The speed of the new wave of interest towards Africa in the last few years has been remarkable, thanks mainly to the growth of stronger economies and democracies on the continent.
This growing interest in the emerging markets of Asia and Africa is being reinforced by the credit crunch and global economic turbulence being felt particularly in the developed markets. These developments present unique opportunities in Africa.
A rising return on investment, an increased need for raw materials and a growing middle class in some African countries are all proving important factors for investment decisions.
In this global economy, the case for Regional Economic Communities (RECs) represents one of Africa’s best hopes for attracting continuing investment and development.
East Africa, with its First Investment Conference in Kigali, Rwanda on 26 – 27 June 2008, is demonstrating real momentum in making its own regional market a reality, through the East African Community.
The conference comes at an opportune moment and is a good opportunity to showcase to potential investors the positive conditions and opportunities for doing business in the region.
Why East Africa? Why not? Country by country analysis shows sustained progress in these countries in the last few years.
The Africa Economic Outlook 2008 highlights the competitive advantages that make the East Africa region an ideal destination for investment.
The expansion of the East African Community (EAC) last July to include Rwanda and Burundi was significant in terms of creating a market of 120 million people. Some would argue that market size alone is not sufficient grounds for guaranteeing real returns on investment.
This is true, but sustained returns are crucial for raising the investment portfolio in terms of harnessing the comparative advantages when partner states work together.
The Case of Rwanda
Here in Rwanda you are on course to be a regional services hub and a centre for excellence in ICT.
The setting up of telecentres in rural areas is part of a $65 million plan to transform Rwanda into a knowledge based centre by 2020, demonstrating that national size does not hold back the resolve for prosperity. With investment opportunities available across all key sectors, Rwanda is a rising star in the region.
In November 2007 the country’s Economic Development and Poverty Reduction Strategy (EDPRS) was launched.
The EDPRS recognises the private sector as the key driver of growth and development. One of the three programmes of the strategy is Sustainable Growth for Jobs and Exports, which aims to reduce the costs of doing business in the country.
This is critical if an attractive investment climate is to be developed. The World Bank’s ‘Doing Business’ Index for Africa has rated the country the first in the region for business creation.
Opportunities for investment in Rwanda include: value addition in terms of cleaning coffee and the processing of hides and skins for export; tourism, which is the second source of export earnings and continuing to grow; mining; the construction industry and horticulture - flowers, which is expected to increase by 26% in the next two years. All these and other opportunities make Rwanda an attractive destination for FDI.
Tanzania and Uganda are now providing substantial opportunities in the extractive sectors. The Mining and Quarrying sector in Tanzania grew by 15.9% between 2001 -2006.
Uganda’s oil find has raised the prospects of the country becoming an oil producer by 2009.
Kenya is returning to normal business conditions after the post election disturbances earlier in the year. The recently highly successful Initial Public Offering of Kenya’s Safaricom, is a major boost to restoring investor confidence, as is the positive contribution of the Prime Minister at the Africa region World Economic Forum in South Africa 3 weeks ago.
The East African Community is making good progress in actualising the Charter’s objectives through the implementation of the 3rd EAC Development Strategy 2006-2010.
The strength of the EAC comes from member states galvanising their efforts to adopt a regional approach to redress some of the challenges of trade and investment, especially the conflicts over cross border trade.
The EAC’s Industrial Development and Investment Strategy, once fully functioning, will be a firm basis for partner states to harmonise their investment programmes and policies.
A united approach to attracting investment is the way forward for achieving the desired momentum for capital inflows to the region.
Through regional initiatives and projects the EAC is tackling some the challenges of doing business in the region. The East African Railways Master Plan once implemented will open up the region to trade and investment.
But there is clearly an urgent need to strengthen the current Rift Valley Railway action. Much needed energy requirements are due to be addressed through the East African Power Master Plan, the region’s top priority.
Last year the EAC received initial funding from the Investment Climate Facility for Africa (ICF) for an Anti-Counterfeiting project aimed at combating piracy and counterfeit goods in the region.
The EAC is taking the lead on this for Africa, but each country needs to improve its product standards and aspects of the operations of its Standards Bureau.
This project will develop policy and enabling law that will address illegal trading. Intellectual Property Rights Protection is a cornerstone of establishing a more conducive investment climate.
East Africa will also benefit from the first ICF project, the Rwanda Investment Climate Project (RICP) launched last year, to improve the business environment in the country. This project will form the basis for evolving best practices for others to emulate within the EAC framework.
The Way Forward
Investors are following the growing stability of the East African Region with keen interest. More recently, the interest shown by private equity companies towards African assets is a welcome development.
The First East African Investment Conference is therefore a milestone and an opportunity to sell East Africa as a high-profile destination for investment.
The presence of political and business leaders from the region in Kigali will be an excellent opportunity for continued dialogue with international investors on how best to transform the region into a bedrock of foreign investment on the African continent.
Baroness Lynda Chalker is Chairman of Africa Matters Limited, a Trustee and Board Member of the Global Leadership Foundation, a member of the Africa and Nigeria Advisory Councils for Renaissance Capital and a Trustee of the Investment Climate Facility for Africa.