This chapter provides an overview of investment promotion agencies (IPAs) in EAC Partners States, including their organisational characteristics and main efforts to attract and facilitate sustainable investment. It also draws on the experience of other regions to provide lessons on better targeting FDI to support sustainable development and sharpening the indicators used for this purpose.
Sustainable Investment Policy Perspectives of the East African Community
Abstract
Governments design investment strategies to support national development objectives through the promotion and facilitation of foreign direct investment (FDI). Effective investment promotion strategies maximise FDI benefits by prioritising specific sectors, countries and investors and hence influencing the kind of investment that is attracted (OECD, 2018[1]). Additionally, investment facilitation measures complement these strategies to support the establishment, operations and expansions of investors that have made their location decision. This section provides an overview of the main measures taken by the EAC’s Partner States in attracting and facilitating investment, particularly to support their sustainable development objectives. It looks at the strategic orientations provided in the EAC Model Investment Code (2006) and the EAC Investment Policy (2019) and offers a comparative analysis of the characteristics and priorities of individual Partner States’ investment promotion agencies (IPAs).
Most countries in the world have established IPAs to promote and facilitate investment. To support their countries’ economic development efforts, IPAs are increasingly focusing on attracting more and higher-quality FDI, while also deepening the integration of their economies into global value chains (Lewis and Whyte, 2022[2]). In less advanced countries, IPAs can play a more substantial role, as international investors usually have less knowledge of local business opportunities, struggle to obtain up-to-date information and can face cultural differences (Heilbron and Kronfol, 2020[3]). In this context, all Partner States have established IPAs, which according to the EAC Investment Policy, are responsible for promoting available opportunities and facilitating investment for both local and foreign investors (Table 3.1). In the case of Tanzania, and due to its unique political structure, two investment regimes coexist, one for mainland Tanzania and one for Zanzibar, resulting in two distinct IPAs (EAC, 2019[4]).
1. In 2020 South Sudan Investment Authority (SSIA) was transformed into the Ministry of Investment.
2. As a semi-autonomous region, Zanzibar has its own investment promotion authority.
Source: OECD compilation based on EAC IPAs’ establishing statutes, 2024.
3.1.1. IPAs in the EAC are well-established and frequently involve the private sector
IPAs are established with different institutional settings, governance and strategic priorities. The way governments organise their institutional framework for investment promotion and facilitation responds to their policy objectives and the priority they give to FDI (OECD, 2020[5]). Governance structures can play a significant role in the effectiveness of IPAs’ investment promotion and facilitation efforts. The EAC Model Investment Code provides that IPAs in the Partner States should be “the primary agency of the government for the purpose of coordinating, encouraging, promoting and facilitating investment in the Partner State and advising the government on the investment policy and related matters” (EAC, 2006[6]).
Except for South Sudan, where investment attraction lies within the Ministry of Investment, all EAC IPAs are constituted as semi-autonomous public agencies and were established through laws or decrees (EAC, 2019[4]). All IPAs are governed by a board of directors, which is usually formed by representatives of various governmental departments. The EAC Model Investment Code recommends Partner States to include business representatives on their IPAs’ board of directors (EAC, 2006[6]). In Burundi, the DRC, Uganda, Tanzania, and Zanzibar, the boards of IPAs include at least one representative from the private sector (Figure 3.1). The Board of Directors is only chaired by private sector members in the DRC and Burundi, however, where the chair of the board is held by a representative from the private sector in the former and by the director of the chamber of commerce in the latter. Including private sector actors ensures that the interests of businesses are considered. Including other stakeholders, such as academia, trade associations and civil society, can help IPAs further enhance their accountability to investment targets and attain a better understanding of investor needs (Steenbergen, 2023[7]).
Note: The category "Board Chair & Secretariat" includes members who hold specific government-appointed roles on the board. These roles include the Chairman appointed on such terms, Director General (or Secretary General) of the IPA and Secretary of the Cabinet.
Source: OECD compilation based on IPAs’ establishing statutes, 2024.
