by the United Nations Conference on Trade and Development (Unctad) FDIs in East Africa declined by nine per cent to $7.8 billion in 2019, from $9 billion in 2018.

 

The report forecasts FDI inflows to the continent will fall by 25 to 40 per cent in 2020, exacerbated by low commodity prices.

 

“Although all industries are set to be affected, several services industries including aviation, hospitality, tourism and leisure are hit hard, a trend likely to persist for some time in the future,” said James Zhan, Unctad director of investment and enterprise.

 

The decrease, according to the report, comes after the continent recorded a 10 per cent decline in FDIs flows to $45 billion in 2019 from $46 billion in 2018.

Alternatively, the expected transformation of international production also brings some opportunities for development, such as promoting resilience-seeking investment, building regional value chains and entering new markets through digital platforms, the report reads in part

However, capturing these opportunities will require a shift in development strategies.

According to Mukhisa Kituyi Secretary-General of Unctad, export-oriented investment geared towards exploiting factors of production, resources and low-cost labour will remain important.

But the pool of such investment is shrinking, and the first rungs on the development ladder could become much harder to climb.

He pointed out that, “A degree of rebalancing towards growth based on domestic and regional demand and promoting investment in infrastructure and domestic services is necessary. That means promoting investment in SDG sectors.”

Additionally, the large amounts of institutional capital looking for investment opportunities in global markets does not look for investment projects in manufacturing, but for value-creating projects in infrastructure, renewable energy, water and sanitation, food and agriculture, and health care.

“We have now entered the last decade for the implementation of the SDGs. We need action to translate increased interest in SDG finance into increased SDG investment in the least developed countries.”

eashimwe@newtimesrwanda.com

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