To woo more investors, EA states should keep sprucing up policies

Kenya and Tanzania have in the recent past initiated a welcome alignment of purpose and fresh energy to make the region investor-centric and encourage the harnessing of opportunities in industries with the potential to scale and contribute significantly to creating employment and expanding the economies of East African countries.

The launch of the Kenya Investment Policy and the Country Investment Handbook in Nairobi, and the cotton and apparel sector stakeholders meeting in Dar es Salaam represented positive signs on what can be achieved when clear policy guidelines encourage increased foreign and domestic investments in a range of industries.

This alignment has never been more urgent. Kenya is going through a very difficult economic phase, with the corporate sector shrinking operations to manage costs. Jobs are being shed in Tanzania as well as in Uganda. Desperation is setting in, with potential to cause social unrest.

Few industries have much potential for employment and economic expansion as those in the cotton, textile and apparel sector.

This sector, in many ways, represents the industry of the future as it contains all the greatest potential to create employment and grow economies in the region.

It is the industry that in the 1980s produced in excess of 70,000 bales; supplying the domestic textile industry, which comprised of 52 textile mills and employed over 42,000 people.

Uganda was producing close to 200,000 bales even earlier than this, which had shrunk to just over 30,000 bales by end of 2017. Both political and management related issues caused the decline.

But there is renewed hope. With costs of production becoming increasingly higher in traditional apparel and garments source markets—mainly China, East Africa is becoming a favoured alternative for big global brands. Ethiopia is already trailblazing in this by providing the kind of incentives that investors appreciate—fully serviced industrial parks, tax breaks, etc.

There is a further incentive offered to countries of East Africa through tax breaks like that offered under the African Growth and Opportunity Act (Agoa), and the Everything but Arms rebated duty access to the US and the EU countries.

This opportunity is prompting welcome action from governments. In Uganda, the cotton, textiles and apparel sector strategy has been completed and will be mainstreamed in the third National Development Plan to be launched next year. The strategy recommends a raft of proposals including creation of a strategically placed focal point that will drive the strategy implementation process.

Other recommendations include the need to build fit-to-purpose industrial parks that will attract millers into the market, improve communications to facilitate speed-to-market movement, develop a comprehensive marketing plan for Uganda as a destination and reduce and harmonise the cost of energy.

Kenya is prioritising the sector as one of the key drivers of the manufacturing pillar under the Big 4 Agenda economic blueprint. The manufacturing pillar is expected to create 800,000 new jobs by 2022.

A key recommendation in the Kenya Investment Policy is the formation of a National Investment Council to be chaired by the president and on which will sit all the key ministries and agencies that make critical investment decisions.

The council will streamline the execution of key decisions and accelerate the resolution of problems that may hamper completion of projects. It is expected that such an initiative should boost the already significant attraction Kenya holds for investors and increase the flow of Foreign Direct Investment and Domestic Direct Investment.

There are significant efforts being made to revive the apparel and textile sector, including the reopening of the Rivatex factory in Eldoret and plans to open the Kicomi in Kisumu.

What the East African region needs is an investor-centric environment that accommodates the interests of investors right across the value chain—from the point of entry all the way to sale of goods.

Kenya and East Africa generally must embrace the need to become investor-centric and continually improve the investor environment.

Tom Mshindi is managing partner at Blue Crane.