High public debt levels and political risks will dim Kenya’s prospects as an investment destination in 2018, global consultancy ControlRisks has said in a new report.
ControlRisks says that while there are already signs of recovery after a tough political season, there are persistent risks that could affect decision-making by investors coming into Kenya.
Specifically, ControlRisks argues that tension between counties and the national government put off investors.
“The government will need to consolidate stability and focus on building effective working relationships with county governments to keep political risks at bay,” says ControlRisks in a statement.
Further, political threats to businesses will come from the increasingly cross-border nature of infrastructure projects which rely on the goodwill of multiple governments within East Africa.
ControlRisks further argues that the pending repayment of the first tranche of the Eurobond and strong appetite for external debts remain key risks for the Kenyan economy and a preoccupation for investors.
“While Kenya remains unlikely to default on its debt, growing interest payments and international banks’ shrinking appetite to provide further loans will result in lower public spending, which has been a key driver for economic growth in recent years,” writes the firm.
Kenya’s public debt has been ballooning over the last few years, growing to Sh4.4 trillion at the end of September in comparison to less than Sh2.5 trillion in December 2014.
The Treasury has hinted at borrowing more money in 2018 to offset some of the loans that are reaching maturity.
Businesses going to other East African countries will face similar risks as in Kenya.