Markets & Finance

Western companies top list of investors in Kenya

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Key drivers of FDI inflows are planned investments in infrastructure such as the Konza technopolis, roads, energy and the standard gauge railway. Photo/FILE

UK and US investors remained positive about Kenya’s economic prospects in the 15 months to April despite recent diplomatic spats between Western governments and Nairobi, latest data from the investment authority shows.

Joint ventures by companies and individuals from the two countries, which have traditionally been Kenya’s leading sources of foreign investment, planned Sh37 billion worth of capital investments for the country with the potential of creating 8,200 jobs.

Co-investors from the US and Canada were second with Sh17 billion worth of proposed investments expected to create 7,658 jobs.

The two top groups of investors constituted more than 80 per cent of all jobs expected out of foreign investments plans received between January 2013 and March 2014 despite Kenya’s openly stated Eastbound foreign policy.

Gitahi Gachahi, the chief executive of audit and financial advisory firm Ernst & Young, said Kenya was a beneficiary of the larger sub-Saharan Africa (SSA) economic growth story that continues to attract a steady flow of foreign direct investments.

“We know that most of the world’s fastest growing economies are in sub-Saharan Africa and though Kenya is not among the top 10, it has since 2007 remained among Africa’s top 20 recipients of FDI,” he said.

Indian billionaire Mukesh Ambani’s Delta Corporation East Africa was the single largest investor. It planned to spend up to Sh76 billion in Kenya’s real estate sector.

Mr Ambani last year acquired 10 plots valued at nearly Sh3 billion in Nairobi for commercial and residential estate development – a deal that is expected to employ 865 people.

Nigerian billionaire Aliko Dangote’s cement manufacturing concern was the second single largest investor with a Sh35.2 billion ($400 million) investment plan that would employ 616 people.

“Some of the companies that have proposed to start work in Kenya have acquired licences. What is remaining is for them to break ground and we expect that it will happen soon,” said Moses Ikiara, the Kenya Investment Authority (KenInvest) chief executive.

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Dr Ikiara said the large pool of skilled labour and youthful population were among the reasons foreign investors are keen on Kenya.

Key drivers of FDI inflows are planned investments in infrastructure such as the Konza technopolis, roads, energy and the standard gauge railway, he said.

KenInvest data, however, captures only part of the FDI picture as law firms, audit and financial advisory companies sometimes manage FDI inflows without reference to the investment authority.

Kenya’s diplomatic relations with Western governments, especially the United Kingdom, have been frosty in the past couple of years but the data appears to show a steady growth in investment from the European nation that colonised Kenya for nearly 100 years.

Diplomatic relations between the two countries hit a new low last month after the UK warned its citizens against travelling to Kenya. Local officials have termed the advisories, issued in the wake of sustained terrorist attacks, as ill-advised.

Since coming to power in April last year, President Uhuru Kenyatta has followed in his predecessor Mwai Kibaki’s footsteps by striking multi-billion shilling deals with Chinese and other Asian nations.

The volume of proposed investment by Western companies, however, indicates that foreign investors continue to plan with profit or returns in mind rather than the diplomatic rows.

That outlook may come in handy for Kenya as it markets the debut Sh132 billion sovereign bond that is expected to be largely taken up by European and North American investors.

National Treasury officials are currently in the US on the first leg of the campaign for the Irish Stock Exchange-listed Eurobond.

The Treasury said in a Kenya Gazette notice last month that it had waived withholding tax for the bond investors as part of a raft of sweeteners.

The KenInvest data shows that the agricultural sector is the most attractive to foreign investors going by proposed investments in the sector.

By end of March 2014, the sector had attracted Sh37.1 billion worth of investments followed by energy with Sh21.8 billion.

The manufacturing sector attracted proposals worth Sh19.7 billion while tourism and services got Sh2.8 billion and Sh2.2 billion worth of investments, respectively.

Last October, consumer goods manufacturer Unilever proposed to invest Sh18 billion ($205 million) in a new Kenyan plant helping raise the UK’s capital targeting East Africa’s largest economy.

Hill International, a US business services company, in February proposed to establish a Sh616 million ($7 million) investment in the local scene while the automotive components seller Robert Bosch of Germany filed a Sh211 million investment proposal with Kenyan authorities.

The list of major investors included warehousing and storage firm Bollore Africa Logistics with a Sh17 billion proposal, electronics consumer goods manufacturer Royal Philips of the Netherlands with an Sh801 million ($9.1 million) plan and financial services provider Stichting DOB Equity of the Netherlands with Sh968 million.

The list also included metal manufacturers GZ Industries of Nigeria which has proposed to bring in Sh8.8 billion ($100 million) and employ 966 people.

The appeal of Africa’s leading cities in terms of doing business was also seen to be a factor in FDI flows.