Top Trends and Opportunities in East Africa [June 2–8]

I. INTRODUCTION

From June 1 to 8, the East African Community (EAC) experienced the transforming power of strategic partnerships and government efforts.?

Tanzania's ports and financial sector are attracting investments, while Kenya's tech hub is getting a boost from South Korea, Uganda's gaming industry is suddenly expanding, and Rwanda is taking huge steps in climate action and sustainable finance. South Sudan, on the other hand, is prioritizing children's health with new vaccine initiatives.

We have identified prospects for both investors and businesses interested in these developments. Continue reading to learn more.

II. TREND OF THE WEEK

As of March 2024, Statista reported that the leading African countries by internet user count were Egypt (82 million), Nigeria (103 million), and South Africa (45.3 million).?

EAC internet penetration rates are as follows:

• DR Congo: 28.3 million users (27.2% of the country’s population).
• Ethiopia: 24.8 million users (21%).

• Tanzania: 21.8 million users (31.9%).

• Kenya: 22.7 million users (40.8%).

• Uganda: 13 million users (27%)

• Rwanda: 4.9 million users (34.4%)

East Africa's growing internet user base presents considerable opportunities for businesses and investors in the digital economy. The region's increasing connectivity opens doors for e-commerce, digital financial services, online education, and other tech-driven sectors.?

However, there remains potential for further growth, particularly in Uganda and Rwanda. It suggests untapped markets for internet-based services and products.

III. TOP HEADLINES

TANZANIA

1. Financial and Maritime Sectors See Major Deals

Adani International Ports Holdings (AIPH) has secured a 30-year agreement to operate and manage Container Terminal 2 (CT2) at the Dar es Salaam Port in Tanzania. This move aligns with AIPH's ambitious goal of becoming a leading global port operator by 2030. In October 2023, the Emirati logistics giant DP World inked a similar agreement (valued at over USD 250 million) to operate four of the 12 berths at the Dar es Salaam port.

CT2, a four-berth terminal, has an annual cargo handling capacity of 1 million TEUs (twenty-foot equivalent units) and handled 83% of Tanzania's total container volumes in 2023. The Dar es Salaam Port serves as a crucial gateway with extensive road and rail connections, making it a vital trade hub for East Africa.

In a related development, East Africa Gateway Limited (EAGL), a joint venture of AIPH, AD Ports Group, and East Harbour Terminals Limited, acquired a 95% stake in Tanzania International Container Terminal Services Limited (TICTS) for USD 39.5 million. AIPH will be the controlling shareholder in EAGL, further solidifying its position in the region.

TICTS previously operated CT2 until September 2022 and currently owns the port's handling equipment and employs the workforce. Adani will utilize TICTS' expertise and resources to efficiently manage CT2's operations.

On the financial services front, Selcom, a Dar-based pan-African payments technology provider, has acquired Access Microfinance Bank Tanzania (AMBT). The acquisition, valued at an undisclosed amount, will see AMBT rebranded as Selcom Microfinance Bank Tanzania (SMBT). Selcom aims to extend its innovative "Get Paid to Pay" rewards program to digital banking customers, thus incentivizing engagement with everyday financial activities.

The move aims to blend advanced fintech solutions with traditional banking services. So it could reshape how microfinance services are delivered countrywide. Selcom now holds a 90% stake in SMBT, with the African Development Bank (AfDB) retaining its 5.06% shareholding.

KENYA

2. Tech Hub Attracts Korean Investment

Kenya is intensifying efforts to position its Konza Technopolis as a leading regional innovation hub after securing a USD 220 million investment from South Korea's Export-Import Bank. This strategic deal will finance the development of a state-of-the-art 160-acre Digital Media City within the Technopolis, which is located 40 kilometers from Nairobi.

Conceived to unlock Kenya's rising creative economy, the Digital Media City will house world-class facilities for music production, post-production, media training, and filmmaking. It aims to provide a launchpad for local talent to gain global exposure in the electronic broadcasting space.

