East Africa is fast emerging as an important investment destination going by the recent Foreign Direct Investments (FDI), according to the 2014 Africa attractiveness survey by Ernst & Young.
Four East African countries were ranked in the top 10 countries by FDI projects in 2013, showing the regions increasing attractiveness among investors. FDI projects into the region increased by 7.4% in 2013 compared to the previous year, second only to West Africa which registered an improvement of 20.5%.
Also for the first time, the region overtook North Africa in terms of FDI projects. The region that includes Kenya, Tanzania, Uganda, Rwanda and Burundi accounted for 17% of FDI projects flowing into sub-Saharan Africa between 2007 and 2013, which according to the survey have grown at a Compounded Annual Growth Rate (CAGR) of 23.4%, the second highest in Africa.
East Africa’s main attraction lies in its growing market potential which is made up of 210 million people, an improving economic environment, infrastructure development, political stability, ongoing integration through the East African Community (EAC) initiative and the recent discoveries of gas and oil.
Rising disposable incomes have seen financial services, retail and consumer products (RCP) and technology, media and telecommunication (TMT) become the three most targeted sectors in the region. Banks have seen the usage of their mobile phone services by their more than 50 million subscribers increase more than six-fold in the past five years, making East Africa the world’s fastest-growing market. Notable investor countries include Kenya, United States, Britain and India. Kenya leads the pack as the biggest investor increasing its investments by 9.5% in the 2012-13 period according to investment specialists fDi Intelligence.
Kenya, being the biggest economy in the region, has naturally seen plenty of interest directed its way. The country attracted the second-highest number of FDI projects last year behind South Africa. In addition, FDI projects into the country have been increasing at a CAGR of more than 40% in the past seven years. With such high interest, it’s not surprising that Nairobi is home to some of the biggest international organizations such as HSBC, Bank of China and IBM. The latter even established its first African innovation hub in the capital, further shoring up the city’s status as a telecommunication hub.
The attractiveness survey that tracks FDI in the region shows Nairobi’s share of FDI projects in Africa has increased fivefold from just 1.5% in 2007 to 7.5% in 2013. Nairobi is now listed third as the most attractive city to do business in sub-Saharan Africa.
Tanzania is not far behind, especially following its recent natural gas discoveries. The country, which also ranks as Africa’s third largest gold producer, has seen FDI projects grow at a CAGR of more than 23% in the past seven years which is impressive considering its need for more infrastructure. Dar es Salaam is set to become Africa’s fifth-most populous city in Africa by 2030 and will see the greatest expansion of middle class households with incomes between $5,000 and $20,000 every year by 2030.
Uganda which debuted in the ranking of the top 10 countries in 2013 also grew its FDI projects by more than 20% since 2007. Recent oil discovery may keep the momentum of double-digit growth for a long time to come. Neighboring Rwanda has equally enjoyed impressive growth in the past few years underpinned by huge investments in IT infrastructure – the country laid fiber-optic cables covering the whole country in 2010 – and increasing ease of doing business, which has seen the country ranked 32nd on the World Bank’s Doing Business rankings in 2014 and third in sub-Saharan Africa for its favorable business environment.
The remarkable progress in FDI inflow shows the improving perception toward the region. Ongoing work toward a common currency by 2023, together with the plans to make the region operate as a common market, should further boost East Africa’s attractiveness in the coming years.
Already the common market protocol which came into force three years ago, and set to be fully implemented by 2015, is expected to achieve the four freedoms – free movement of people, goods, services and capital within the region.
This should help grow East Africa’s intra-regional investment and encourage regional integration. With such progress, it’s undoubtable that the future is bright.
Cryptocurrency for Africans
George Gordon is on a quest to revolutionize the financial system. The director of Africa Master Blockchain Company talks digital currencies, blind risks and board games.
What is this new African cryptocurrency you are offering?
Where the majority of current digital currencies are based on speculative models, AfriUnion Coin (AUC) and the AfriNational Tokens (ANT)are designed for a transactional purpose allowing international payments, remittances, foreign direct investment as well as day-to-day transactions at local retail stores and other outlets. While the option for speculative trade is available with AUC, the focus is not around that.
Each African country will have a specially-designed ANT which will allow users to pay for goods and services and bills easily through completely digital means without requiring any bank account. AUC and ANT will be fully interchangeable to one another and there will be no fees for the user.
It’s the natural next step for digital finance from mobile banking which most Africans are accustomed to. The ability to freely have the power to send and receive money locally and internationally will allow the freedom of choice and spending power many Africans don’t have currently.
What is your own investment philosophy?
I am a gambler! I believe in taking risks and putting things on the line. That being said, blind risk or whimsical guesses don’t get you very far. Always acquire enough information to understand to a reasonable level what the thing you are planning on investing is or how it works and then trust your instinct and gut feel.
What advice would you give entrepreneurs wanting to invest in blockchain?