To support their activities, some IPAs have established additional offices on top of their headquarters. The Burundi Development Agency, the Kenya Investment Authority (KenInvest), the Tanzania Investment Centre, the Uganda Investment Authority and the Zanzibar Investment Promotion Authority have at least one regional office (i.e., an office in a region within their country). In the DRC, the National Agency for the Promotion of Investments, has not yet established additional offices, but its constituting law allows it to open representations or branches in other locations within the DRC or abroad by decision of the Board of Directors. The existence of regional offices can help IPAs attract FDI in these locations and support their development objectives, particularly in countries with few or no subnational agencies dedicated to investment promotion and facilitation. For instance, the regional offices of the Tanzania Investment Centre, called zonal offices, conduct investment promotion and facilitation activities at the local level by showcasing relevant investment opportunities and assisting investors in obtaining relevant permits and licences. Offices can also be located abroad. As such, the Rwanda Development Board is the only EAC IPA that has set up liaison offices in other countries, notably in Canada, China and Türkiye.
3.1.2. EAC agencies have multiple mandates and often go beyond attracting FDI
The EAC Investment Policy’s overarching objective is “to create an enabling environment for investment to promote and market the EAC Partner States equitably” (EAC, 2019[4]). To achieve this objective, all EAC IPAs are mandated to promote and facilitate FDI in their respective jurisdictions, as well as to support broad economic development, such as promoting local investment, developing an attractive business environment and supporting small and medium-sized enterprises (SMEs) (Figure 3.2). In some instances, IPAs may have more specific mandates, such as export promotion (Burundi, Rwanda and Zanzibar), tourism promotion (Rwanda and Zanzibar) and the negotiation of international deals and agreements (Burundi and Rwanda). Regardless of the number of mandates, they should be coherent and well-defined, for instance, distinguishing between policymaking and implementation. Evidence shows that agencies with too many mandates that overlap or contradict those of other government agencies will struggle to deliver substantial results (Heilbron and Whyte, 2019[8]).
Source: OECD compilation based on IPAs’ establishing statutes, 2024.
Governments may also opt to establish special economic zones (SEZs) and export processing zones (EPZs) to attract investors, create jobs and streamline procedures. These areas are often governed by a single administrative authority, which may or may not be the IPA (OECD, 2015[9]). For example, in Burundi, the Special Economic Zones Managing Authority was established to provide an enabling business environment, attract local and foreign investments, and offer fiscal and non-fiscal incentives. In other instances, the management of SEZs is directly carried out by the IPA, such as in Rwanda, South Sudan and Zanzibar. Similarly, with the upcoming merger of the Tanzania Investment Centre and the Export Processing Zone Authority, the new entity will be responsible for SEZs in addition to promoting investment. In Uganda, the IPA manages only industrial parks, as the Free Zones Act of 2014 established as a separate entity, the Uganda Free Zones Authority, which is responsible for the establishment, development, management, marketing, maintenance, supervision and control of SEZs. In Kenya, the Export Processing Zones Authority, established in 1990 by the EPZ Act, oversees the promotion and facilitation of export-oriented investments. It provides information on exporting opportunities and facilitates administrative procedures in its zones. It also advocates in favour of enhancing the ease of doing business in the country.
As the key contact point between government and investors, IPAs provide tailored services to ensure a simplified, clear and engaging experience for firms to do business within the country. A recent World Bank survey revealed that most international investors find IPA services valuable during all stages of their investment (Heilbron and Aranda-Larrey, 2020[10]). In the EAC region, all IPAs offer investment promotion and facilitation services by disseminating investment opportunities, supporting foreign investors in setting up and expanding operations, and managing grants and incentives (Figure 3.3). To ensure that services are delivered in an efficient and transparent manners, IPAs can provide client charters to set targets for service delivery and detailing the expected timeline, costs and requirements associated to each service. While KenInvest, publishes comprehensive client charters covering all these aspects, the Rwanda Development Board provides information on service timescales but not on costs or requirements. Other EAC IPAs lack such detailed client charters, resulting in potential lower levels of investor confidence. Timestamped client charters could ensure that investors are updated on current IPA practices and standards in the support services offered. Additionally, most IPAs also provide information on legal and administrative procedures and engage in policy advocacy with relevant authorities. Compared to IPAs from other regions in the continent, namely ECOWAS and SADC, EAC IPAs tend to engage more in policy advocacy, while fewer organise matchmaking and networking events and provide strategic business advice (i.e., marketing, financial or administrative support when entering their home market).
Source: OECD compilation based on IPAs’ websites, 2024.
