Kenyan firms usurp foreign investors in new projects drive

Foreign investors are pumping billions into the tourism sector emboldened by stabilisation of internal politics and improvement of governance structures.

The sector attracted a total of Sh9.2 billion in new capital in the 12 months to June last year compared to Sh3.3 billion a year earlier, with foreign investors accounting for nearly all of the capital increase.

Analysts say tourism is set to see more investments, helped by economic recovery and a positive business environment.

“The setup of the coalition government and the adoption of the new Constitution are two developments that have entrenched peace and boosted Kenya’s governance, thus assuring foreign investors,” said Mr Jake Grieves-Cook, the immediate former chairman of the Kenya Tourist Board.

“There has been an increase in scheduled flights from Europe to Nairobi in tandem with an increase in tourist numbers in the past 12 months and these factors boost the prospects of high returns for investors,” he said, adding that Nairobi has been the biggest beneficiaries of the new investments.

At least seven five star hotels have opened shop in the capital over the past two years including Ole Sereni, Tribe Hotel and Crowne Plaza--leaving the city with additional 2,000 beds.

International arrivals are expected to reach a high of 1.2 million in 2010 with earnings reaching Sh100 billion, beating the 2007 benchmark of 1.04 million arrivals and earnings of Sh63.5 billion.

The ICT sector has recorded a decline in new investments, with analysts saying the lull is normal.

New capital investment in the sector dropped to Sh157 million in the 12 months to June last year, from a high of Sh9.2 billion a year earlier.

“In the 2008/09 period, there were massive new investments in infrastructure, including submarine cables and inland fibre optic lines, leading to the sharp increase in foreign capital inflows,” said Muriuki Mureithi, an analyst at Summit Strategies, an ICT consultancy firm.

The government and private sector investors have invested billions in Seacom, TEAMS, and Eassy sea cables that have been completed, connecting Kenya to high speed global internet.

“After the heavy infrastructural investments, players in the sector are now consolidating their businesses, focusing on quality of service and innovation,” Mr Mureithi said.