East Africa’s in­vest­ment poli­cies hurt­ing for­eign in­flows into re­gion

FDI into the re­gion is down three per cent to $7.6b from the pre­vi­ous year

The East African - - BUSINESS -


East African coun­tries’ in­creas­ing re­stric­tions on for­eign in­vest­ments are be­ing blamed for the de­cline in for­eign in­flows into the re­gion.

A new sur­vey by the Usbased ad­vi­sory firm AT Kear­ney shows that in­vestors are more con­cerned about the op­er­at­ing en­vi­ron­ment in emerg­ing mar­kets and pre­fer putting their money into the US econ­omy due to the coun­try’s large do­mes­tic mar­ket, im­prov­ing eco­nomic per­for­mance and new, lower cor­po­rate tax rate.

For­eign di­rect in­vest­ment into East Africa — the fastest-grow­ing re­gion on the con­ti­nent — de­clined three per cent from the pre­vi­ous year to $7.6 bil­lion, ac­cord­ing to the sur­vey.

Last year, an Aus­tralian min­ing com­pany, Orecorp, an­nounced plans to re­view its op­er­a­tions in Tan­za­nia af­ter the coun­try re­vised its min­ing laws to en­able the gov­ern­ment to rene­go­ti­ate all min­ing con­tracts.

The US Agency for In­ter­na­tional De­vel­op­ment says for­eign in­vestors seek­ing to in­ject cap­i­tal into the re­gion are fac­ing reg­u­la­tory and pol­icy re­stric­tions, that have re­duced their ap­petite for putting money into in the six-mem­ber eco­nomic bloc.

For ex­am­ple, in South Su­dan, all busi­nesses es­tab­lished by ex­pa­tri­ates must be 31 per cent owned by lo­cals while Tan­za­nia dis­cour­ages for­eign in­vest­ment in sec­tors such as tele­coms, min­ing, ship­ping, fish­ing and civil avi­a­tion by im­pos­ing in­vest­ment ceil­ings and dif­fi­cult li­cens­ing re­quire­ments.

In ad­di­tion, for­eign in­vestors are forced into com­pul­sory ac­tions, in­clud­ing forced joint ven­tures, manda­tory use of lo­cal in­puts and staff and con­di­tions for hir­ing for­eign staff.

The US agency, in its

Pic­ture: File

For­eign com­pa­nies op­er­at­ing in Tan­za­nia’s min­ing sec­tor are re­quired to pre­serve 30 per cent share­hold­ing for the cit­i­zens.

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