3.1.3. IPAs are progressively leveraging digitalisation to facilitate investment
One-stop-shops (OSSs) are one of the primary tools at the disposal of governments to facilitate investment. If well-designed, they can be a deciding factor for investors when selecting an investment destination as they tend to cut down transaction costs by streamlining administrative procedures, reducing information asymmetries and providing clarity on current investment policies (OECD, 2015[9]). OSSs can be of different types: they range from entry points for investors, providing relevant information on administrative requirements (such as in Burundi, the DRC and South Sudan) to fully-fledged platforms, centralising under the same roof all or most necessary procedures to invest (such as in Kenya, Rwanda, Tanzania, Uganda and Zanzibar).
The EAC Model Investment Code stipulates that all IPAs shall operate an OSS and assist investors in matters related to fiscal requirements, investment registration forms, environmental impact assessments, entry and visa permits, and the procurement of land and utilities (EAC, 2006[6]). Except for South Sudan, all agencies in the region provide information on business creation and registration, with most of them also sharing information on taxation and exemptions, and investment certificates (Figure 3.4). When relevant, IPAs also offer information on the general costs and fees charged as well as on the licences required to operate in regulated sectors, such as mining, banking and healthcare. But more comprehensive client charters indicating the expected time and costs of each procedure could be established to increase transparency and investor confidence. These procedures are also not always supported by the Partner States’ OSSs – particularly those that act just as mere information providers – and therefore must be completed through the corresponding department or ministry. If investors have to independently contact too many authorities separately, the effectiveness and usefulness of OSSs diminishes significantly. Whole-of-government approaches in investment facilitation (including through the OSSs) could streamline processes and reduce redundancy, preventing investors from having to navigate multiple departments, through interagency co-ordination and integrated information systems for data sharing and communication.
Note: “Provides information” refers to the cases where the OSS portal provides information on the steps to follow, the documentation required and the relevant authority to contact. “Provides support” refers to the cases where the OSS directly supports investors in completing the necessary procedures. The percentages represent the total number of IPAs; thus, Tanzania and Zanzibar are counted separately.
Source: OECD compilation based on IPAs’ and OSSs’ websites, 2024.
To offer simplified, streamlined and centralised investment-related procedures, IPAs could further embrace the digital transformation, improving transparency, promoting effective communication and reducing barriers to entry. In the OECD, half of IPAs have migrated most of their procedures to an online platform, with over 30% of them having fully digitalised the process to start a business and invest (de Crombrugghe and Moore, 2021[11]). Understanding the importance of digitalisation, Partner States have started adopting digital tools to improve their investment facilitation activities. For instance, in 2015, KenInvest began using the eRegulations online platform, providing a detailed, step-by-step description of administrative procedures, as well as associated costs, legal justifications and contact details of relevant officials. As a result, KenInvest has seen a rise in positive feedback from prospective investors and has managed to improve collaboration efforts with partner governmental agencies (UNCTAD, 2017[12]).
Rwanda’s One Stop Centre has been at the forefront of the country’s investment facilitation efforts, offering one of the fastest business registration processes in Africa (US Department of State, 2023[13]). Besides providing information and support on basic procedures related to the establishment of operations, the agency also shares relevant information on consumer protection, tourism regulation and workforce availability. Furthermore, most of these procedures can be completed online, without the physical presence of the investors being required in the respective agencies or ministries. This has resulted in Rwanda being frequently ranked among the best countries for doing business in Africa. On its Doing Business indicator (2020), the World Bank ranked it the second-best country in Africa, just after Mauritius, and the first among EAC Partner States, leading in the categories related to starting a business, dealing with construction permits and registering property (World Bank, 2020[14]).
OSSs need to be well-established to function efficiently and avoid unnecessary transactional costs; Egypt and the United Kingdom provide good practice examples (Box 3.1). To complement well-functioning OOSs, initiatives can also be developed at the regional level. For example, it could be envisaged to establish an investors’ helpdesk at the EAC Secretariat to support prospective investors interested in the region.
One-stop-shops can significantly reduce transaction costs for businesses and facilitate the establishment of foreign firms in the country. Nevertheless, they run the risk of becoming “one-more stop” if officials do not have sufficient decision-making powers and full approval authority, leading to a duplication of responsibilities and increased uncertainty for foreign investors.
