Roll out red carpet, not red tape for investors

With a challenging economic outlook ahead, international investment into East Africa and its people is more important than ever.

The energy sector is primed for such investment. In fact, it has been a focus sector for many years, as evident in the ambitious public targets and projects of countries in the region such as Kenya’s Big 4 Agenda and Vision 2030, Ethiopia’s Growth and Transformation Plan II, the development of the South Sudanese National Electricity Bill and the Ruizizi III hydroelectric power project which will provide power to Burundi, Eastern DRC and Rwanda.

Any incentive must be carefully considered and applied. Governments must fully understand the implications of offering (or revoking) such incentives and the impact such decisions can have on projects at various stages of commissioning. March 2020 saw the Kenyan Government assenting to pandemic-related tax relief, but the relevant amendment Act simultaneously revoked VAT concessions relied on by power generation companies. For projects in the planning stages, such a change may both affect financial feasibility and impact investor appetite to commit, as it can highlight to investors that a favourable tax position is not guaranteed for the life of the project. For a long-term investor, preservation of the status quo on taxation is equally as important as the need for regulatory stability and certainty.