East Africa is one of the most diverse regions in Middle Africa, running from Ethiopia in the north to Tanzania in the south. The region has at its core the East Africa Community (EAC), made up of Kenya, Tanzania, Uganda, Rwanda, Burundi and South Sudan, and has close trade ties with Ethiopia.
Ethiopia and Kenya dominate East Africa, by virtue of their large populations and diversified economies. Kenya is one of Middle Africa’s most diverse exporters of soft commodities, led by tea, horticultural goods and coffee, while also acting as a trade hub, channelling flows of goods and raw materials into East and Central Africa, and exports of commodities out to world markets. Ethiopia is a major exporter of coffee and horticultural goods, and is rapidly emerging as a rival to Kenya as it undergoes massive investment in its infrastructure and industrial capacity. Tanzania could challenge both countries in the long-term as a regional commodity and trade hub, given the country’s expansive coastline, territory and rapidly growing population. The other countries in East Africa are relatively small players, with Uganda focused on its role as a transit hub for goods and services into and out of Central Africa, and Rwanda developing its role as a regional IT services hub. South Sudan remains a key trade corridor for goods transiting from East Africa to North Africa, but its potential has been greatly constrained by political instability.
The EAC has made huge advances in regional integration over the past decade, which has helped drive rising volumes of intra-regional trade and investment. Increased integration and the reduction in transaction costs should increase East Africa’s attractiveness to portfolio, private equity, and FDI investors.
East Africa is a highly diverse producer of soft commodities for the world market, with a major share of world exports of tea, horticultural goods, coffee and cashew nuts. The region is also a major exporter of gold, coltan and mineral ores. Recent discoveries of commercial quantities of hydrocarbons, both inland and offshore, could see the region become a major oil and gas player over the coming years.
East Africa has the second largest financial sector in Middle Africa, with an estimated 14.3% of the region’s banking assets in 2015, and is leading the way in financial innovation and the development of financial technology (Fintech). The runaway success of the M-Pesa mobile payment platform in Kenya, and the many services delivered to African consumers via this platform, are transforming Africa’s financial sector, both in East Africa and beyond.