Economy rebound fuels optimism on FDI flows

Citi’s Joyce-Ann Wainaina. FILE PHOTO | NMG

By CHARLES MWANIKI
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Summary

• Citi head of global subsidiaries in sub-Saharan Africa Joyce-Ann Wainaina said in a media summit last week that while the pandemic has tested resilience across all companies, they have responded by accelerating digitisation.
• East African firms also derived some fiscal breathing space during the pandemic due to low oil prices, which helped protect their balance of payment positions at a time when inflows were hampered by global travel and trade restrictions.

Foreign investment inflows by multinationals are expected to remain healthy in Kenya and East Africa despite the economic hiccups caused by the Covid-19 pandemic, buoyed by a growing middle class and a young, tech-savvy workforce.

Citi head of global subsidiaries in sub-Saharan Africa Joyce-Ann Wainaina said in a media summit last week that while the pandemic has tested resilience across all companies, they have responded by accelerating digitisation and moving to consumer-focused models to keep supply chains growing.

East African firms also derived some fiscal breathing space during the pandemic due to low oil prices, which helped protect their balance of payment positions at a time when inflows were hampered by global travel and trade restrictions.

This has helped to protect the competitiveness of the region in attracting foreign investments, which in recent years has gone up due to good economic growth and improvements in infrastructure.

“The region is still attractive for foreign direct investments, with a population that is of relatively low age, is digitally savvy and with a growing middle class. This (FDI) will continue to grow,” said Ms Wainaina.

The regional countries, especially the ocean facing ones, have been investing heavily in interconnecting infrastructure such as roads and railways and power connectivity in a bid to attract investments.

Tax incentives have also helped attract investors, although there is a push to roll some of the rebates to shore up revenue performance to cut fiscal deficits.

The last two years have, however, not been without challenges, especially due to the Covid-19 pandemic, which reduced appetite for new investments globally as many firms adopted a wait-and-see attitude.

FDI flows into the country were projected to decline by as much as 40 percent last year by UNCTAD in the face of Covid restrictions.