Investing in Eastern Africa: opportunities and challenges

Abstract

The economy of the Eastern Africa region experienced a strong GDP growth before the outbreak of the Covid-19 pandemic. For instance, the annual average growth over 2000-2019 was 6.1% and -0.7% in 2020 with Covid-19’s impact. Like the world and the African continent, the economy of the region is expected to rebound in 2021 with projected real GDP growth of 3% and to continue to grow in 2022 at a pace of 4.1% (UNECA, 2020). The structure of the economies in the region is a function of the country: some countries such as South Sudan and DRC are “resource-rich” countries, with their economies highly dependent on natural resources, whereas the economy of the island Seychelles is driven by tourism. For the island Comoros, its economy depends on tourism and remittances from its diaspora. The region has several areas of strength and has several investment opportunities for attracting more investment, particularly FDI flows to foster its industrialization and development. These include, among other things, the large size of its internal market made of 437 million potential consumers, the strong economic growth prospect, as well as the region being rich in natural resources ideal for agriculture, mining, and tourism. There are also huge investment opportunities in the manufacturing, infrastructure, and service internal market sectors. The main recommendations from this study are summarized. They are intended to help the countries in the region implement measures and action plans that would help them address the main challenges they are currently facing to benefit from AfCFTA and its investment protocol implementation.