Nairobi’s Garden City Mall. The minting of fresh millionaires means that there is more money to be spent in up market retail stores. PHOTO | FILE
What you need to know:
The African Economic Outlook 2016 report says that Kenya is among the countries with no significant natural resources that are receiving significant FDI inflows targeted at their consumer-oriented sectors.
Kenya received Sh190 billion ($1.9 billion) in foreign direct investment (FDI) last year as rising income levels offer a market for growth and opportunities for better returns.
The investment is 65 per cent higher than the Sh115 billion received in 2014, data from the African Development Bank (AfDB) shows.
The African Economic Outlook 2016 report says that Kenya is among the countries with no significant natural resources that are receiving significant FDI inflows targeted at their consumer-oriented sectors.
“Kenya’s investment has risen from US$500 million (Sh50 billion) in 2013 to USD$1.9 billion (Sh190 billion) in 2015,” the report says.
“Several countries without significant resources are attracting investors, including Kenya, Tanzania and Uganda, reflecting the shift towards consumer goods.”
The rise in the number of people with higher disposable income has attracted foreign investments in sectors such as retail and real estate.
Among the retail stores that have recently set up shop in the country is South African firm Massmart which trades as Game establishing its first store in Garden City in March last year.
French retailer Carrefour which last week opened its first store in Karen’s The Hub is also looking to open a second one at Two Rivers Mall. Botswana retailer Choppies Enterprises also acquired Ukwala Supermarket’s 10 stores at a cost of Sh1 billion.
Among the recent real estate deals is the purchase of a 40 per cent stake at a cost of Sh6.4 billion in Two Rivers Mall by UK-based multinational Old Mutual.
A recently- released wealth report shows that the number of super wealthy individuals in Kenya had risen from 5,300 in 2007 to 8,500 by the end of last year with their wealth almost doubling.
The miniting of fresh millionaires means that there is more money to be spent in the glitzy retail stores as well as purchase real estate including a second home.
“Lower-tier millionaires in Kenya have a high propensity to hold cash and residential real estate,” the wealth report says.
The report adds that Kenya had Africa’s third largest luxury markey valued at Sh40 billion. This includes luxury cars, yachts, private jets, personal luxury goods (which includes watches, clothing, accessories and jewellery) and luxury hotels and lodges.
Kenya’s FDI inflow was however outpaced by neighbours Tanzania (Sh230 billion) and Ethiopia (Sh210 billion) while Uganda received Sh130 billion.
University of Nairobi economic lecturer X.N Iraki said that Tanzania benefitted more due to its minerals while Ethiopia has a better investment climate.
“For Ethiopia, a large market and very friendly policies are attracting lots of FDI,” he said.
The AfDB said that Ethiopia’s FDI is mainly in labour-intensive areas.
Ethiopia has slowly been opening up to foreign investment in the manufacturing and retail sectors.
“Although the 32 projects launched there in 2015 accounted for only 4.4 per cent of total investment in Africa, these made up 18.5 per cent of the jobs from the FDI in Africa,” the report adds.
Dr Iraki said that despite the increase in FDI, bad publicity from terrorism to corruption may be affecting Kenya’s attractiveness to some investors.
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