Sentiment Around Investing in East Africa Wanes
At the beginning of 2020, few developing world regions excited as much attention as East Africa. Driven by a resurgent Kenyan economy, the promise of economic liberalisation in Ethiopia and the possibility of vast oil production in Uganda, investors were flocking to the region in the hope of taking advantage of bold new opportunities. A year later, that picture looks very different. Ravaged by a war in Ethiopia, dubious elections in Uganda and Tanzania, and a second wave of the coronavirus, the region has become emblematic of Africa’s struggles. Despite the destabilising forces, the World Bank has projected that it will remain the continent’s fastest growing region in 2021, alongside Southern Africa, with growth of 2.7%, but for some the shine has already worn off. For many investors, Ethiopia remains “no big deal yet”, says Charlie Robertson, Africa economist at Renaissance Capital. Foreign investment in the country slumped to $2.5bn in 2019, from $3.3bn in 2018, according to UNCTAD’s World Investment Report 2020. The IMF projects zero growth for the country in 2021. Kenya, the region’s most developed economy, has also been badly hit by the pandemic. GDP growth declined from 5.4% in 2019 to 1.5% in 2020 and is projected to rise back to 4.7% this year, according to the IMF.