Why East Africa is attractive to budding entrepreneurs

Parts of East Africa have been crucial to global trade for centuries. Archaeologists have determined that some coastal settlements were part of the Indian Ocean trade network as early as the 7th Century.

Today, the region offers opportunities that go far beyond trade. Investors, particularly those that can make an impact, should find it important to respond to these.

In addition to opportunities in multiple sectors - including agriculture, mining, and tourism - the region has recovered well post Covid-19 and is expected to see a 4.9 per cent average growth this year.

It also has one of the continent's most well-established and best-functioning trade blocs in Africa, the East African Community (EAC).

These factors mean the region has immense potential for any investor with the right approach.

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True regional investing

A good place to start when it comes to understanding the scope of available opportunities in East Africa is to understand what the EAC attracts, especially when it comes to regional investing. Connectivity, for instance?

The EAC bloc represents a market of more than 300 million people in countries with a combined GDP of $923.5 billion (Sh11.5 trillion).

Formed in its current guise in 2000, the EAC launched a common market in 2010, allowing for the free movement of goods, labour, and capital.

This means a business in any of those countries has a much bigger potential market than that which exists within their borders. It also means that they can draw on a much wider labour pool.

These factors are key to businesses and by extension investors. As the EAC continues to evolve - the body has outlined plans for launching a monetary union within 10 years - this will make investments in the region even more compelling.

Return to growth

The investment case will only grow stronger as the region continues to recover from Covid-19.

Before Covid-19, East Africa was the continent's fastest-growing region, with an average gross domestic product (GDP) growth of five per cent.

Additionally, three of the world's top 10 fastest-growing economies in 2020 were in East Africa - Rwanda, Ethiopia and Tanzania.

While Covid-19 and supply chain disruptions had an outsized impact on the region, it isn't immune to global economic pressures such as inflation and product shortages caused by the Ukraine-Russia war.

The region has a young population with a median age of 18.7 years who can form part of the global labour pool.

They are educated, connected and capable of building global, technologically enabled businesses.

Investing for impact

People investing in East Africa can have an outsized impact. For all the region's potential, it still has some way to go before fulfilling it.

Some 35 per cent of people in the region live in extreme poverty.

South Sudan and Burundi have high percentages of people living in extreme poverty, at 85 per cent and 80 per cent, respectively.

This translates to huge potential for investors to make an impact in high-employment sectors such as manufacturing and tourism.

A new El dorado?

While it might be too soon to suggest that East Africa represents a new El dorado, there can be no doubt that there are significant opportunities for investors.

And, while it is important to acknowledge the realities of investing in the region, those opportunities will only keep growing if governments build enabling business environments.