Overview

The Kenya Investment Authority (KenInvest) has teamed up with Oxford Business Group (OBG), to produce the first country investment report. 

The report dubbed ‘Kenya 2014′ will provide insights on the country’s investment potential and opportunities, investment climate and the expected return on investment.Kenya Investment Authority Managing Director Moses Ikiara says the report will be used as the main attraction for  nvestors in the country as they look for independent information on the economic aspects.

“The signing of the Memorandum of Understanding (MoU) between KenInvest and OBG sets out respective institutional responsibilities towards the preparation of the report and other related products such as regular analytical pieces on Kenya’s economic and investment climate dissemination events,” Ikiara said.

He says the report will see investment to Gross Domestic Income (GDP) ratio increase to 32 percent from the current 22 percent.

“Currently , we are about 10 percent points off target. It is our hope and that the MoU we are signing with OBG will generate accurate and up to date information about the investment prospects in Kenya to enable us close the investment to GDP gap as soon as possible, ” he said.

On her part, OBG Country Director Annie Michailidou says the report will be about 250 pages in length and is geared towards the international investors to provide them with the information they need to make actionable decisions in all major sectors.

The major sectors include financial services, energy, agriculture, education and tourism among others.

Michailidou says the OBG group involved will spend eight months on the ground in the country speaking with hundreds of stakeholders in the public private and non-governmental sectors to gain solid understanding of what the real issues are, where the opportunities and challenges for investors lay.

She says Kenya has strong macroeconomic fundamentals with the 2012 GDP growth rate of over 4 percent with strong indicators for more growth to come.

She says that Kenya also benefits from a strategic location with direct access to East African Community (EAC) markets making it an industrial and transportation hub in the region.

“Investors around the globe are looking to diversify their holdings and tap into various investment opportunities in East Africa with indicators such as the interest rate dropping from 18 percent to 8.5 percent in one year and reduced political turmoil show that Kenya is making an active effort to be the preferred regional investment destination,” she said.

Economic Updates

Housing drive puts Kenya construction on growth path

27 November 2014

Major investments in housing and infrastructure have set Kenya’s construction industry, which accounts for 4% of GDP, on course for sizeable expansion in the near term..Read More+

14 August 2014

In a move to tap into its vast geothermal energy resources, Kenya recently invited bids for the construction of two new power plants, representing another step forward in its 2017 target to boost electricity production by 5000MW.Read More+

Kenya devolution still evolving

9 Jul 2014

Devolution in Kenya is still in its early stages, and there have been growing pains with complications relating to funding and concerns over governance, but a spate of new initiatives is looking to increase momentum at the county level on both industrial and social development indicators.Read more+

 Initial public offering to boost Kenya’s capital markets

 25 Jun 2014

 The Nairobi Securities Exchange (NSE) is set to demutualise in the coming months and sell equity in an initial public offering, an important step in Kenya’s plan to grow its financial sector. The move sets the stage for the next steps of its capital markets master plan, which will introduce new alternative instruments, including derivatives, futures, and real estate investment trusts (REITS) in years to come.Read more+

 Kenya pursuing manufacturing growth

05th June 2014

Kenya’s government is currently considering the final iteration of a bill that would establish three special economic zones (SEZs) within the country. The SEZs will allow lower levels of taxation and fewer regulatory hurdles, and will focus primarily on industrial activity, in particular textile production. Read more+

Kenya looks to private investors to finance transport infrastructure

 28th April 2014

 The project involves the rehabilitation of around 160 km of the existing rail system within Nairobi, as well as
 the construction of a new line to the Jomo Kenyatta International Airport.Read More+

 Harnessing ICT for development in Kenya

Kenya | 27 Mar 2014

Having already benefited from initiatives such as mobile banking service M-pesa, Kenya’s commitment to further develop the information and communications technology (ICT) industry is expected to create opportunities for private sector investors. Read more+

Kenya’s mining sector shows promise but shifting regulations concern investors
20 Jan 2014

A nascent mining industry is forming in Kenya, with the first large-scale mining project expected to begin exports this month, although a spate of changes to the regulatory framework over the past 18 months has made for a tighter operating environment for producers. Read more+

 Kenya looks to new markets to boost tourism

18 Dec 2013
A number of new initiatives are under way to help Kenya achieve its goal of 3m tourists by 2017. In particular, the Kenyan Tourism Board (KTB) is prioritising new markets in Asia and the Middle East to diversify away from its traditional markets in Europe and North America. Read more+

 Kenya gears up to boost agricultural production and exports

11 Dec 2013
A national drive to increase food production in Kenya is gathering strength, as the government moves to streamline the regulatory environment and roll out major initiatives aimed at supporting farmers, in line with its long-term vision.Read More+

Expanding mobile money programmes in Kenya
25 Nov 2013

Over the past six years, Kenya has posted significant growth in mobile phone financial services, and the medium-term outlook looks equally encouraging as operators move to offer traditional banking products such as savings accounts and loans. With the sector gradually converging with conventional financial services, the central bank is moving to strengthen its regulatory oversight, which could alter market dynamics.Read more+

