Of 57 countries, Kenya has been ranked third in a global survey of economies projected to register the fastest growth this year, placing the country ahead of other emerging markets in Africa. According to the survey, Kenya’s projected six per cent growth rate this year would see it join China, India, Philippines and Indonesia as the only economies hitting a five per cent growth rate.

The main sectors contributing to economic growth are agriculture, building and construction, infrastructure development, manufacturing, transport and services, and tourism.

The country’s membership in the East African Community and the Common Market for Eastern and Southern Africa (COMESA) makes it attractive to foreign investors and companies looking to access the East and Central African market with over 380 million people. Kenya and the three East African countries recently signed the protocol on the East African Customs Union creating a common external tariff, harmonized to be applied to goods imported from outside the region.

With the launch of Vision 2030, which sets development benchmarks for a number of priority sectors, Kenya is strongly committed to economic growth and development. Check out the Vision 2030 Website.

Though Kenya restricts foreign ownership in some sectors such as infrastructure (e.g. power, mail service, ports, and fixed-line telecommunications which is limited to a maximum of 70% for foreign capital participation) it recognizes that foreign investment is an essential element for the country’s continued economic development and therefore welcomes it. The sectors that have restrictions are undergoing commercialization and economic reforms that will expand room for private business.

The government continues to make moves to liberalise the economy, for an investment-friendly environment in Kenya. The Central Bank of Kenya, for example, has pledged to pursue “a stable monetary policy, which accommodates the highest economic growth rate possible,” while keeping inflation low and stable. Other indications that the government of Kenya is committed to growth and investments include:

  • Government embarking on rebuilding the dilapidated infrastructure to encourage both domestic and foreign investment in order to increase Kenya’s competitiveness as an investment destination. This has involved streamlining the operations of the important sectors in the economy including transport, energy, roads and railway infrastructure etc.
  • Establishment of the Export Processing Zones, which cultivates a suitable investment climate that will help investors capitalize on untapped opportunities in East Africa.
  • Establishing a one-stop shop for investors services: KenInvest, a statutory body established to promote investments and support investors.
  • Committing to good governance by being one of the first members to accede to the Peer Review Initiative of New Partnership for Africa’s Development(NEPAD).
  • Freeing the Kenya Shilling exchange rate to be market driven.
  • Forming bilateral investment treaties and trade agreements.

Opportunities abound for investments in Kenya’s agricultural, industrial, and commercial sectors e.g. horticulture, agro-processing, textiles and apparels, plastics and pharmaceuticals.Tourism, ICT operations and financial services are among the initiatives promoted by the government to encourage investment.

Sectoral Analysis

Agriculture/Horticulture/Floriculture:

The agriculture/horticulture/floriculture sector accounts for over 50% of Kenya exports.It is estimated that the sector accounts both directly and indirectly for the employment of 80% of Kenya’s working population. The floriculture sector is a highly sophisticated, high-tech industry and Kenya’s global success is an indication of Kenya’s ability to enter markets that will give high returns.

Agriculture and horticulture producers are mainly small-scale farmers who are able to produce to demand.The floriculture and horticulture sub-sectors are vibrant and there is significant added value in the value-chain.Tea and coffee present opportunities for increased added value that would provide impetus to the export sector, which is showing signs of stagnation.

It is of note that the Irish research and extension organisation, Teagasc, has recently signed an MoU with its Kenya research equivalent, the Kenya Agriculture and Livestock Research Organisation (KALRO).This will facilitate technical and professional exchanges between the two countries.These will most likely be in the potato and diary sector.

Tourism:

The tourism industry is second to agriculture as a foreign exchange earner.The sector is directed by the National Tourism Strategy.The tourism sector in Kenya is generally aimed at the middle to highend, with visitors attracted by the national game parks and the beach resorts. The NTS aims to diversify the tourism product to include activities holidays such as golf, ecotourism, trekking and water sports.Opportunities are evident to expand the domestic and Asian markets.

Transport:

Kenya’s has embarked on the building of a new standard gauge railway line from Mombasa to Nairobi which will supersede the current antiquated narrow gauge facility.The rail line will eventually continue up to the Ugandan border. Chinese companies have so far been successful in the bids for this construction project.

The discovery of oil in the north of Kenya and plans to build an economic corridor with South Sudan and Ethiopia has generated what is known as the Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET) project.The work on this programme is only just beginning and is expected to present opportunities going forward, particularly as further oil production comes on-stream.In addition, plans to improve road communications to the north and west of Kenya, as well as the greater Nairobi metropolitan area will also provide investment opportunities.It is expected that public private partnerships (PPPs) will be to the fore in attracting finance.