Investors Services Centres (ISCs) – Egypt
With the promulgation of the 2017 Investment Law and as part of Egypt’s investment climate reforms, ISCs were created to grant approvals, certifications and licences necessary for establishing and operating a company in the country. These one-stop-shops provide full start-to-end services to investors, including those related to establishing companies and their branches, approving the minutes of their boards of directors and their general assemblies, issuing approvals and permits, and allocating the necessary real estate for the establishment of projects. ISCs also leverage digital tools to streamline business registration procedures, such as the electronic signature service that enables reducing the time needed for certain procedures. The ISCs follow a number of good international practices. For instance, they are not mandatory entry points for investors, which incentivises them to remain efficient. ISCs are also equipped with a customer relationship management (CRM) system, which includes key performance indicators for monitoring performance. As a result, ISCs have been welcomed by the international business community in Egypt.
GOV.UK – United Kingdom
As part of its digital strategy, the United Kingdom’s government launched in 2010 the single online domain “GOV.UK” to provide a consistent user experience with access to joined-up government services. The website is the starting point for more than 150 government procedures, providing information, guidance and services for businesses and citizens (both local and foreign) on company registration, taxation, visa procedures, exports of goods, among others. While the site is maintained by the Government Digital Service (GDS), individual departments and agencies are still responsible for drafting and managing their own information and services. The GDS includes important features to continuously improve the platform, for instance, they developed a “step-by-step” navigation feature that allows any service to be represented as a series of simple steps. Furthermore, feedback buttons have been integrated on every page so users can provide critical feedback on their experience and report their level of satisfaction when using the available information and services.
Source: (OECD, 2020[5]; OECD, 2020[15]).
3.2.1. Partner States promote a range of diversified sectors…
With rising international competition for FDI, IPAs increasingly seek to prioritise certain sectors over others, as it allows them to target investments that are potentially more beneficial for their economy and better align with national development plans. By focusing on a select number of priority sectors rather than attending to all types of investors, IPAs can improve the effectiveness of their FDI attraction efforts (Sztajerowska and Volpe Martincus, 2021[16]). While priority sectors differ between Partner States, all focus on promoting agricultural and tourism related investments. For the agricultural sector, they highlight opportunities on crops intended to produce edible oils (e.g., soybean, sunflower, palm) and horticulture (e.g., fruits, vegetables, ornamental plants). Partner States also prioritise investments in manufacturing, mining, information and communications technology (ICT), and energy, focusing particularly on sustainable investment projects in the latter (see below). Other specific sectors that EAC IPAs also promote include forestry (the DRC and South Sudan) and services (Rwanda). Compared to IPAs in the ECOWAS and SADC regions, EAC IPAs focus more on health, fishing and the financial sector, but prioritise less the transport and textile sectors (Table 3.2).
Note: Coloured cells represent the sectors that are promoted.
Source: OECD compilation based on IPAs’ websites, 2024.
The EAC Investment Policy also highlights a list of sectors that offer attractive investment opportunities. It emphasises agriculture, infrastructure and real estate, manufacturing, tourism and services (including finance, health and education) as targeted sectors for foreign investors. In the energy sector, it highlights opportunities in mining, oil and gas, but also in renewable energy sources, such as biomass, hydropower, geothermal, solar and wind (EAC, 2019[4]).
3.2.2. … and progressively prioritise sustainable industries
Governments can harness FDI to meet the SDGs. To achieve this, they should not only focus on the volume of investment projects attracted, but also on their capacity to positively affect the diverse angles of sustainable development (Sauvant and Mann, 2019[17]). All agencies in the region put a special emphasis on promoting sustainable FDI. In particular, renewable energies are very actively promoted by EAC IPAs, as 86% of them seek to attract investments in this sector, notably for solar, wind and hydropower projects (Table 3.3). In comparison, in ECOWAS and SADC, only 67% and 63% of member countries prioritise renewable energies, respectively. While KenInvest does not actively target FDI projects in the energy sector, Kenya still enjoys a leading position in clean energy development, with more than 90% of the country’s on-grid electricity originating from renewable sources (US Department of State, 2023[18]).
Source: OECD compilation based on IPAs’ websites, 2024.