Since its establishment in 2009, the Konza Technopolis has struggled to attract major tech investments, with firms favoring Nairobi-based hubs instead. However, this Korean partnership marks a major step towards restoring the project's core vision as East Africa's "Silicon Savannah."

The USD 220 million commitment follows earlier infrastructure investments, including the USD 94 million Korean-funded Kenya Advanced Institute of Science and Technology (KeAIST) campus opened in 2021. Additionally, Kenya has allocated US$ 56 million for technology infrastructure like the National Data Centre, with Phase 1 completed by Huawei in 2021 and Phase 2 ongoing.

Emphasizing Konza's potential as a smart city hub, the government allocated USD 91 million in its 2020/21 budget for the tech city's development, including USD 5.8 million for the data center project. Private sector participation is also picking up, with multinationals like Huawei and the Korea Advanced Institute of Science and Technology (KAIST) establishing a presence.

For investors, the Digital Media City project presents opportunities across the digital media value chain - from content production and post-production to training and technology services. With a supportive regulatory framework and tax incentives for tech firms, Konza aims to attract over USD 300 million in foreign direct investment (FDI) and create 50,000 jobs upon full buildout.

As a result, Konza Technopolis is positioning itself as a competitive investment destination by leveraging partnerships and infrastructure upgrades to drive innovation in media production, ICT, and smart city solutions. According to Statista, Africa's digital media market is expected to generate USD 9.31 billion in revenue by December 2024.?

UGANDA

3. Lotteries and Gaming Industry Reports Record Revenue

According to newly released data, Uganda's gaming and lottery industry witnessed USD 560 million in gambling expenditure in just the first half of 2023, nearly matching the USD 640 million spent in the entire fiscal year (FY) 2022/23.

Increasing compliance, licensing activities, and the rise of online betting platforms complementing traditional brick-and-mortar establishments have fueled that exponential growth. With 45 licensed betting companies operating nationwide, the market is seeing an influx of high rollers attracted by the seamless integration of sports viewership and wagering options. For investors, the opportunity lies in tapping into this growing demand by introducing innovative gaming solutions, digital platforms, and ancillary services tailored to the Ugandan market's preferences.?

The government's proactive stance in regulating and taxing the industry further solidifies its long-term viability as an investment destination. Tax revenues from the betting industry alone tripled from FY 2021/22 to reach USD 20 million in FY 2022/23. That 49.6% year-on-year (YoY) increase represents the industry's potential for sustained growth and profitability.

With the government levying a 30% tax on promoters' turnover, a 15% withholding tax on winnings, and an additional 20% tax on winning tickets, the regulatory framework incentivizes responsible and transparent operations. It creates a conducive environment for legitimate gaming businesses to thrive.

Moreover, the National Lotteries and Gaming Regulatory Board (NGLRB) actively encourages local participation and technological innovation in the sector. For example, it recently licensed a South African gaming company to operate Uganda's national lottery for a decade, with 25% of the generated revenue pledged for developing sports infrastructure.

Investors with expertise in gaming technology, digital platforms, data analytics, and responsible gaming initiatives can capitalize on Uganda's rapidly expanding market.?

RWANDA

4. Government, AfDB Invest in Climate Action?

Rwanda is making considerable progress towards its ambitious climate targets. It is supporting sustainable development through smart investments and innovative financing mechanisms.

The Rwanda Green Fund has approved its first set of investments under Intego - the nation's NDC (Nationally Determined Contributions) Facility. Capitalized with a €46 million seed fund from Germany, Intego will play a key role in implementing Rwanda's Climate Action Plan under the Paris Agreement.

After a rigorous evaluation process, the Green Fund Board has committed USD $43 million towards ten projects aimed at improving climate resilience and reducing greenhouse gas emissions across the country. These initiatives span landscape restoration, forestry, climate-resilient infrastructure, wetland rehabilitation, renewable energy, and energy efficiency.

