Kenya Investment Climate
Kenya is one of Sub-Saharan Africa’s most exciting locations and home to some of the world’s most successful brands. Kenya offers a dynamic and robust economy, perfect for serving the world’s most demanding markets. Kenya boasts of an open and diverse economy with encouraging prospects and thousands of foreign investors all over the world have chosen to set up in Kenya. Kenya is the largest and the most advanced economy in East and Central Africa with strong growth prospects supported by an emerging, urban middle class with an increasing appetite for high-value goods and services. It is the dominant economy in the East Africa Community, contributing to more than 50% to the region’s GDP. The re-based Gross Domestic Product (GDP) places Kenya as the fifth largest economy in Sub-Sahara Africa and ninth in Africa. The Gross Domestic Product (GDP) projected to expand by 5.6 per cent in 2015 which was a slight improvement compared to a 5.3 per cent growth in 2014. The World Bank has projected a 5.9% growth in 2016, rising to 6% in 2017 as a result of low oil prices, good agriculture performance, supportive monetary policy, and ongoing infrastructure investments. Inflation in 2016 has remained within the government target rate, largely driven by food inflation. Inflation increased from 6.4% in December to 7.0% in January, the highest reading in nearly a year. The figure remained within the Central Bank’s inflation target range of 5.0% plus/minus 2.5 percentage points. Annual average inflation was stable at December’s 6.3% in January, the lowest reading since February 2014.
Why invest in Kenya?
- It is East and Central Africa’s largest economy
- Strategic geographical location in the region
- It has access to a big market
- The country has a good network of tax treaties
- Political stability and favourable investment environment
- Government approaches private sector as a central partner in the development and growth of the Kenyan economy.
- Improved infrastructure
- Large pool of labour force
- Well established private sector.
There is strong political commitment to free enterprise and to the membership in the East African Community and similar trade agreements. Kenya is empowered by a new constitution and administration. The administration is made up of the national and county governments that are approaching the private sector as a central partner in the development and growth of the Kenyan economy.
Kenya’s population has doubled over the last 25 years, to an estimate of about 46 million people in 2016 and rapid population growth is set to continue. The population was 38.6 million by the census of 2009. According to recent UN projections, Kenya’s population will grow by around 1 million per year over the next 40 years and will reach about 85 million by 2050. Kenya has the second largest population within the East African Community (EAC) and is growing at a rate of 2.7 per cent per annum. Kenya prides itself in its large pool of highly educated, skilled and sought after work force in Africa. It is estimated that over 55% of the Kenyan population is aged between 15 and 64. This means therefore that majority of the population is active and able to provide labour.
About 27 percent of Kenyans live in urban areas, and Kenya is urbanizing at a rate of about 4.3 percent per year. About 50% of the population is expected to live in urban areas by 2050. The size of Kenya’s middle class is growing as evidenced by the growth in its gross national income per capita which has increased at a Compound annual growth rate (CAGR) of 2 per cent over the past 10 years.
Doing business in Kenya
The highlights of World Bank score of doing business in Kenya is summarised as follows;
|Topic||World Bank 2017 rank||World Bank 2016 rank||Change|
|Starting a business||116||150||34|
|Dealing with Construction Permits||152||155||3|
|Protecting Minority Investors||87||112||25|
|Trading across the boarders||105||107||2|
The country made some improvements in a number of areas.
Kenya’s Standard & Poor’s credit rating stands at B+ with stable outlook. Moody’s credit rating for Kenya was last set at B1 with stable outlook. Fitch’s credit rating for Kenya was last reported at B+ with negative outlook.
Kenya has fully liberalized its economy and removed all obstacles that previously hampered the free flow of trade and private investment, such as exchange controls, import and export licensing, as well as restrictions on remittances of profits and dividends.
The Kenya Constitution guarantees against expropriation of private property in addition to no exchange controls, guarantee repatriation of capital, profits and interests. Kenya is a member of the Multilateral Investment Guarantee Agency (MIGA) and the Africa Trade Insurance Agency (ATIA), which both insure foreign investments against non-commercial risks. Kenya is also a member of the International Centre for Settlement of Investment Disputes (ICSID), which arbitrates cases between foreign investors and host Governments. Kenya has adequate legal framework to handle arbitration cases.
Key development challenges
Kenya is still faced with developmental challenges of poverty, corruption, inequality, governance, low investment and low firm productivity that may slow down the economic growth of the country.
According to Transparency International Kenya score was 26 and ranked 145 least corrupt nations out of 176 countries. Kenya is therefore among the countries in Africa with high corruption levels. The government of Kenya has put strategies in place to fight corruption.
Except the border areas with Somalia, Kenya is reasonably secure country for foreign visitors but still one needs to take necessary precautions for personal security. The government has allocated more resources to security organisations to contain any security threats in the country.
Unemployment and skilled labour
Unemployment among Kenya’s youth is now estimated to stand at 17.3 per cent. The World Bank reports that unemployment continues to deny Kenya the opportunity to put its growing labour force to productive use, thereby “denying the economy the demographic dividend from majority young population”. Kenya has a working-age population of 25.5 million, or over half the country’s population and the number is projected to swell to 39.2 million in the next 14 years when the country hopes to have transformed into an industrialised middle-income economy.
Attitude to investors
Kenya Investment Authority (KenInvest) promotes investments in Kenya. Government of Kenya has also established a Business Environment Delivery Unit focused on addressing challenges facing investors in the country. The Business Regulatory Reform Unit provides information on how to access detailed information on relevant business licenses and permits, including requirements, costs, application forms and contact details for the relevant regulatory agency.
Restrictions on Foreign investment
Kenya has minimal discrimination, if any, against foreigners investing in the country. Both foreign and local investors benefit from government-financed research and the government investment promotion programs. There is however a minimum foreign investment to qualify for investment incentives and an investment certificate of $100,000. Foreign investors have access to land for investment purposes.
Intellectual Property (IP) Rights
Kenya’s national IP legislative framework is divided into copyright law, trade mark law, industrial property law and anti-counterfeiting law and the details are contained in the Constitution of Kenya, 2010, Industrial Property Act 2001,The Seeds and Plant Varieties Act, Cap 326, Trade Mark Act, Cap 506, Copyright Act, No. 12 of 2001 and Anti-Counterfeiting Act, 2008 among others.
Kenya key tourists attractions include Masai Mara Mational Park, Nairobi National Park ,Tsavo National Park , Hell,s Gate National Park , Samburu National Reserve, Lake Nakuru, Amboseli National Park, Lamu Islands , Mombasa Beaches , Mount Kenya and Malindi among others.
Kenya natural resources include: limestone, soda ash, salt, gemstones, fluorspar, zinc, diatomite, oil, gas, gypsum, wildlife, hydropower, beaches and islands among others.
Investment climate in Kenya has been summarized to include the following
- Kenya Vision 2030
- Why Invest in Kenya?
- Investment Opportunities in Kenya
- investment Guarantees in Kenya
- Challenges to Overcome
- Tax Climate
- Investment Facilitation
- Facilitating Organisations
- Business Environment
- Land in Kenya