Other sustainable investments promoted include reforestation, sustainable agriculture and eco-tourism. For example, the National Investment Promotion Agency of the DRC seeks to attract investments to plant around three million hectares of forest by 2025 with the objective of removing three million tons of CO2 equivalent and generating more than 30 000 jobs. KenInvest works towards ensuring food security by promoting investments that make use of organic farming methods and embrace technological advances to enhance climate change resilience. The Rwanda Development Board offers investment opportunities in conservation projects and natural parks, such as the Volcanoes National Park Experiential Centre and the Kigali Cultural Village, as a means of conserving the country’s natural heritage while also diversifying tourism income and expanding research-oriented activities.
Several IPAs have taken additional steps to advance sustainable investment. KenInvest’s 2023-2027 Strategic Plan, entitled "Spearheading Equitable Investment-Led Transformation," includes strategic responses aimed at targeting different SDGs as part of its economic recovery strategies. The latter are designed to reposition the economy for steady, inclusive, and sustainable growth. Additionally, the Rwanda Development Board entered into a joint venture with a private company in 2019 for the development of the Gabiro Agribusiness Hub Project, a holistic and commercial agricultural ecosystem. By 2024, this initiative has attracted seven companies involved in the production of high-value crops aimed at enhancing food security, specifically targeting SDG 2 (Zero Hunger). The SDG Investments Tanzania Platform of the Tanzania Investment Centre provides another illustration. Developed in co-operation with the United Nations Development Programme, its goal is to mobilise sustainable investment by providing information on business opportunities with the potential to contribute to sustainable development. Zanzibar launched its Blue Economy Policy in 2020, which seeks to reap the economic benefits of marine and coastal resources to support economic growth, employment generation and investment attraction, without jeopardising the ecosystem. It targets the sectors of fisheries, maritime trade, energy and tourism.
3.2.3. Investment tracking is centred around simple assessment metrics
Beyond targeting investments in sustainable sectors, IPAs should track their contribution in attracting FDI and measuring its impact on sustainable development. Effective assessment can provide IPAs with vital information on the effects that foreign-owned firms have on job-creation, environmental protection and innovation generation (OECD, 2019[19]). To achieve this, EAC IPAs could capitalise on the SDGs as a basis for their prioritisation and monitoring and evaluation efforts. The Republic of Türkiye’s Investment Office provides a concrete example on how IPAs can draw upon the SDGs to adopt a scoring mechanism aiming at prioritising both incoming and current investment projects by weighing their contribution to the SDGs (Box 3.2).
In line with the national strategy of promoting quality FDI, the Investment Office of the Presidency of the Republic of Türkiye launched a new scoring mechanism, which prioritises investment projects based on five pillars: investment size, direct contributions, potential contributions, investor prestige and SDG compliance. For the last pillar, the IPA developed a survey made up of a series of simple questions on whether investors comply with specific SDGs through their investment project. The table below provides an illustration:
Based on the results of the questionnaire, the Investment Office then categorises investment projects, with higher priority given to those that score higher on sustainability vis-à-vis the other pillars. To ensure effective prioritisation and that the investment project aligns with sustainability objectives, the scoring mechanism is used for both ex-ante and ex-post analysis. The agency scores the investment project before the investor makes its location decision (potential investments), once the location has been decided (attracted investments) and after the project has been established (realised investments). As such, the scoring mechanism is also used as an impact assessment tool, supporting the Investment Office’s monitoring and evaluation efforts.
Source: Presentation delivered by the Investment Office of the Presidency of the Republic of Türkiye.
To use FDI to support the implementation of the SDGs, Partner States need to ensure that the indicators used by their IPAs to prioritise investments and to measure their outcomes are aligned with their overarching investment promotion strategies. IPAs need to rely on specific and consistent indicators – which must go beyond metrics relating to the number and value of investment projects or on the number of jobs created – to ensure that they attract the right investments and that the attracted FDI generates the desired outcomes. Some EAC IPAs have already begun developing holistic monitoring and evaluation frameworks. For instance, as part of KenInvest’s Strategic Plan: 2023-2027, an annual investment survey must be conducted to determine whether investment targets are contributing to Kenya’s Vision 2030 (i.e., Kenya’s national development plan). It includes specific strategic objectives and their respective outcome indicators, some of which address different aspects of sustainability.
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