East African Business Week (Kampala)
22 October 2007
editorial
One of the main stories in this issue of East African Business Week is Tanzania's continued good performance in attracting Foreign Direct Investment (FDI) courtesy of its booming mining sector.
Figures from the latest World Investment Report 2007, which tracks the 2006 performance indicate that Tanzania attracted FDI amounting to US$377 million, because of huge inflows into the mining sector.
Uganda also performed well (second to Tanzania in regional rating) with FDI values of US$307 million, a 19% growth from the 2005 figures.
Infact, the report put both Uganda and Tanzania among the top 10 major recipients of FDI in Africa. In declining order they include Sudan, Equatorial Guinea, Chad, Tanzania, Ethiopia, Zambia, Uganda, Burundi, Madagascar and Mali.
Uganda's 19% jump in FDI inflows from $257 million in 2005 to $307 million in 2006 was partly a result of investments from Australia in the oil industry. Other notable sources of FDI for Uganda were recorded from Egypt, India, Kenya, South Africa and the United States of America in services and agro processing.
According to Uganda's investments state minister, Professor Semakula Kiwanuka, a power shortfall, experienced over the last two years has curtailed additional inflows.
Burundi, considering that it is just coming out of economic and political ruins did well with estimates putting inflows at $290 million while Rwanda, which one would say is now on a steady path to development ironically scored a miserable $15 million.
The interesting one was the region's super power--Kenya that ironically got $51 million in FDI.
Begining with the Kenya and Rwanda scenarios, there are two issues that we would like to raise to your attention.
One: that incraesed FDIs are a sign of growth but not necessarily a sign of development. Kenya's FDI is low but the country has also been cited a mong the top investors in East Africa.
Rwanda's FDI may be low, but that could be a result of deliberate efforts by the Kigali authorities to filter in only investors who trully invest in meaningful ventures.
Uganda and Tanzania may have good figures, but the two countries need to re-asses the type of investments they have recorded.
FDI is a beatiful idea if well implemented, but can be disastrous if quark investors are allowed to come and spoil the economies.
Another worrying trend in the report was that out of the $36 billion (a new record level) that Africa attracted in terms of FDI as a continent, East Africa accounted for a paltry $1.04 billion.
The good news though is that the report notes that of the $36 billion worth of FDI inflows, more than half of those investments have gone into the extractive industries.
The report also noted that Transnational Corporations (TNCs) in the telecommunications sector have also started to invest in least developed countries (LDCs) with Uganda having licensed two new players.
EAC countries need to study this report and re-examine their FDI strategies in-depth.
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