First, do some research in terms of what the blockchain technology is being applied for or created in terms of its application to an industry or project. Thereafter, check the white paper for the design of the platform as well as its functionality and applicability to what it is trying to achieve. If it aligns with your personal investment rules, then go for it,however, remember that blockchain is continuously evolving and thus you need to explore outside the usual and standard.
First cash-less, now card-less. What is the future of online banking?
If we are looking into what is currently science fiction, I would say the future is digital contact lenses that will be able to connect you to all your social media accounts, internet, news as well as make payments by just looking at QR codes or specialized barcodes to approve and accept payments.
Now, realistically we are not far off from such innovation and technology, but for the time being, I think the next step is scanning of QR codes at retailers and having the transaction automated from your wallet to the retailers digitally.
What is your most prized investment and why?
My mind. I believe that the work I have put into developing my mind, and continue to do so every day, is the number one investment that I have ever done. It allows me to look at things in a unique perspective as well as provides me with the tools to push boundaries and create new opportunities.
Money, success, fame? Which is most important to you?
I would have to say success… because it is most likely going to bring the other two as well, right? But success in the form of starting something and letting it grow and succeed and knowing that something new exists because of your efforts.
What do you spend your money on mostly?
Board games. I love board games and believe it’s a fantastic way to expand your mind as well as have fun with friends.
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King Price Insurance’s CEO Gideon Galloway, who built an insurance company in South Africa worth over $226 million in six years, talks investments, industry trends and how self-driving cars will change the entire car insurance landscape.
Offering The American Dream
Gar Lippincott and Daniel Ryan of Atlantic American Partners were in South Africa recently looking for high-net-worth individuals wanting to invest in the US.
It’s a warm spring day in September, and Gar Lippincott and Daniel Ryan have just arrived in South Africa. It is Lippincott’s first time in the country, and he is jet-lagged.
A little over two months ago, he was booked to fly here from the United States (US) but was turned back at immigration.
“At Atlanta airport, the lady looked at Daniel’s visa and let him through and she looked at my visa and she said ‘I am afraid you can’t get on the plane because you have to have a blank page on your passport’. I said ‘I have three blank pages’ and she said ‘no, it’s supposed to be the one that says visa on it’. She said it’s the rules in South Africa so I had to sadly go back home… now when I was coming, I was told that’s not an issue anymore so I am happy they have made traveling into the country easier,” says Lippincott.
With a brand-new passport, he’s here with Ryan looking for people who want to invest in the US in exchange for a green card.
Lippincott, the Managing Partner of Atlantic American Partners, says he has always been keen on South Africa for its growth opportunities and prospects.
“From what I understand, the things that are causing short-term decline in the economy in South Africa are set up to provide long-term growth and hopefully people will understand this,” he says. Ryan, the company’s Managing Director of Emerging Markets – Africa, agrees: “I lived in Malawi for 12 years and South Africa is still considered the shining one throughout the continent. Even with all the problems, everyone still wants to come here because of the opportunities.”
According to an AfrAsia Bank report, South Africa comes second to Mauritius in boasting the highest number of high-net-worth individuals.
These are the kind of people Ryan and Lippincott target through their work at Atlantic American Partners. The company has real estate investors and professional private equity fund managers that manage money for banks, insurance companies, and pension funds. In addition, they help people get US green cards and ultimately US citizenship through the US government’s EB-5 Immigrant Investor Visa Program.
“Basically we look for people who want to move to the United States and we help them do so legally by investing and the nice thing is, with our program, they are also able to get a nice return on investment,” he says.
According to Lippincott, for a $500,000 investment that creates 10 jobs for American workers, you could get a green card in about two years and be a US citizen in about six or seven years. “Twenty seven countries have an investor visa program but with most of them, it’s essentially a fee you pay, or you need to be actively engaged in the day-to-day operation of a business. For example, you invest $1.5 million in Australia, but you need to hire employees and generate a certain amount of revenue. One of the biggest advantages with our program is you actually invest the $500,000 into a fund. We act as a trustee of that money and within five to seven years, they get that money back with a bit of return on investment and you are a permanent citizen in the US.”
Atlantic American Partners invests the money in real estate developments like hotels, apartments and student accommodation.
“What’s nice about the program is it doesn’t only cover the investor; it covers the spouse and children under 21. Our biggest family was a Hungarian family with seven children so they got nine green cards for $500,000,” says Lippincott.
The company says it has had positive response in South Africa. “Two months ago, we were here and we had scheduled six presentations for 100 people and we ended up speaking to 450 people. Most were business people, people worried about the economy, people worried about the political future of South Africa and people concerned about the education future of their children,” says Ryan.
According to Lippincott, despite the news of the clampdown on immigration, the US economy is booming and will perish without immigration. In the era of Donald Trump and his anti-immigrant views, that’s heartening news indeed.
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