Successfully investing in Kenya

Kenya has successfully built a fairly diversified and dynamic economy and offers a good investment climate. The most important port in East Africa, "Port of Mombasa", through which a large part of the international goods traffic is handled, serves as a hub to the East African, Pan-African and Asian markets. In addition, there is another large deep-sea port of the country's coast, which is currently under construction ("Lamu Port"). 

 

Stronger than originally expected, the inflation rate has been rising since the beginning of the year and has now exceeded the upper limit of the Central Bank of Kenya's (CBK) target range of 7.5 percent for the first time since August 2017. The inflation rate, which was already 8.32 percent in July 2022, which has at the same time slowed down the economy and private consumption, is further boost and at the same time accelerated by rising prices of fuels and food items such as dairy products, flour and cooking oil. This development can be attributed, among other things, to the consequences of the COVID-19 pandemic, but also to the supply chains interrupted by the war in Ukraine, which has further intensified inflation. The high prices also affect the country's imports of goods, e.g. fuel, food or machinery. Kenya is expected to face further increases in food prices in the coming months due to the high cost of fertilisers. In addition, the low rainfall will also be responsible for a decline in maize production.  

 

However, the economic growth outlook of many companies for 2022 and 2023 remains quite positive. For the current year, gross domestic product is forecasted to grow by 4.5 percent. For 2023, the outlook is 5 percent (Economist Intelligence Unit). 

 

Kenya has a good investment climate that is attractive to international companies looking for a location for regional or Pan-African economic activities.

 

Locally, many infrastructure projects are under development and planning, with Public Private Partnerships (PPPs) expected to become increasingly important. One example of a "PPP" is the first toll highway "Nairobi Expressway". 

 

Other important economic sectors are the health, construction, agribusiness and manufacturing/production ("Big Four" agenda of the Kenyan government). Positive prospects are also predicted in the sectors energy, water, transport, food processing, communications and IT (IT-based services, bandwidth), which will see increasing foreign direct investment.

 

Kenya is continuously working on improving its regulatory framework and its attractiveness as a destination for FDI.

Some of the challenges faced by the companies include:

The Pan-African Free Trade Area will be quite beneficial for foreign investors as it will tackle barriers to invest­ment entry, reduce time and costs for investment approvals, enhance transparency, improve efficiency, and promote investment-related cooperation and coordination across the African continent. This free trade zone will also provide foreign investors with a larger market. 

 

The Pan-African Free Trade Area will certainly take some time before the intended benefits are realised.

Although Kenya's economic activities were severely affected by the Covid 19 pandemic, the economy has gradually recovered from these impacts. Although the 1st half of 2022 has been quite satisfactory, companies there are still taking a wait-and-see approach with regard to the outcome of the presidential elections on 9 August 2022. Nevertheless, the majority of locally based German companies assume a positive economic outlook for 2023. 

 

However, this forecast could be affected by disruptive social conditions due to the result of the presidential elections as well as a renewed increase in COVID-19 infections (vaccination rate as of June 2022: around 30 percent).

 

One of the significant goals of the Kenyan government is to qualify young professionals. It has also taken measures to combat climate change by increasing the share of renewable energies for power generation. Another example is the increase in tree cover on at least 10 percent of the country's land. Kenya is on track to meet its climate change targets by 2030.