Notable projects include the Resilient Nyamagabe initiative to strengthen community climate resilience through erosion control and agroforestry in the erosion-prone Southern Province. The Nyabugogo Wetland Restoration will improve the wetland's carbon capture capacity, while the Greening RNP project will transition the Rwanda National Police towards low-carbon energy consumption.

With an additional USD 7 million in co-financing, these investments are set to have a major impact on Rwanda's climate action efforts and support its sustainable development goals.

Complementing those efforts, the African Development Bank (AfDB) and the Rwandan government have signed a partial credit guarantee agreement to mobilize financing for green and social initiatives. This agreement will enable Rwanda to raise up to USD 215 million competitively from international commercial banks, thus diversifying its funding sources.

The partial guarantee has already facilitated a USD 200 million loan from JPMorgan, with a USD 50 million guarantee from the AfDB. This inaugural transaction under Rwanda's Sustainable Finance Framework establishes the country as a credible sustainable borrower and builds a track record in international financial markets.

Aligned with Rwanda's national strategy for transformation and Vision 2050, the guarantee supports the country's efforts to promote inclusive green growth and drive a resilient economy.

SOUTH SUDAN

5. Major Push to Protect Children's Health

South Sudan is taking big steps to safeguard its youngest citizens' health and lives. The country is strengthening its child immunization efforts by introducing new vaccines and running vaccination campaigns. These initiatives tackle serious diseases that affect many children. They also create opportunities for investment in healthcare and pharmaceuticals.

The nation received its first shipment of 645,000 doses of a new malaria vaccine called R21. That modern vaccine will be given initially in 28 counties where malaria is very common. Plans are underway to make it available nationwide. Why? Malaria is the biggest killer of children in South Sudan. In 2022 alone, there were an estimated 2.8 million malaria cases and 6,680 deaths from the disease. On average, around 7,630 new malaria cases and 18 deaths occur every single day. The malaria vaccine can help reduce these alarming numbers.

The government has also partnered with Médecins Sans Frontières (MSF) to launch a vaccination campaign against hepatitis E. This deadly outbreak mainly affects women and pregnant women, who face up to 40% risk of death. Since April 2023, 501 hepatitis E cases have been treated at an MSF hospital in Jonglei State, with 21 deaths, mostly pregnant women. Vaccinating this high-risk group is crucial to controlling the outbreak.

In 2014, South Sudan introduced the pentavalent vaccine into its routine immunization program. The expanded vaccine protects children against five diseases: diphtheria, pertussis, tetanus, hepatitis B, and pneumonia. The country has also conducted successful nationwide campaigns, vaccinating over 2 million children against polio and 1.7 million against measles in early 2024.

These efforts strengthen disease prevention and lower childhood mortality rates. As immunization efforts ramp up, demand for vaccines, medical supplies, cold chain logistics, and healthcare services will increase. This creates potential opportunities for investors in these sectors to support South Sudan's public health goals while exploring business prospects.

ETHIOPIA

6. Economic Outlook Brightens

Ethiopia has approved a record high national budget of approximately USD 17.42 billion for the upcoming FY 2024–25, starting July 8th. This marks a notable increase from the FY 2023–24 budget of about USD 14.7 billion.

The new budget, unanimously approved by the Council of Ministers, will finance regular federal government expenses, capital expenditures, financial support to regional states, implementation of sustainable development goals (SDGs), and reserve funds. It was crafted based on the current fiscal performance, government's financial capacity, anticipated revenues, and assessed needs of government institutions.

The proposed budget now awaits ratification by the Ethiopian parliament later this month.

Simultaneously, the nation's appeal to international investors is soaring, according to its Ministry of Foreign Affairs. This was evidenced by recent high-level business delegations from Saudi Arabia and Pakistan exploring trade and investment opportunities. The 79-member Saudi delegation aimed to enhance bilateral economic ties, while over 80 Pakistani companies scouted for business prospects during their six-day visit.

