Global firms pitch camp in Nairobi to tap new markets
Nairobi, Kenya, is set to become a regional investment hub for major multi-national companies setting up base for a slice of the East African market. Photo/ANTHONY KAMAU
Leading global conglomerates have opened regional head offices, retail outlets and manufacturing plants in Nairobi, raising Kenya’s status as the commercial hub for the wider East and Central Africa.
The capital has benefited from regional integration efforts and the country’s outward looking policies.
The entry of more multinationals in the economy has added lustre to a country that has since the 1980s struggled to attract and retain new investments as single party politics, a regulated economy and inertia to reform combined over time to put off foreign capital looking for stable markets and decent returns.
With investors in developed markets increasingly looking to balance portfolios through interests in high-return frontier economies, Global Visa International and Panasonic are the latest to announce plans to base their launching pads to the wider sub-Saharan Africa through Nairobi.
“Panasonic will this year concentrate on Africa, with the company looking to establish regional offices in Kenya and Angola by the end of the year,” said Seiji Koyanagi, managing director of Panasonic Marketing Middle East.
They join more than a dozen companies including Nokia Siemens Networks, Airtel, Nestle, and PepsiCo that have picked Nairobi as their centre of operations in the continent as multinationals seek physical presence and local intelligence in markets where they previously relied on correspondents.
“The West has high appetite for the African market and where else is better to enter it than Kenya? Kenya has the necessary pool of talent, sufficient democratic space and is strategically located,” said Mr James Muratha, regional director, Stanbic Investments (E.A.) Ltd.
It is not lost that most of the companies are hiving off Africa operations from their Middle East and Asia or Northern Africa and Mediterranean departments, underlying the importance of the continent as a business unit with unique challenges and opportunities.
In terms of co-ordination activities Nairobi is steadily gaining from Dubai and South Africa which despite being communications nodes of repute, rising costs for expatriates and hostilities from local communities have respectively served as want away factors.
In contrast, Kenya boasts one of the most skilled populations in Africa and is well served by a network of international sea and air ports, which enable easy connections to the land locked Great Lakes region, newly independent Southern Sudan and direct flight links to Europe, Middle east and Asia.
New Constitution
“The Kenyan airport now rivals South Africa since it is easy for them to connect to the North and South. The passage of the new constitution has also boosted the investment climate that is making Nairobi very attractive to these multinationals who have identified Africa as their last investment frontier having exploited Asia and the USSR,” said Mr Sammy Onyango, CEO of Deloitte East Africa.
Through a railway and road infrastructure that is now undergoing earnest upgrade, investors are assured of easy access to markets for finished goods and raw materials as well as convenience for personnel engaged in assignments in countries like Uganda, Rwanda, Burundi, South Sudan and DR Congo.
These factors have seen billions of shillings injected in the country with positive impact on job creation, technology transfer, and pulling of feed-off enterprises to the Kenya economy which is increasing being driven more by the service sector though agriculture remains its backbone.
Nokia Siemens Networks which recently relocated its African headquarters from Dubai to Nairobi with its eyes cast on the planned upgrade of regional mobile networks to 3G and 4G platforms says it will raise its establishment in Nairobi by 30 more heads to 250 this year, more than doubling its staff from 109 in 2009.
Swiss beverage and nutrition food giant Nestle has also opened a regional head office at Athi River to spearhead its operations in 20 Equatorial Africa Region including Kenya, Uganda, Congo, Congo Brazaville, Angola, Madagascar among others.
The entity is operating as Nestle Equatorial African Region EPZ, and is being run besides Nestle Foods Kenya, heralding competition in the food processing segment that will overtime enhance quality and slow potential surge in prices.
The entry of the multinationals is also set to renew competition with their local counterparts and this could result in high quality products and services to the benefit of consumers in the region.
“There will be competition with the local companies and it will be crucial for companies to improve on quality of their products. But these companies are more interested in the South Sudan market and are looking at riding on the existing good ties between Kenya and South Sudan,” said Mr Reginald Kadzutu, the head of Fund Management at Amana Capital.
The entry of multinationals could also generate fresh demand for office space and housing to settle their employees.
Bharti Airtel plans to invest Sh12 billion on its network in Kenya, including the construction of its headquarters in Nairobi.
The firm says it will employ about 1,000 people to run its call centre.
But it is the government that stands to be the greatest beneficiary through taxes.
“These companies will provide an alternative source of taxes giving the government a headroom to lower taxes,” said Mr Onyango.
US beverage giant PepsiCo, which stopped bottling in Kenya under competitive pressure in the 1970s is putting up a Sh2.4 billion plant off Thika and Baba Dogo roads which will employ at least 300 people once completed.
Reorganise operations
Its rival Coca-Cola has responded with a Sh5 billion investment plan and reorganised its African operations to make Nairobi headquarters responsible for 39 countries.
“Efforts by the government in reform and infrastructure upgrade over the last six years have given us confidence and optimism about doing business here,” said Ahmet Bozer, the company’s Eurasia-Africa Group President in a statement.