 Recent discoveries in Kenya highlight oil and gas potential

4 Nov 2013
Kenya’s run of geologic luck continues, following the announcement of the country’s fourth consecutive discovery of oil by the UK’s Tullow Oil and Canada’s Africa Oil. Similarly, while activity in the natural gas sector is proceeding at a slower pace, following the recent departure of one explorer, the outlook for new finds is promising.Read more+

 Kenya looks to boost exports

10 Oct 2013
The IMF has predicted that Kenya’s current account deficit will improve this year, although its exports remain vulnerable to exogenous factors. As the government looks to boost its overseas sales, it must also work to encourage its two main trading partners – the EU and the East African Community (EAC) – to finalise a planned trade agreement to ensure it maintains preferential access to European consumers.Read more+

News

Kenya Year in Review 2013
20 Jan 2014
Last year Kenya saw robust economic growth, thanks in part to a smooth conclusion to the March presidential elections as well as to the discovery of new hydrocarbon deposits and aquifers. Planned reforms and devolution look set to improve the overall business environment over the course of 2014, although the East African nation still faces challenges, including the end of tariff exemptions for key exports to the EU and continued instability in its northern neighbours.

The IMF estimates GDP growth for 2013 at around 5.9%, with expansion forecast to continue at a healthy pace in 2014, rising to 6.2%. Growth came on the back of rising domestic consumption as well as an increase in capital inflows, brought about in part by an increase in infrastructure activity. It was not all smooth sailing however, particularly for the agriculture sector, which accounts for around a quarter of GDP. The country is a major producer of flowers, tea and coffee, which represent the country’s second, third and fourth largest foreign-exchange earners respectively. Although production in the first part of the year increased and revenues were comparatively stable, a decline in international prices for cash crops combined with droughts in the east and northeast, and outbreaks of disease, made for a much tighter environment for farmers.

The Westgate shopping centre attack in September also represented a major concern for the country’s economy, but fears of investor flight did not materialise – as of late December, the value of the NSE All Share Index was up around 10% since the attack.

Indeed, headline indicators in most sectors were generally fairly strong. In the financial sector, the Nairobi Stock Exchange (NSE) boomed last year, with the value of the NSE All-Share Index up nearly 45% for the year-to-date as of late December. Looking ahead, 2014 should bring more opportunities for financial investors seeking exposure to the country, through the planned issue of the first Kenyan Eurobond. The government reportedly aims to raise $1.5bn through the bond, making it sub-Saharan Africa’s largest debut issue to date. The funds will be used largely to finance infrastructure developments.

The government has also overseen a gradual devolution of power to a new set of governmental entities. Shortly after Uhuru Kenyatta’s narrow victory during the presidential elections in March – which avoided a repeat of the violence that followed the previous round of polls in December 2007 – new county-level governments were established, as set out by the 2010 constitution, with local authorities now responsible for administering some tasks previously carried out by the central government. Although concerns have been raised over the governance capacity of the new counties, it is hoped the devolution will help improve local oversight and strengthen development, particularly in rural areas.

Important natural resource discoveries
The economy received a major boost from a series of underground developments. In September the government announced the discovery of two large water aquifers in the arid Turkana region in the north-west. Together these are estimated to contain around 250bn cu metres of water, more than 80 times the country’s annual consumption. Furthermore, the aquifers have an estimated annual recharge rate of 3.4bn cu metres, exceeding estimated yearly usage, suggesting they can be drawn upon for an indefinite period.

The burgeoning oil industry also saw important new finds. Following two discoveries by partners Tullow and African Oil at wells in the Lokichar basin in Turkana in 2012, the two companies together struck oil in three more locations in the basin in 2013, in July, September and November. Commercial production of oil is expected to begin in 2016 and the discoveries have sparked interest in remaining licences from some of the largest international energy firms.

Global and regional trade
2014 will prove a crucial year for exporters, who have been grappling with the low levels of growth in the EU, the country’s primary trading partner. Agriculture accounts for a large share of exports, which overall were down 0.7% in the first nine months of the year on the same period in 2012. Exports to Europe, which accounted for around 40% of overseas sales in 2012, may come under further pressure in 2014, with the EU saying it could terminate a temporary trade agreement with the East Africa Community (EAC), of which Kenya is a member, this year.

Without special terms, Kenya will face tariffs of up to 16% on its exports to the EU under the General System of Preference. The higher tariffs are based on Kenya’s UN classification as a “developing country”. The other members of the EAC – Uganda, Tanzania, Rwanda and Burundi – are classified as “least-developed countries”, and so can continue to export goods to Europe with no duties or quotas under the EU’s “Everything But Arms” initiative.

Meanwhile, efforts continue apace to further integrate the EAC community. Among other initiatives aimed at reducing non-tariff trade barriers, a single Customs territory among Kenya, Rwanda and Uganda came into effect in September. At the 15th EAC Summit, held in Uganda in December, leaders of the five member states endorsed a monetary union protocol, which will pave the way for a common currency. According to a joint statement read at the conference by Kenyatta, who recently took over the group’s chairmanship, a single currency will reduce transaction costs and minimise currency fluctuations, boosting levels of trade and investment.