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THE STATE OF EAST AFRICA REPORT SERIES

The State of East Africa Executive Report-2013

On Inclusiveness and Equity
The People of East Africa
The East African Economy
The State 8 of East Africa 2013
2011 was responsible for 79 per cent of the region’s total trade expansion and for 72 per cent of total trade in that year. Although exports increased by $1.76 billion they accounted for just 21 percent of that year’s trade growth and only 28 per cent of the region’s total trade in 2011, the lowest since 2005. The $18 billion value of East Africa’s top five imports in 2011 was more than twice as large as the $7 billion value of its top five exports. East Africa’s five most important export products can barely pay for its fuel bill.

East Africa attracted foreign direct investment (FDI) inflows of $3.9 billion in 2012, a $1.8 billion increase from $2.6 billion in 2011. With a combined total inflow of $3.4 billion, the two main energyrich countries of Uganda and Tanzania received 90 per cent of the investment inflows into the region.

In addition to the lure of the extractives sector, other investors in East Africa are targeting regional and domestic consumers with healthcare, financial services and cement production.

In 2011, the region received $8.3 billion in total net disbursements of aid up from $7.9 billion in 2010, and representing 18 per cent of total aid flows to sub-Saharan Africa for 2011. Uganda and Rwanda experienced aid cuts in 2012. This year also saw a shift in aid allocations by donors away from the poorest countries, towards middle-income countries. These are signs that declining aid flows to the region could soon be a strong feature of its economic relationship with donor countries.

Corruption continues to blight the landscape of East Africa’s most important institutions including those responsible for security and justice. The police account for 50 per cent of the most corrupt sectors in the region followed by the judiciary at 30 per cent. The police departments in all five East African Community states appear in the top ten most corrupt institutions, which points to the harsh reality experienced by many citizens in their dealing with law enforcement institutions in the region. When confronted with corrupt practices, few citizens in the region bother to make official complaints: In Kenya, only five per cent indicated that they reported incidents of bribery to the authorities. The figure in the other EAC member states was eight per cent in Uganda, 10 per cent in Burundi, 11 per cent in Tanzania and 15 per cent in Rwanda.There is a pervasive feeling that the economic conditions have worsened in the past five years.

In the 2012 Tanzania Afrobarometer Survey, 40 per cent of adults felt that current economic conditions in Tanzania were very bad, compared to 25 per cent in 2008. In 2012, 62 per cent of Ugandans felt that their living conditions were at least fairly bad compared to 42 per cent just two years earlier. In Kenya, 84 per cent of adults described the current economic conditions as either ‘very bad’ or ‘fairly bad’ in 2011, a 30-point jump from 54 per cent in 2005.Burundi is the least unequal country in the East Africa, followed, in order of rising inequality, by Tanzania, Uganda, Kenya and Rwanda. The trends in the last two decades point to Rwanda and Burundi reducing inequality more recently, albeit from a very high level in Rwanda. Kenya and Tanzania seem to be expanding the gap between rich and poor, while Uganda has kept it mostly stable for two decades.