Ethiopia's foreign direct investment (FDI) has experienced a troubling decline, while Uganda has witnessed a record-high inflow of investments and Kenya has seen a remarkable surge.
Ethiopia, once a promising investment destination, has faced a sharp drop in FDI over the past three years from over three billion dollars to 600 million dollars.Â
Ernst and Young's Africa Attractiveness Report 2023 reveals that the number of FDI projects in Ethiopia dwindled from 34 in 2019 to a mere five in 2021, with a slight increase to six in 2022.
Various factors contribute to this decline, including the lingering impact of the COVID-19 pandemic, the Russia-Ukraine conflict, and internal security concerns.
Compounding these challenges are Ethiopia's removal from the African Growth and Opportunity Act (AGOA), high inflation rates, foreign exchange restrictions, and mounting debt.
Nevertheless, the Ethiopian government has introduced incentive packages to entice investments, with notable interest from the United Kingdom, particularly in the telecoms sector.
Meanwhile, Uganda has experienced a significant upswing in foreign investments.
Despite a recent decline in FDI, the country attracted a record-high inflow of over $10 billion in 2022, the highest among East African nations. This surge in investment has led to the creation of more than 6,300 jobs.
France emerged as Uganda's leading investor, focusing primarily on the oil and gas sector. Notably, France's TotalEnergies and China National Offshore Oil Corporation (CNOOC) signed a monumental $10 billion deal with Uganda and Tanzania to develop crude oil production.
Additionally, Kenya has made strategic investments in Uganda's consumer sector, contributing to the country's FDI growth.
Looking at the broader East African region, a total of 114 projects were recorded in 2022, attracting a capital investment of $14.5 billion and generating approximately 22,000 jobs.
Kenya stands out as the largest FDI destination, with 63 projects amounting to $2 billion in capital investment and creating 7,819 jobs.
Key sectors driving Kenya's FDI growth include business services, technology, and transportation and warehousing.
The United States has emerged as the leading investor in Kenya, with 14 projects valued at $748 million and creating 3,764 jobs.
Notably, a pharmaceutical project from the U.S. garnered the largest capital inflow and generated the most FDI-related jobs in Kenya.
