Rwanda Secures $1B Korean Investment for Tech and Infrastructure
Shikana Group
Leading legal and investment advisory firm specialized in foreign investments in Africa.
INTRODUCTION
Welcome to last week's East African Community (EAC) Update. As we enter the second half of 2024, our region remains resilient and capable in the face of global economic concerns.?
This edition spotlights major developments across multiple sectors, from innovative energy solutions in South Sudan to landmark trade agreements in Kenya. We also explore how countries like Ethiopia and Rwanda are leveraging international partnerships to fuel their economic growth.?
East Africa is positioning itself as a continental growth driver. That is why we have covered the opportunities and challenges shaping EAC’s business environment. Join us as we tell these stories and their implications for investors in the region.
TREND OF THE WEEK
East Africa is set to drive Africa's economic growth in the coming years, according to the African Development Bank’s (AfDB) African Economic Outlook 2024.?
Forecasts show the region's real gross domestic product (GDP) growth could reach 4.9% in 2024 and 5.7% in 2025, up from an estimated 1.5% in 2023. This growth is supported by increased public investments in manufacturing, services, and key infrastructure projects across countries like Rwanda, Burundi, Tanzania, Ethiopia, Uganda, Kenya, and Djibouti.
However, the region faces some hurdles:
Despite these challenges, East Africa's projected growth outpaces the continent's overall estimated GDP growth of 3.1% in 2023. This trend highlights the region's economic resilience and potential, even in the face of global and local pressures.
Other interesting data points from AfDB’s recent publication:
TOP HEADLINES
TANZANIA
1. New National Lottery Operator Welcomed
South Africa's ITHUBA, in partnership with Tanzania's SF Group, has been licensed to operate the national lottery in Tanzania. The license was officially handed over on July 1, 2024, at the Gaming Board of Tanzania headquarters in Dar es Salaam.
Key Details:
The industry's trajectory is impressive, with projections indicating that revenue in Tanzania's gaming market will reach USD 382.50 million by the end of 2024. This figure is expected to grow at a compound annual growth rate of 10.16% over the next five years, potentially reaching USD 620.50 million by 2029. Such growth is underpinned by increasing user penetration, which is anticipated to rise from 16.7% in 2024 to 18.1% by 2029, translating to an estimated 14.4 million users by the end of the forecast period.?
The gaming sector contributes over 3% to the country's GDP. Government revenue from the industry rose from TZS 78 billion in the 2017–18 fiscal year to a projected TZS 96 billion in FY 2019–20. This growth is attributed to technological innovations and an improved business environment. Those factors have attracted more investments and led to the introduction of new gaming formats such as online casinos and SMS lotteries.
Within the industry, sports betting has emerged as the leading segment, overtaking traditional retail casinos. Three private operators: betPawa, M-Bet, and Sportpesa, dominate the online sports betting market, according to our 2019 market research report on gambling in Tanzania. Concurrently, gross gaming revenues of internet casinos increased by 97% in FY 2018–2019. This rise in online gaming activities is largely driven by increased smartphone penetration and improved internet access across the country.
Our survey found 89% of sports betting participants fall within the 18–34 age bracket. And as of December 2022, Tanzania's internet penetration rate stood at 48.5%, with over 30 million users.
KENYA
2. Doors to European Markets Open
The European Union (EU)-Kenya Economic Partnership Agreement (EPA) took effect July 1. It is a major milestone in EU-African trade relations. The EPA represents the culmination of a multi-year negotiation and ratification process, reflecting both parties' commitment to strengthening ties while prioritizing sustainability.
Key stages in the EPA's development:
This comprehensive agreement aims to support bilateral trade and investment while setting new standards for sustainable trade practices. The economic potential is substantial, as evidenced by the growth in EU-Kenya trade, which reached EUR 3 billion in 2023, representing a 16% increase from 2018.
At its core, the EPA offers immediate benefits to Kenya:
The agreement stands out for its ambitious sustainability commitments, making it the most forward-thinking deal negotiated between the EU and an African country in this regard. It includes binding provisions on:
To support Kenya's economic growth, the EPA includes a dedicated chapter on economic and development cooperation. This focuses on improving the competitiveness of the Kenyan economy and building capacity for local businesses to engage in international trade.
