It maybe the unspoken truth but bitter as it is, Eastern Africans will have to bear the bitter taste it spews and concede that the region is falling way too short in attracting foreign direct investments. And that’s never a sign of good things, if you ask any economist. More so considering that the countries in the region have little domestic investment capacity. FDI is as important to them as is their sovereignty.
If ones goes by the latest FDI report by UN Conference on Trade and Development (UNCTAD) UNCTAD REPORT ON FDI – JANUARY 23RD Egypt, Nigeria, Angola and South Africa’s performance from 2010 – 2012 is a vindication to those who hold their economic belief in North, West and Southern Africa.
Don’t shout at me yet. I know many other reports have shown Kenya to be second only to South Africa in attracting FDI on the continent. I know Uganda, with its “newly” proven oil wells has been following Kenya closely in this regards, so does Ethiopia with its massive investment in energy projects. Even Tanzania managed to attract considerable investments as the euphoria for gas reserves spikes.
But, those are just projects counted in numbers. Check the monetary value of the investments and it turns out to be a totally different story. Egypt’s less than 40 projects for example trounce South Africa’s 155 – making the former’s investment value at over $6bn compared to South Africa’s $1.2bn. Yet Kenya, which led its peers in Eastern Africa last year, could only afford 55 projects.
Even worse, most FDI tracking agencies like FDI Intelligence have largely painted a rosey picture by reflecting investment attractions in terms of percentages and not in value. This approach hence disguises underlying shortfalls in economic performance by ignoring the key factor of monetary value.
The FDI Intelligence report for last example shows the number of projects coming to Kenya rose 77 per cent from 2010, pushing it ahead of Nigeria, and Egypt. I guess the rest of the countries in the region including Uganda should be thankful that they were not included in the survey, for, its very misleading.
By and large, most investments coming into Eastern Africa are into the service sector. Its largely banks and support services. Its no-wonder then that Uganda, which has 3nb barrels in oil deposits, is struggling to find financing for its planned billion dollar petroleum refinery. While investor appetite would be expected to be at its peak with oil and gas activity in the region, it seems the money guys are still jittery.
They are waiting for-example to see how Kenya’s election goes next month. How the DR Congo issue is sorted. How South Sudan and Sudan peace talks end. How Tanzania and Malawi settle their boundary quarrel. And with Meles Zenawi gone, how Ethiopia’s transition holds amid Eritrean and Somali chaos.
In contrast, South Africa, Nigeria and Angola continue to rack in billion dollar FDIs because its obvious investor confidence in the countries is high. South Africa has its polital bearing sorted so they are opening up more and more mines. Egypt, with all its chaos capitalises on the change and freedom the Mursi era brings. There is nothing to worry Edwardo Dos Santos’ Angola, not since Jonas Savimbi’s UNITA met its fate – even the Cabinda enclave separatists just hot for the sake of it. While Nigeria, with all its Boko Haram has cemented its spot as Africa’s top investment destination, with its millions of increasingly resourceful people.
Does anyone think the licensed oil companies like Dominion which have been selling oil blocks held in Kenya and Uganda are doing it for the sake? Is it speculation? Yes, speculation is part of the game in the oil and gas industry but it could be a sign of things worse. May be they’re afraid of getting stuck in it. Maybe not. But who knows? Seeing as governments are spending much of their time drumming up the oil and gas dream – yet ignoring other sectors which could attract the much important FDI in the short-term.