Kenya's Manufacturing Sector Defies Overall Economic Slowdown
Shikana Group
Leading legal and investment advisory firm specialized in foreign investments in Africa.
I. INTRODUCTION
Welcome to Shikana Group's weekly round-up on East African business. Our newsletter covers key developments in Tanzania, Kenya, Uganda, Rwanda, Burundi, and DR Congo.
Today, we focus on economic resilience, digital transformation, and infrastructure development across the region.
II. TREND OF THE WEEK
The EAC is seeing a surge in renewable energy investments. Kenya, Tanzania, and Uganda are leading this trend, with several large-scale solar and wind projects underway.
In Kenya, the Lake Turkana Wind Power (LTWP) project, Africa's largest wind farm, is now at full capacity, generating 310 MW of clean energy that is enough to supply one million homes.
Tanzania has recently signed a USD 374 million deal with the International Finance Corporation (IFC) and nine others to develop a 100 MW wind farm in the Singida region. Uganda, on the other hand, is expanding its solar capacity with the 20MW Kabulasoke solar power plant now operational.
This shift towards renewable energy is driven by the region's abundant natural resources, decreasing technology costs, and a growing commitment to sustainable development.
The trend is reshaping the energy market by creating jobs and attracting foreign investment. It also addresses the persistent challenge of power shortages, potentially encouraging industrial growth and improving living standards across East Africa.
III. TOP HEADLINES
Here is everything you need to know about what happened in the EAC during the second week of September 2024.
TANZANIA
1. UHC, Infrastructure Development On Track
Tanzania has launched a new universal healthcare law, providing health insurance to all citizens and foreign residents. The Tanzania Insurance Regulatory Authority(TIRA) is overseeing the program's implementation, which began in August 2024.This move aims to improve public health while stimulating economic growth.
The government is running public awareness campaigns to increase understanding and acceptance of health insurance. Only 32% of Tanzanians currently have health insurance, according to the Ministry of Health. The new program aims to cover70% of the population by 2026.
In parallel, Tanzania is actively seeking foreign investment in infrastructure and natural resources. The country is collaborating with international partners on the Lobito Corridor, a transcontinental railway project. The project has already attracted over USD 3 billion in investment and is expected to support regional trade.
2. China Pledges $50 Billion Investment as Nickel Project Advances
President Samia Suluhu Hassan's efforts to position Tanzania as a strategic partner for China in Africa have yielded results.
At the recent Forum on China-Africa Cooperation (FOCAC) summit in Beijing, Chinese President Xi Jinping announced a USD 50 billion investment pledge to African nations over the next three years, with Tanzania expected to be a major beneficiary.
This investment aims to strengthen infrastructure, industrialization, and trade development in Tanzania. President Hassan highlighted Tanzania's readiness to serve as a model for socio-economic innovations facilitated by Chinese investments. That could potentially position the country as a key player in China's broader African strategy.
In a parallel development, Lifezone Metals Limited has initiated the project financing process for the Kabanga Nickel Project in Tanzania. This project is set to play a crucial role in meeting global demand for nickel, particularly as industries transition towards electric vehicles and renewable energy solutions. We expect the advancement of this important mining project will contribute positively to Tanzania's economy and create new job opportunities.
Meanwhile, Tanzania's government continues its focus on improving governance and combating corruption. The Prevention and Combating of Corruption Bureau (PCCB) reported saving approximately TZS 15.5 billion (about USD 5.7 million) from various development projects through its oversight efforts. This includes numerous investigations and cases brought before the courts. That reflects on going efforts to improve transparency and accountability in public service management.
These updates collectively demonstrate Tanzania's proactive approach to attracting foreign investment while addressing internal governance challenges. The goal? Sustainable economic growth.
KENYA
3. Private Sector Contracts as Manufacturing Shows Resilience
Kenya's private sector faced challenges in September 2024, as shown by the Stanbic Bank Kenya Purchasing Managers' Index (PMI) falling to 49.7 from 50.6 in August. This decline indicates a contraction in business activity.
Manufacturing and construction showed improvement, with the Kenya Association of Manufacturers (KAM) reporting a 5% increase in output compared to the previous quarter. However, agriculture, wholesale & retail, and services sectors experienced declines. The Kenya National Bureau of Statistics (KNBS) reported a3% decrease in agricultural exports, mainly due to drought conditions in some parts of the country.