Saudi investors have already committed USD 4.5 billion across 233 projects in Ethiopia over the past two decades, creating over 75,000 jobs. Ethiopia's exports to Saudi Arabia reached USD 325 million in 2022/2023, thus highlighting the strengthening of the trade relationship.

The business forums, site visits, and signed agreements during these delegations have raised awareness of Ethiopia's favorable investment climate and available options across key economic sectors like manufacturing.

IV. UPCOMING EVENTS

1. DRC Mining Week

What: A premier platform for industry leaders, investors, and policymakers to discuss the future of mining in the Democratic Republic of Congo (DRC) and the wider region. The event will focus on sustainable mining practices, local transformation, and investment opportunities.

Where: Grand Karavia Hotel, Lubumbashi, DRC.

When: June 12th - 14th, 2024.

Why Attend:

• Connect with 1,300+ industry leaders, investors, and policymakers from 57 countries.
• Gain valuable insights on sustainable mining, local processing, investment opportunities, and economic development in the DRC.
• Explore the latest mining technologies and solutions showcased by leading companies.

Who Should Attend:

• Mining company executives and managers
• Investors and financiers
• Government officials and policymakers
• Technology and equipment suppliers
• Consultants and service providers

Register: https://wearevuka.com/mining/drc-mining-week/.?

2. Africa Business Day?

What: A Swiss-African Business Circle (SABC) annual event. It is Switzerland's premier platform for businesses operating in or interested in the African market. The day will feature a hybrid format with both in-person and virtual attendance options.

Where: Novartis Campus in Basel, Switzerland.

When: June 27, 2024.

Who Should Attend:

• Swiss companies interested in doing business in Africa.
• Investors seeking insights into large-scale projects and opportunities.
• Government officials and experts interested in sustainable development in Africa.

Why Attend:

• Gain valuable insights into large-scale projects in key sectors like health, agriculture, and infrastructure.
• Connect with CEOs, managing directors, investors, government officials, and representatives from Swiss and African embassies.
• Learn about Swiss-led cleantech innovations and their potential to address sustainability challenges in Africa. Shikana Group's Managing Director, Amne Suedi, will moderate a panel discussion on that topic.

Register: https://www.s-ge.com/en/event/third-party-event/africa-business-day-2024?ct?

V. OPINION OF THE WEEK

“The economy at the base of the pyramid is the future.

For a long time, many multinationals assumed that the people at the base of the pyramid could not be served and that they were not a viable market. That is the only frontier left in business. If you are not serving this particular group, you will not be in business for long.?

The ‘kadogo’ economy solves social issues and helps improve the economic situation of many people.”

?Michael Momanyi, General Manager, Premier Gas (2012)

VI. CONCLUSION

East Africa's active business environment provides a wealth of opportunities for international investors.

To navigate the intricacies of investing in this region, you can partner with Shikana Group. Our market-leading legal and investment advisory teams are experts in market entry, due diligence, project finance, and business setup. We guide investors through the complexities of the East African market, ensuring a smooth and successful investment journey.?

As the region continues to evolve, strategic partnerships and expert guidance will be key to unlocking its full potential. Simply click here to schedule a free consultation.

VII. RESOURCES

1. Africa number of internet users by country 2024 | Statista?
2. Adani Ports Signs 30-Year Concession Pact To Operate Tanzania Port Terminal?
3. South Korea to Invest KShs. 31bn in Konza City - Kenyan Wall Street?
4. Ugandans Urged to Invest in Lucrative Gaming Business | ChimpReports?
5. African Development Bank and Rwanda Sign Partial Credit Guarantee Agreement to Support Green and Social Initiatives?
6. How South Sudan keeps vaccines cool, from the airport all the way to arms?
7. Ethiopia sees surge in foreign investment interest – MFA?
8. Ten insightful quotes on doing business in Africa?