Why Invest in EAC

Posted in Investment Guide

Human Capital: The EAC region has sufficient human capital to support new and existing businesses in the EAC with high quality, innovative and skilled human resource at all levels. The EAC has also established institutions to leverage the community as a regional human capital hub. These institutions include the Inter-University Council for East Africa and the East African Science and Technology Commission. The Inter-University Council for East Africa coordinates the harmonisation of higher education and training systems in East Africa, facilitates their strategic development and promotes internationally comparable standards and systems to ensure high quality human capital development necessary for developing and implementing investments. The East African Science and Technology Commission assists in coordination of the development and implementation of Science, Technology and innovation investment initiatives. All these efforts are aimed at consolidating the EAC as a regional human capital hub. 

Natural Resources: The region has an abundance of resources such as its rich diversity of wild life, fresh water masses, marine waters, rolling grasslands and other magnificent physical features.

• East Africa is home to two of Africa’s most popular safari destinations - Kenya and Tanzania – along with gorilla encounters in the rainforests of Uganda and Rwanda, and the tropical beaches of Zanzibar.
• The two highest mountains in Africa, Mt. Kilimanjaro and Mt. Kenya are located in the EAC.
• East Africa is also home to the River Nile and its source Lake Victoria, which is the largest lake in Africa and the second largest freshwater lake in the world.

The region is also endowed with a variety of minerals, including fluorspar, titanium and zirconium, gold, oil, gas, cobalt and nickel, diamonds, copper, coal and iron ore. This presents an opportunity for investment and development of the mining industry, which is currently underdeveloped 

Mineral Resources in EAC

^{Source: EAC Vision 2050 and South Sudan Development Strategy} 

Market Size and Access: The internal EAC market has over 174 million consumers, while the Common Market for Eastern and Southern Africa (COMESA) comprises 20 member states with a population of over 460 million. Rwanda, Kenya, Uganda and Burundi are all members of COMESA. The Southern African Development Community (SADC) is composed of 15 member states among which is Tanzania - the only EAC state that also belongs to the SADC bloc. The other EAC Partner States may access SADC market through Tanzania, whereas Tanzania may access COMESA Market through any of the other EAC Partner States. EAC products also access various international markets:

• The European Union (EU) is the largest trading partner of the EAC countries. Exports from EAC countries have had preferential access to the EU market under the Cotonou agreement between the EU and the African, Caribbean and Pacific States (ACP).
• Together with other sub-Saharan African countries, the EAC States also qualify for duty-free access to the US market under the African Growth and Opportunity Act (AGOA), which has been extended until 2025.
• Products from EAC countries can also access various markets in the developed world through the Generalized System of Preferences (GSP), which offers preferential treatment to a wide range of products originating in developing countries.

A brief summary of EAC, COMESA and SADC Markets

Infrastructure: All EAC Partner States have invested heavily in infrastructure development. Thus, the region has a relatively well-established infrastructure to support and sustain investments and businesses. The partner states are committed to continued improvements of all infrastructure for the benefit of investment in the region.

Strategic location: Bordering the Indian Ocean and Somalia on the east, and Ethiopia and Sudan on the north, Central African Republic on the west and Malawi, Mozambique and Zambia on the South, the EAC is strategically located as a regional financial, communication and transport hub. No wonder, it hosts continental offices for several international organisations and multinational companies.

Macro-economic stability: There has been sustained macro-economic stability in the EAC mainly due to effective macro-economic policies. For East Africa Region, inflation, an important indicator of macroeconomic stability, remained in the double digits in 2018, increasing by 0.5 percentage point from 14.0 percent in 2017. In Africa, East Africa continues to lead with GDP growth. In 2018, East Africa’s GDP growth was estimated at 5.7 percent in 2018, followed by North Africa at 4.9 percent, West Africa at 3.3 percent, Central Africa at 2.2 percent, and Southern Africa at 1.2 percent (East Africa Economic Outlook, African Development Bank Group, 2019).

Peace and Security: The EAC is a largely peaceful region. Article 124 of The Treaty for the Establishment of the East African Community recognizes the need for peace and security within the EAC Partner States. The same article spells out wide-ranging approaches for implementation in order to have a stable and secure environment within the region. This kind of environment is geared towards promoting development and harmonious living of the people of EAC. Peace and Security has been acknowledged at EAC level as critical to creation of the right environment upon which regional integration in all aspects can be fostered. Strategies on the control of cross border crime ensure security of persons and goods as they move within the region are continually being developed and implemented. The EAC partner states are all committed to maintaining peace and security in the region 

Political Stability: Five of the six EAC Partner States have had regular free and fair elections for heads of state and other political leaders. These elections have always been endorsed by international observers. South Sudan has also agreed on a Unity government which is planned to take effect from 2020. The EAC integration underpins the commitment and the political will of the EAC Heads of State to the integration process. The treaty establishing the East African Community also acknowledges participation of the private sector and civil society and thus the operational principle for the Community is a people-centred and private sector led integration. The ultimate goal of the EAC regional integration is Political Federation, which is the fourth step after the Customs Union, Common Market and Monetary Union. Political federation will further enhance political stability across the region. 

Export Processing and Special Economic Zones: Each Partner State has gazetted export processing zones (EPZ) and Special Economic Zones (SEZ). EPZ and SEZ across the Partner States focus on contributing to building a strong export-led economic development through industrialization. EPZ and SEZ provide a number of specific incentives for investors operating within them, which include fiscal and non-fiscal incentives, including corporate tax holidays, duty and VAT exemptions.