German firms in Kenya freeze expansion plans

Majority of the German firms operating in Kenya have frozen their expansion plans for 2019 citing difficult operating environment.

Of the 41 firms surveyed by the Delegation of German Industry and Commerce in Kenya (AHK), only 28 per cent plan to increase investment next year even though three in every five of them say they are satisfied with the country’s economic management.

According to the AHK’s Business Outlook Survey, 61 percent of the firms see business environment as the biggest risk to their operations with slightly over half of them (51.2 percent) citing poor access to finance.

“Kenya continues to be an attractive partner for German businesses aiming to enter the whole Eastern Africa region,” said Ms Daniella Pleitz, chairperson of the German Business Association in Kenya

“However, for continued growth of mutually beneficial partnerships, it is important to look at the challenges to business and focus on developing solutions which will take both countries forward.”

German multinationals with operations in Kenya include commercial and industrial refrigeration and air conditioning technologies firm Bitzer, consulting firm Rödl & Partner, Chemicals firm BASF, Allianz Insurance among others

Germany is also a growing source of tourists visiting Kenyan game parks and beaches in their tens of thousands every year. The global economic giant is Kenya's third-largest export market in Europe after the UK and Netherlands with a value of Sh54.7 billion traded in 2017 according to the Economic Survey, from Sh55.2 billion in 2016.

The finding of the survey released on December 11 shows that 39 percent of the German firms are worried about poor demand while 36 percent of them citing exchange rate as a top concern.

Only 29.3 per cent of the firms think trade barriers is an issue, 26.8 percent are worried over both legal uncertainty and lack of skilled labour while 24.4 per cent have issues with the quality of infrastructure. Price of energy and raw materials and cost of labour are seen as peripheral risks bothering hardly any firm.

Kenya is still in recovery after a prolonged drought in 2016/17 and the anxiety caused by the extended election period of 2017, notes the survey.

“The results of our survey clearly show the potential for future German business but also the challenges. ...embracing technology in business services, welcoming economic policies and a push to increase trust by fighting corruption are some of the reasons Kenya is growing in business interest,” said Ms Maren Diale-Schellschmidt, AHK country director.