The agreement also incorporates safeguards for both parties, allowing for protective measures if imports threaten to disrupt the economy. Special conditions are in place to protect Kenya's developing industries, ensuring a balanced approach to market opening.
Implementation and monitoring of the EPA will involve civil society representatives, including trade unions, business associations, and NGOs. A dispute settlement mechanism is in place to enforce sustainability commitments, with a review clause allowing for future strengthening of these provisions.
UGANDA
3. New Era in Fuel Trade Begins
Uganda's petroleum sector has made progress with the arrival of its first direct oil shipment at Mombasa port on July 3, 2024. This event marks a major shift in Uganda's fuel import strategy and has implications for regional trade dynamics.
The first vessel docked at Kipevu Oil Terminal 2 (KOT2) carrying about 60,000 metric tonnes (MT) of petrol, with a second vessel scheduled to arrive later the same day with approximately 70,000 MT of diesel. This new arrangement places the Uganda National Oil Corporation (UNOC) as the sole importer of fuel for Uganda, effectively ending the role of Kenyan oil market companies in fuel transit business to the neighboring country.
This change follows a series of developments in Uganda's petroleum sector. The country has approximately 6.5 billion barrels of oil reserves in its western region, with at least 1.4 billion estimated to be economically recoverable. Major international oil companies, including Total S.A., China National Offshore Oil Corporation (CNOOC), and Tullow, have production licenses to develop these reserves.
Key impacts of the new import arrangement include:
While this development represents a major change in Uganda's energy import strategy, it is important to note that the country is also progressing towards becoming an oil producer. In May 2023, Uganda and Tanzania signed an agreement for a 1,450-km heated oil export pipeline to Tanzania's Port of Tanga, with infrastructure development estimated to cost USD 15 billion.
The new KOT2 terminal in Mombasa is capable of handling multiple vessels simultaneously. Kenya's Petroleum Principal Secretary Mohamed Liban noted that this agreement could increase fuel handled to different East African nations from the current 40 percent of total fuel handled in Mombasa port.
RWANDA
4. Asian Financing Aligns with National Strategy
Rwanda has secured a $1 billion concessional loan agreement with South Korea, signed on July 5, 2024. This new arrangement doubles the previous $500 million deal from 2022 and extends the cooperation period to 2024–2028.
Key details:
The agreement aligns with Rwanda's second National Strategy for Transformation (NST2). Finance Minister Yusuf Murangwa stated it will support human capital development, agricultural improvements, establish ICT-led governance, and strengthen the business environment.
This deal is part of Rwanda's broader economic blueprint. In May, the government announced that USD 1.02 billion of its FY 2024–25 budget would come from external loans.
The signing follows President Paul Kagame's attendance at the inaugural Korea-Africa Summit in June 2024. South Korea's Ambassador to Rwanda, Jeong Woo Jin, noted ongoing cooperation in agriculture, ICT, education, health, and infrastructure.
领英推荐
The deal represents strong financial commitment. But its actual impact on Rwanda's development goals remains to be seen. In the coming years, we encourage you to monitor the funded projects’ effectiveness and Rwanda's ability to manage this increased debt load.
SOUTH SUDAN
5. Solar Energy to Power Connectivity
The Energy Inclusion Facility (EIF) and the Finnish Industrial Cooperation Fund (Finnfund) have jointly provided $20 million in financing to Communication & Renewable Energy Infrastructure (CREI), an asset manager focused on South Sudan's telecom sector.
We've compiled key funding details below.
The funding will support the installation of at least 413 hybrid energy solutions at telecom sites across South Sudan. This initiative aims to:
Valtter Louhivuori, Head of Finnfund's Nairobi office, emphasized the alignment of this investment with their objectives in digitalization and climate action. He noted the potential for improved mobile connectivity to promote economic growth and social inclusion.
This project is particularly important given South Sudan's limited connectivity infrastructure and low mobile phone penetration. With a population of 11 million, the country stands to benefit substantially from better telco capabilities and the shift towards more sustainable energy solutions in this sector.
The initiative demonstrates how targeted investments can address multiple development goals simultaneously. For example, it combines improvements in communication infrastructure with the promotion of renewable energy in challenging markets.