The Central Bank of Kenya (CBK) has maintained its benchmark interest rate at10.5%, aiming to balance inflation control with economic growth support. Inflation stood at 6.8% in September, within the government's target range of2.5% to 7.5%.
UGANDA
4. Banking Sector Growth Overshadowed by Staff Turnover Concerns
In Uganda, the financial institutions industry is growing. But it is facing stability concerns due to employees quitting their jobs. The Bank of Uganda's(BoU) 2024 Annual Report shows that banking sector assets grew by 8.4% in the year ending June 2024, reaching 53.9 trillion Ugandan shillings (USD 14.5billion).
However, the report highlights that high staff turnover is undermining operational stability and institutional knowledge within financial institutions. The Uganda Bankers' Association (UBA) reported an average churn rate of 15% across the sector, compared to a global average of 11% for the financial services industry.
In response, several banks have announced new retention strategies. Stanbic Bank Uganda, the country's largest bank by assets, has introduced a comprehensive employee development program, including leadership training and mentorship opportunities.
RWANDA
领英推荐
5. Anticipated Interest Rate Cut Sparks Investment Optimism
Financial institutions in Rwanda are forecasting a significant drop in interest rates. The National Bank of Rwanda (BNR) is expected to lower its key repo rate from the current 7% to stimulate economic growth.
This anticipated decrease comes as Rwanda's year-on-year (YoY) inflation rate stood at 5% in August 2024, a notable improvement from over 21% in 2023. The Rwanda Development Board (RDB) reported that this lower inflation environment is attracting new foreign investments, with FDI inflows increasing by 15% in the first half of 2024 compared to the same period last year.
The potential interest rate cut is expected to boost lending, particularly to small and medium-sized enterprises (SMEs). The Rwanda Bankers Association (RBA)estimates that SME loans could increase by up to 20% in the coming year if rates decrease as expected.
DRC
6. Ceasefire Agreement Revives Economic Activity in Eastern Provinces
A recent ceasefire agreement between the Democratic Republic of Congo (DRC) and Rwanda offers hope for economic stability in the region. The agreement, signed on July 30th under Angola's mediation, aims to end hostilities in eastern DRC.
The conflict has significantly impacted the eastern provinces, displacing over 2.5million people in North Kivu alone. However, the ceasefire has allowed some economic activities to resume. The North Kivu Chamber of Commerce reported a 20% increase in cross-border trade with Uganda and Rwanda in August compared to July.
The DRC government has announced plans to allocate USD 100 million for reconstruction efforts in the affected areas. This includes rebuilding infrastructure and providing support for displaced persons to return home. The World Bank has pledged an additional $250 million to support these efforts, focusing on job creation and economic recovery in the region.
IV. UPCOMING EVENTS
What: Showcase of jewelry made from Tanzanian gemstones with opportunities to purchase at discounted prices
Where: Zambarau Gems, Haile Selasie Road,Dar es Salaam, Tanzania
When: October 19, 2024
Why Attend: Experience unique Tanzania gemstones, enjoy special discounts, and learn about local jewelry craftsmanship
Who Should Attend: Jewelry enthusiasts, collectors, investors, and anyone interested in Tanzanian gems
Registration: https://shikanagroup.lpages.co/zambarau-october-event/.
2. Swahili International Tourism Expo (S!TE)
What: Swahili International Tourism Expo (S!TE)
When: October 11 - October 13, 2024
Where: Dar-es-Salaam, Tanzania
Who Should Attend: Tourism professionals, including travel agents, hotels, and tour companies
Why Attend: To promote Tanzania’s tourism sector and facilitate business networking within the industry.
V. EXPERT OPINION
"African countries need to invest in human capital to improve competitiveness and integrate into global value chains. Our abundant natural resources are not enough; we must develop our workforce to drive innovation and productivity across all sectors."
Bernard Nguekeng, Lecturer in Economics and Management at Yaoundé II University, Cameroon(African Economic Conference 2023)
VI. CONCLUSION
This week's update indicates the diverse economic environment across East Africa.
Tanzania's universal healthcare initiative and infrastructure investments show promise for long-term growth.
Kenya's private sector faces challenges, underlining the need for supportive policies. Uganda's banking sector growth is tempered by staff turnover issues, while Rwanda's potential interest rate cut could stimulate SME growth. DRC's ceasefire agreement, on the other hand, offers hope for economic recovery in these regions.
VII. RESOURCES
For more detailed information on the topics covered in this newsletter, please refer to the following resources: