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Ten niche sectors with huge investment potential in East Africa

By Barry Silah
Tuesday, May 25th, 2021 00:00 | 4 mins read
Geothermal energy. Photo/Courtesy

Following the adoption of the East Africa Community Industrialisation Policy and Strategy in 2011, the region identified six strategic industries  in which the region holds potential comparative advantage. With the recent renewal of trade pacts between Kenya and the United Republic of Tanzania, efforts to refocus trade and investment towards these key sectors.

Agriculture

Accounting for about 36 per cent of Gross Domestic Product (GDP) in the EAC economy, the agriculture sector still remains largely untapped.

Opportunities for large-scale commercial farming exist in the region for a wide variety of food and cash crops.

The key investment opportunities in the sector can be found in fisheries, cotton, livestock, tobacco, and coffee farming. However, experts says that the key to sector growth lies in a shift from subsistence, to commercial farming.

Energy

Modern sources of energy are essential for socio-economic development, and such investments in are crucial in realising universal energy access in Africa.

In this regard, the region has embraced regional cooperation as a means of developing markets and attracting more energy investments in East Africa as a pool.

Market reforms have also been experienced at both the national and regional levels, and liberalisation has been embraced as a means of attracting energy investments in East Africa. The sector is currently being driven by clean energy initiatives.

Infrastructure

Most countries in East Africa are seeking to invest in so-called large-scale infrastructure projects with the support of national and international development programmes.

These capital intensive investments are the basis for the effective implementation of Agenda 2063, but to do so, countries must increase their finances in the field of technology, science, and innovation to ensure continuous and inclusive growth.

The development and expansion of the infrastructure make countries more attractive for foreign companies.

Oil and gas

To understand the sector’s potential, the EAC organizes the East African Petroleum Conference after every two years.

Among resolutions made include the need to develop the partner states to harmonise policies and legal and fiscal regimes pertaining to petroleum exploration.

In Burundi, recent seismic and magnetic surveys have indicated that there may be oil under Lake Tanganyika and the Rusizi river plam. Kenya’s petroleum potential lies in four sedimentary basins: Anza, Mandera, Tertiary Rift and Lamu.

In Rwanda, there is hydrocarbon potential existing in North Western Rwanda and deep under Lake Kivu.

In Tanzania, significant gas discoveries have been made on the coastal shores of Songo Songo Island and Mnazi Bay. In Uganda, a number of mining companies have taken up licenses in the mining sector and will soon start exporting oil.

Mining of minerals

The EAC countries are richly endowed with a variety of mineral resources. Burundi is well endowed with deposits of nickel, vanadium, cassiterite, Colombo-tantalite, gold, and uranium.

Kenya has four belts of minerals - the gold greenstone belt in western Kenya, which extends to Tanzania; the Mozambique belt passing through central Kenya, the source of Kenya’s unique gemstones; the Rift belt, which has a variety of resources including soda ash, fluorspar and diatomite; and, the coastal belt, which has titanium.

Tanzania has a wide variety of minerals including diamonds, gold, base metals, and gemstones while Uganda also has a variety of mineral resources including copper, cobalt, tin, iron ore, tungsten, beryllium, limestone, phosphates, and diatomite.

Tourism

The region envisions nature-based tourism revenue is a pillar of the future economic development of their respective countries.

Kenya Vision 2030 views tourism development as a key pillar for national development, and a mechanism to alleviate poverty, generate foreign revenue for the government and contribute to wildlife conservation, a key support base for tourism activities.

The East African Community partner states (Kenya, Uganda, Tanzania, Rwanda and Burundi, and recently South Sudan) have continued to strengthen their cooperation in Tourism and Wildlife sectors.

Task forces have been formed to develop a work plan for the study and piloting of a single tourist visa to spur growth in the sector.

Housing and Construction

African’s construction industry is the target of firms from large economies. This is because of accruing benefits and the availability of huge investment opportunities in energy and infrastructure, cheap labour, and a fast-growing consumer market.

There is also a beneficial business environment that includes favourable economic development policies and rising commodity prices.

As a region, East Africa has the largest number of recorded projects with 139 projects. The projects included are spread over 43 of Africa’s 54 countries.

Information and Communication Technology

The information and communications technology (ICT) sector has been the major driver of economic growth in East Africa over the last decade, growing by as much as 40 per cent.

To date, growth has largely come from innovation by large multinational and local enterprises. Small and medium-sized enterprises (SMEs) are poised to play a bigger role in the next phase of industry growth. However, they face a multitude of system-wide challenges that must be overcome in order for them to succeed.

This sector has witnessed an annual compounded growth rate of 40 per cent within the last five years, the fastest globally.

Mobile telephony dominates the sector, far outstripping any other mode of connectivity excluding, perhaps, radio, and newspapers.

Finance

The Partner States are harmonising their banking acts so as to eventually integrate their financial systems.

Investment potential exists in establishing commercial banks as well as other services like brokerage, investment consultations, asset valuation, sales and bank assurance, asset management, real-estate financing, lease finance, agricultural finance and advisory services.

The rapid growth of the informal sector offers opportunities in the provision of credit and related services.

Demand for insurance services has also risen. The East African Securities Regulatory Authority is helping member states develop capital markets institutions facilitates exchange of information to help enforce laws and regulations in the different countries.

Manufacturing

Despite the setbacks caused by the Covid-19 pandemic, the manufacturing sector in East Africa still offers investment.

Packaging and the circular economy are said to be the biggest areas of interest areas. In Kenya, for example, plastic carrier bags were banned in 2017 and the government is working on an extended producer responsibility (EPR) scheme, currently in draft format.

Manufacturing Africa’s data shows that the assembly of TVs and fridges is emerging as an untapped opportunity, specifically in Kenya.

This is because of the size of the potential market estimated to be in excess of $170 million or (Sh17 billion) with margins ranging between 10 per cent and 15 per cent.

There is also limited local competition with only two local assemblers in the country.