Oil, gas discoveries boost FDIs to Dar, Kampala

Buoyed by oil and gas discoveries, Tanzania and Uganda have recorded an increase in foreign direct investments (FDIs) for 2012 against the global trend that saw investment inflows declining.

The just launched World Investments Report for 2013 shows that the two neighbouring countries were the favourite of foreign investors in the region, attracting the most FDIs particularly in oil, gas and mining sectors.

The report released in Dar es Salaam by the UN Conference on Trade and Development (UNCTAD) shows that Tanzania registered 38.77 per cent increase in FDIs from 1,229.4 million US dollars in 2011 to 1,706 million dollars in 2012.

The report shows Uganda’s FDI inflows increased by 92 percent from 894 million dollars in 2011 to 1,721 million dollars in 2012, topping the East African region. For both countries, the rise in investments is seen to have been boosted by the recent discoveries of oil and gas.

Tanzania has so far made gas discoveries of about 42 trillion cubic feet (tcf) in five onshore and offshore gas fields in the southern regions of Lindi and Mtwara. Prospects are high for increased foreign direct investments as the East African country expects in the next few years to become a major energy exporter.

At present, gas fields in Songo Songo and Mnazi bay generate about half of power for the national grid.
Uganda struck oil in 2006 and it estimates its crude reserves at 3.5 billion barrels. The East Africa's third largest economy aims for commercial output of the resource by 2016 at the earliest.

Among the key findings of the 2013 report is for the first time ever, developing economies absorbed more FDIs in 2012 than developed countries.  In addition, the developed countries generated almost one third of global FDI outflows. They accounting for 52 per cent of global FDI flows.

This is partly because the biggest fall in FDI inflows occurred in developed countries, which now account for only 42 per cent of global flows, the report shows.
FDI flows to developing economies proved to be much more resilient than flows to developed countries, recording their second highest level to US$703 billion.

On the continental level, the FDI trends show Africa experienced FDI increase in 2012 while global FDI fell by 18 per cent. It bucked the trend with inflows increasing 5 per cent to $50 billion.

The West Africa had the biggest share of investment but its flows to the region declined by 5 per cent to $16.8 billion largely due to decreased investment in the continent's top oil producer Nigeria. Its FDI inflows fell from $8.9 billion in 2011 to $7 billion last year due to political insecurity and a weak global economy.

FDI flows to South Africa slumped 24 per cent to $4.6 billion in 2012, largely due to a foreign mining company offloading its stake in a South African subsidiary, the report said.

However, inflows to its neighbour Mozambique doubled to $5.2 billion as foreign investors have developed huge offshore gas and coal deposits.
FDI to central Africa surged 23 per cent to a record $10 billion.

However, in general terms global foreign direct investments declined in 2012. The findings show the global FDI flows declined in 2012 to below the pre-economic crisis level, due mainly to macroeconomic fragility and policy uncertainty for investors.

According to the findings, the global FDI recovery that started in 2010 and 2011 will now take longer than expected.
“The road to FDI recovery is thus proving bumpy and may take longer than expected,” the report suggests.
Source: The Daily News, reported from Dar es Salaam, Tanzania
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