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Uganda, Ethiopia, Tanzania top as Kenya investments abroad up 37pc
The latest State-commissioned foreign investment survey shows that the total stock of outward investment rose from Sh610 billion in 2022 to Sh834.2 billion in 2023, which stamped the fastest annual growth witnessed in recent years.
Kenyan companies in 2023 held assets abroad worth Sh834.2 billion, marking a 36.8 percent increase from the previous year.
The most popular destinations were Uganda, Ethiopia and Tanzania, indicating that returns were better across borders than in the local market.
The latest State-commissioned foreign investment survey shows that the total stock of outward investment rose from Sh610 billion in 2022 to Sh834.2 billion in 2023, which stamped the fastest annual growth witnessed in recent years.
An outward direct investment is a business strategy in which a domestic firm expands its operations to a foreign country, and is common among firms that feel their respective domestic markets are saturated and that better high-growth business opportunities are available abroad.
Such outflows often boost a firm’s investment competitiveness and buttress long-term sustainable growth.
Uganda, Ethiopia, and Tanzania stood as the top destinations for Kenyan capital holding Sh104.6 billion, Sh101.9 billion, and Sh96.7 billion in foreign assets stock, respectively, with banks and telcos leading the push driven by younger markets and higher margins.
Other key targets for Kenyan investors included the Democratic Republic of Congo (DRC), Mauritius, and South Africa, with the top six countries accounting for more than half of Kenya’s outward investments in 2023.
“Notably, investments in these destinations increased in 2023, except Tanzania, which recorded a 6.6 percent decline in the stock of foreign assets,” says the report in part.
“At the end of 2023, the stock of assets held in the UK rose by 50.9 percent to Sh70.3 billion, largely on account of increased disbursements of currency and deposits, and loans. On the contrary, the stock of assets held in the US and the United Arab Emirates declined by 43.5 percent and 44.9 percent to Sh35.2 billion and Sh8.9 billion at the end of 2023, respectively.”
Large firms that have made significant investments through acquisitions in regional markets in recent years include lenders KCB and Equity in the DRC, Uganda, Tanzania, and Rwanda, as well as Safaricom in Ethiopia.
Last year alone, local firms more than doubled their fresh investments in foreign nations to hit $1.31 billion (about Sh169.1 billion at current conversion rates), marking a 122.8 percent jump from the $588 million (Sh75.9 billion) recorded a year earlier, according to a report by the United Nations Conference on Trade and Development.
However, in terms of investment inflows into Kenya, Sh242.61 billion for 2023, up from Sh118.19 billion in the previous year.
A survey conducted by the Central Bank of Kenya (CBK) and the Kenya Investment Authority showed that the bulk of the foreign direct investment (FDI) into Kenya in 2023 went into the technology sector, leapfrogging banks, factories, and retail stores to become the biggest recipients of foreign capital into Kenya.
The survey, whose findings were released last Wednesday, found that firms in Kenya’s fast-growing digital marketplace now account for more than a quarter of foreign direct investment flows into Kenya, up from less than 10 percent in 2020.
Investments in Kenya’s information and communication sector by foreign firms, largely through equity and investment fund shares, grew to Sh64.67 billion in 2023, up from Sh14.39 billion.
Investments in Kenya’s ICT space leaped ahead of key sectors such as finance and insurance, manufacturing, wholesale and retail trade, as well as the mining and quarrying sector.
“The information and communication sector was the largest recipient of FDI inflows, which increased by Sh26.8 billion to Sh64.7 billion in 2023, pointing to a sustained investor interest in Kenya’s digital economy and innovation landscape,” researchers for the 2024 FIS 2024 wrote in the report on Wednesday.
The FDI flows into the sector represented a 70.92 percent growth over Sh37.84 billion in the prior year, making it the fastest-growing recipient.
It was followed by manufacturing, whose flows grew 39.35 percent to Sh32.46 billion, and finance and insurance services at 34.96 percent to Sh45.32 billion.
The wholesale and retail trade sector, which was the biggest magnet for FDIs in 2022 with investments into retailers such as QuickMart and Naivas, posted a marginal 2.14 percent drop from Sh49.36 billion to Sh48.31 billion in 2023. The sector’s activities extend to the repair of motor vehicles and motorcycle services for the purpose of the FIS surveys.
