Kenya surges to second place in Africa FDI ranking

Kenya has registered one of the fastest rates of foreign direct investment (FDI) growth over the last seven years.

A report released by consultancy firm Ernest & Young last week says the growth of inflows to Kenya has been one of the fastest in sub-Sahara Africa, and is only second to Ghana’s.

“Two prominent examples are Ghana and Kenya, which have jumped from the bottom half of the top 10 rankings in previous years. In 2013, these two countries featured in the top four, registering compound annual growth rate (CAGR) of more than 40 per cent each in FDI projects, since 2007,” says EY’s Attractiveness Survey Africa 2014.

The country’s FDI average growth between 2007 and 2013 was 40 per cent while Ghana’s stood at over 50 per cent in the same period.

The report said FDI flows are primarily going into retail and consumer products, telecommunications, technology, media, minerals, oil and natural gas sectors and are mainly from the UK, US and India.

EY’s report says the growth rate is earning Kenya the status of an FDI hotspot, joining Ghana, Mozambique, Zambia, Tanzania, Uganda, Nigeria and Rwanda.
For Kenya, foreign money is targeting businesses that are servicing firms catering to the growing middle class with an appetite for spending.

“Increasingly, investors have been targeting Kenya as a springboard to growing East African consumer markets,” said the report.

The findings mirror sentiments from an earlier report by the consultancy’s competitor, Deloitte, which said a majority of investments by private equity firms will mainly be in small and mid-size businesses servicing the consumer class.

“Going forward, deals are expected to concentrate on SMEs in the consumer driven sectors, where an expanding middle class is seen as a key driver of future revenues,” said Deloitte’s regional private equity survey for East Africa.

Publicly announced private equity deals since the beginning of the year have so far been reflective of the findings of both reports.

Private equity firm Fusion recently invested in Gal Bakeries and Dutch firm TBL Mirror Fund invested in Neo Amadiva, a high-end chain of salons whose customers are middle class.

Real-estate investments in shopping malls, also targeting the growing consumer class, have increased as seen by the mega malls in the pipeline.

Garden City Mall, which is being built along Thika Road, will be the largest mall in the region at 50,000 square metres.

Centum is also putting up a shopping mall on its Two Rivers Project while the Hub, in Karen area of Nairobi County, will add retail space.