2019 forecast of political and security risk for sub-Saharan Africa. PHOTO | RISKMAP
Efforts by East Africa Community member countries to attract
foreign investors are being hampered by corruption, insecurity,
unfavourable regulatory environment and a slow regional integration
process.
Although some countries in the region have
improved significantly on the ease of doing business ranking, foreign
investors seeking opportunities in the region remain apprehensive due to
the existence of factors that bring about uncertainties.
Because
of these, many companies, particularly in capital intensive sectors
like mining, oil and gas, manufacturing and building and construction
are being forced to adopt a cautious approach when it comes to investing
in the region.
Corruption, in particular, is a major
concern because investors often want to know if they must pay bribes to
get licences and do business.
Countries in East Africa
have repeatedly been ranked among the most corrupt by Transparency
International, with Kenya ranking at position 143 out of 180 countries
in the 2017 index.
Tanzania was at position 103,
Uganda 151, Burundi 157 and South Sudan 179. Only Rwanda has managed to
contain corruption at position 48.
Other challenges
Insecurity,
including terrorist attacks in Kenya, conflicts in South Sudan and fears
of unrest during election cycles, is also a major concern for foreign
investors, some of whom have been forced to shelve plans of coming to
the region.
“Corruption is a major issue across East
Africa and investors often ask whether it is manageable,” said Daniel
Heal, Control Risks senior partner, East Africa.
The
good news for Kenya, which has been victim of numerous terrorist
attacks, is that while they distract people and forces government to
divert resources to fight the terrorists, they have minimal impacts on
economic growth.
The problems facing investors are
compounded by unfavourable policies and regulations, some of which
compel foreign companies to bring on board local shareholding and list
on stockmarket to operate in the region.
Investors’
concerns are evident given the fact that foreign direct investment into
region declined by three per cent to $7.6 billion last year according to
a survey by US-based advisory firm AT Kearney.
Despite
concerns over the EAC’s investment environment, the fact that the
region is among the fastest growing averaging six per cent is a source
of optimism going into the future.
According to Control Risks, which has just released its RiskMap2019,
Kenya and other African countries can leverage financing for
infrastructure development from multiple partners as the economic
rivalry between the United States and China intensifies.
RiskMap2019 is a publication forecasting political and security risk for business leaders and policy makers across the globe.
“So
far, the US-China rivalry has played out less visibly in Africa than on
other continents. Support for China or the US has not emerged as a
defining issue in African politics with most countries keen to pursue
closer ties and seek financing from both sides rather than falling
neatly into one camp. In 2019, we might see this changing,” said Mr
Heal.
He added that this year, the US will seek to
rival China in development finance in the continent, leading into a more
concerted US commercial strategy.
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