ETHIOPIA
6. Major Financial Support on Horizon
Ethiopian Prime Minister Abiy Ahmed announced on July 4, that the country is expecting to receive about USD 10.5 billion in aid over the coming years. That move is contingent on the successful conclusion of ongoing negotiations with international lending institutions.
The potential package comes at a crucial time for Ethiopia, which is dealing with notable economic challenges. The country currently faces $28 billion in external debt, high inflation (though down to 23% in 2024 from 30% in 2023), and a shortage of foreign currency reserves. In December 2023, Ethiopia's credit rating was downgraded to partial default after missing a USD 33 million coupon payment on a Eurobond.
The anticipated aid is expected to be structured as follows:
However, securing this support may require Ethiopia to implement significant economic reforms. Analysts suggest that a devaluation of the birr, which currently trades about 50% weaker than the official exchange rate on the black market, may be necessary to secure IMF support. Prime Minister Abiy acknowledged that while some of Ethiopia's proposals have been accepted, there are reforms the government is reluctant to implement immediately.
This potential aid package discussion occurs against the backdrop of Ethiopia's recently approved record budget of USD 16.83 billion for FY 2024/2025, a 21.1% increase from the previous year. Notably, USD 2.4 billion has been allocated for debt repayment.
UPCOMING EVENTS
1. Infrastructure Africa Business Forum 2024
What: The event connects industry stakeholders. It promotes dialogue and promotes investment around Africa's infrastructure needs.
Where: Cape Town International Convention Centre (CTICC), Cape Town, South Africa
When: July 16-17, 2024
Who should attend: Infrastructure professionals, project developers, investors, DFIs, service providers, banks, and anyone interested in African infrastructure development.
Why attend:
Registration: https://www.infrastructure-africa.com/register/ or call +27 11 463 9184.
2. African Natural Resources & Energy Investment Summit (AFNIS) 2024
What: The 3rd edition of AFNIS, focusing on "Natural Resources for Economic Development"
Where: State House Conference Centre, Presidential Villa, Abuja, Nigeria
When: July 16-18, 2024
Who should attend: Government officials, energy and natural resource sector professionals, investors, policymakers, and stakeholders interested in African natural resources and energy development.
Why attend:
Registration: Contact Taiwo Ojo at +234 903 138 1084 or [email protected] .
OPINION OF THE WEEK
“It is a once-in-a-lifetime opportunity to see a country being rebuilt.?
We have seen it in Rwanda and Sierra Leone. Every time that happens it brings great opportunities.?
When a country has the kind of destruction Somalia has had, a boom follows. The opportunities are limitless.”
Liban Egal, founder and chairman, First Somali Bank
CONCLUSION
This newsletter edition has shed light on East Africa's economic complexity. While Ethiopia eyes a $10.5 billion lifeline, its 23% inflation rate signals ongoing challenges. Kenya's EU trade deal opens doors, but success hinges on local businesses' ability to meet European standards. Uganda's direct fuel imports may reduce costs, but it disrupts established regional trade patterns.
Numbers tell a lucrative story:
The coming weeks will reveal which of these developments truly reshape EAC’s business climate.
RESOURCES
FOLLOW ME for breaking tech news & content ? helping usher in tech 2.0 ? at AMD for a reason w/ purpose ? LinkedIn persona ?
4 个月Interesting! Shikana Group
CEO, Epic Entrepreneur Media | Join the Epic Entrepreneurs | Business Strategist | Linkedin Coach | Speaker | Follow for posts on Business & Life Mastery
4 个月Love to see Africa thriving in business Shikana Group ??
Executive Resume Writer — ATS | Personal Branding Strategist | LinkedIn Profile Optimization Specialist | Helped 8900+ Job Seekers in 35 Countries | AI Writing | Skyrocketed 251+ Brands/Pages
4 个月I'll keep this in mind
Sales is like a box of chocolates. Wrong! We should know exactly what we are getting. Together we will make sure that you know where your Sales are coming from in the remainder of this fiscal year.
4 个月Thank you for sharing the news Shikana Group
Viral AI & app coders for hire. $51Mn sales attributed. Let’s discuss your product. US Onshore coders available. Creator of HonestAI, LinkedIn’s largest AI channel. Open to Speaking engagements on Viral Tech & Marketing.
4 个月It is a great news Shikana Group