The investors say Kenya and Africa, in general, have a myriad of glaring opportunities that need to be tapped.
Last December, the African Import and Export Bank (Afrexim Bank) said it wants to pump money into Kenyan firms in various sectors as the Pan-African lender eyes an increased role in the Kenyan economy.
Despite mounting concerns on political and business risks associated with the looming August 2022 general election and the Coronavirus crisis, global private equity firms are pumping billions into the Kenyan economy as they look to reap returns in the medium to long term.
The private equity (PE) firms — a class of investors keen on maximising profits — have stepped up their focus on Kenyan companies renewing hopes that Nairobi is back on the global radar as an investment hotspot.
An increasing number of PE firms are now competing to unlock billions of investment deals in Nairobi.
The investors say Kenya and Africa, in general, have a myriad of glaring opportunities that need to be tapped.
“Africa is the place to be for European development financiers. It is a continent where jobs and investments are very much needed, and at the same time, it is the new frontier where opportunities abound, and life is getting better for millions of people,” Finnfund chief executive officer Jaakko Kangasniemi explained recently while underlining why Finland’s sovereign wealth company Finnfund has chosen Nairobi as a launchpad for its regional operations.
“Some of our best and most impactful investments are in East Africa, and we intend to make many more such investments in the coming years.”
Mr Kangasniemi spoke when Finnfund opened a regional office in Nairobi seeking to expand its portfolio in the local market where it has already made several investments.
The fund usually invests between €200 million (Sh25.9 billion) to €250 million (Sh32.4 billion) in 20 to 30 companies throughout developing countries.
It targets profitable, privately owned businesses in areas such as renewable energy, sustainable forestry, sustainable agriculture, financial institutions as well as digital infrastructure solutions.
The fund said it will deploy two to three investment professionals at the Nairobi office to scout for opportunities.
Finnfund has invested billions of shillings in 17 companies operating in Kenya including Elgon Road Developments, Penda Health, Sanergy Inc, and Lake Turkana Wind Power.
“The regional office will play a central role in strengthening our position in the East African market,” said Johanna Raehalme, the head of the Nairobi office.
“The location supports and streamlines the follow-up of the regional market and existing projects and collaboration with co-investors.”
But Finnfund is not an isolated case as more firms have stepped up investments in Kenya.
The Finish fund has followed other sovereign wealth funds in setting up a regional office in Nairobi in the recent past with eyes on local deals. Others who have done so include Proparco (French), DEG (German), CDC (UK) and FMO (Dutch).
The above funds say they see a new promise in Nairobi. But they are not alone.
A group of 30 technology entrepreneurs with links to Silicon Valley for instance recently raised $200 million (about Sh22 billion) for investing in promising tech start-ups in Kenya and elsewhere in Africa.
The new Africa-focused fund backed by Stockholm-based Norrsken fund said it will target to provide early-stage funding to promising start-ups and founders in Kenya and the region, the Swedish fund said.
It did not immediately however clarify how much of the war chest will be channelled into Kenya.
It however said Nairobi is the new place to be for global investors.
“Eyes are turning towards Africa as the next epicentre for digital disruption. Technology is enabling emerging enterprises to leapfrog legacy ways of doing business. Leaders are emerging but a lack of growth capital is holding them back,” explained Ngetha Waithaka, a general partner of the new fund dubbed Norrsken22.
“Africa has a population of 1.2 billion, where 60 percent are below 25 years old. In the next decade, this young, digital-first generation will change not only the future of Africa but of the world,” said Niklas Adalberth, founder of Norrsken Foundation in a statement echoing similar observations by other funds.
The International Finance Corporation (IFC), the investment arm of the World Bank, underlined these sentiments recently pointed out that it is training its investment guns on Kenya.
IFC managing director Makhtar Diop during his tour of Kenya said it is eyeing housing, pharmaceutical deals with the Kenyan private sector.
IFC has already invested in about 125 local firms so far, acquiring significant stakes in some companies, but with most of the investments in the form of long-term loans.
In recent months, the multilateral lender has invested billions of shillings in Kenyan companies such as Co-op Bank, Equity and KCB cementing its role as one of the most prominent foreign institutional investors in the local market.
Last December, the African Import and Export Bank (Afrexim Bank) said it wants to pump money into Kenyan firms in various sectors as the Pan-African lender eyes an increased role in the Kenyan economy.
Afrexim, which finances and promotes African trade, said it will work with both government and private sector to bankroll various projects in need of funding.
“We are looking at providing support in different areas,” said Afrexim director and global head of client relations Rene Awambeng.
Afreximbank has in the past decade financed several local big-ticket deals, including debt to national carrier Kenya Airways.
But what is leading the investment binge?
Recent studies have noted that the improvement in ease of doing business, high return potential across all sectors, a well-diversified economy and consolidation in sectors such as financial services has created an avenue for increased PE activity.
In the financial services, several analysts have said they expect consolidation in the banking industry and innovations to be the main drivers of activity.
Besides security assurances, Nairobi is seen to hold other key strategic advantages which are likely to sustain the investments.
Kenya’s FDI attraction has been helped by its status as the region’s financial centre, and a hub for many multinationals doing business in the region.
President Uhuru Kenyatta’s administration has over the years been making efforts to create a regional financial hub in Nairobi.
Potential benefits of hosting multinationals and corporates in a country include investment in buildings, rents and employment.
