Auto firm sets up regional headquarters in Nairobi

Japanese conglomerate Toyota Tsusho Corporation has established a regional headquarters in Nairobi, setting the stage for big-ticket investments in Kenya and its neighbouring states.

The new office will search for investment opportunities in the energy, oil, agricultural, and health sectors as the company ramps up its local portfolio of investments.

It is the latest multinational to establish its regional headquarters in Nairobi, asserting the country’s position as a favourite investment destination in Eastern Africa.

“The establishment of a hub in East Africa will provide access to countries surrounding the EAC and new business opportunities in those countries too,” Toyota said in a statement.

The firm’s existing local investments include a new vehicle dealership (Toyota Kenya), used car sales (Toyotsu Auto Mart), and its contract to build KenGen’s Olkaria I and IV geothermal plants that will produce 280 megawatts of power.

It has made a bid to construct the proposed Lamu-Juba oil pipeline that is estimated to cost $5 billion, with the firm eyeing major investments in the regional pharmaceutical distribution and commercial agriculture.

Toyota says the restructuring is aimed at taking advantage of more investment opportunities created under the East African Community, an economic integration of five regional states.

The EAC common market is becoming increasingly important to investors, offering access to a market of 130-million people with free movement of factors of production.

“This integration is expected to further stimulate economic activity, and high growth is expected in the region in future,” Toyota said.

Its current and prospective portfolio of investments in Kenya and the region will be managed from the new office in Nairobi as opposed to South Africa as was the case previously.

The new operation, dubbed Toyota Tsusho East Africa, will succeed the current Kenya-focused office in Nairobi which is scheduled to be closed at the end of next month.

It will be in charge of the conglomerate’s business in Kenya, Uganda, Tanzania, Burundi, and Rwanda. Toyota says the East African office will in the long term have significant  interests in the automotive, logistics, chemical, farm mechanisation, and geothermal sectors.

The firm’s regional headquarters in Nairobi further boosts the capital’s profile as a regional investment hub, joining other multinationals such as General Electric, PepsiCo, and Beiqi Foton that have set up similar operations.

An influx of foreign direct investment is seen as critical in creating new jobs and boosting exports that in turn earn foreign exchange.

Analysts say Kenya’s strong points lie in the country’s relatively bigger economy, a highly-skilled labour force as well as its status as a regional transport and communication hub.

These have seen it take a significant share of manufacturing and distribution networks coming into the region.

For Toyota, the new office is the first step in making more investments in Kenya and in the regional market that is on the verge of major mineral resource boom, including Uganda’s oil and Tanzania’s natural gas finds.

KenGen’s was Toyota’s first major deal outside the motor vehicle business in Kenya, with the company leveraging on acquisitions and Greenfield investments to diversify into other areas.

Toyota and South Korean firm Hyundai Engineering are developing four geothermal power stations with a capacity of 70 megawatts apiece - two each at Olkaria stations I and IV.

Billed as the single largest geothermal project in the world, it will significantly expand KenGen’s current capacity of 158 MW from the cheap energy source.

Toyota’s new office comes at a time when the multinational has acquired its rival CFAO, giving it a direct presence in Africa’s automotive, pharmaceutical, food, and equipment business.

The deal, concluded in December, has tightened Toyota’s grip on the local automotive business and offered it an opportunity to expand its presence in other areas such as pharmaceutical distribution.

CFAO is one of the largest distributors of pharmaceutical products and services in Kenya and other African markets.

The acquisition has made Toyota the biggest dealer in Kenya’s new vehicle market with a total market share of 40 per cent. The buyout of DT Dobie and CICA Motors, subsidiaries of CFAO, has given it six franchises in total including Mercedes, Nissan, and Jeep.

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