Mombasa port is currently undergoing a major modernisation with considerable financial support from donors such as Trade Mark East Africa.TMEA is focusing in facilitating the integration of the EAC market.

During 2013 and 2014 Kenya Airways embarked on a programme to modernise its fleet through the purchase of a number of Boeing 787 Dreamliner planes. The airline also expanded its Asian routes.The KQ expansion and the entry into the Kenyan market of a number of smaller low-cost airlines has stimulated the east African aviation sector and has presented opportunities in aircraft maintenance, servicing, leasing and ancillary supports.However, the recent Ebola crisis and terrorism activities in Kenya has slowed this growth and created cash flow problems for the airline.

Infrastructure and Building Construction:

Kenya’s economic growth has been strong over the past four years recovering after the violence in 2008 and the global recession.Growth has averaged over 5%/annum, and is predictedto pass 6% in 2015.These strong growth rates are an indicator for the strength of the construction industry particularly in Nairobi with its growing middle class population.Kenya’s attractiveness as the biggest economy in the East African Community, a transport hub, a business friendly environment, a vibrant financial sector and the second biggest (after New York) UN agency centre has created the demand for office and residential accommodation as well as retail centres.It is again notable that it is Chinese contractors that are prominent in bidding for these contracts.Some Irish construction supervisors have been employed in these projects. 

Manufacturing:

Under the auspices of the overarching Vision 2030Some of the best opportunities are in the garment sector due to the attractive incentives from the US AGOA (Africa Growth and Opportunity Act) programme.Garment production to date has been mainly concentrated in the Athi County Export Processing Zone (EPZ) some 50km outside Nairobi.The BATA shoe manufacturers have also a strong presence in Kenya.

Medical and Veterinary Supplies:

A number of Irish players have entered the pharmaceutical market in Kenya, such as Norbrook and Bimeda. A huge domestic and regional market exists for human and animal drugs.
Energy:

Kenya’s energy demands continue to grow and it has made some inroads in addressing these demands through the development of geothermal sources. Kenya now rates eighth in global geothermal production. The search for alternative sources is moving to wind and solar energy and a number of projects are on-going.

The discovery of oil reserves by Tullow Oil has given rise to much optimism.However, these oil resources will be expensive to extract and transport, and as long as oil prices remain low, the incentive to extract also remains low.The development of these oil fields and ancillary services look good over the long-term.A factor of operating in the oil extractive sector will be maintaining relationships and an opus operandi with local communities which will require particular skills usually the found among NGOs and civil society.

Kenya Industry Clusters

As part of regional and national competitiveness, Kenya has developed, upon recommendation byThe National Economic and social council, the Industry Cluster Development, a sectoral and geographical concentration of enterprises framework.

The gains of clustering include localized external economies, particularly economies of scale and scope, as small firms specialize and engage in a division of labour. Geographical proximity also creates possibilities for local cooperation, between firms and through local institutions.

Kenya hasestablished the Export Processing Zones Authority as the official organ mandated to promote, attract and facilitate investment. The authority iskeen on cultivating a suitable investment climate that will help investors capitalize on untapped opportunities in East Africa and the whole of the African Continent.

The emerging clusters in Kenya include; Cement Cluster in Athi River, Egg Cluster in Thika and Wangige, Mining Cluster in Mwatate, Soapstones Cluster in Kisii, Metallurgical Cluster in Nairobi, Wine Cluster in Yatta, Science and Technology in Juja, Petroleum Cluster in Turkana, Wood cluster in Eldoret, Rabbit Cluster in Thika, Textile cluster in Kitengela, Aeronautical cluster in Wilson. 

 The Athi River EPZ, for example, has provided facilities with necessary infrastructure and services which include: serviced land for lease, industrial buildings, office blocks, health centre, banking facilities at the business centre, electricity supply with sub-station, fire station, telephone, water reticulation, sewage disposal, tarmacked roads with street lights, security and on-site police post, warehouse and gatehouse with customs and EPZA zone support, among others. 

 Kenya Industrial Estate LTD provides industrial estate developments and incubators, financial support and business advisory services. They provide construction industrial estates/incubators in fast growing business centres as workspaces that provide entrepreneurs with specific services to nurture and encourage growth of their enterprises to levels that are sustainable. 

Useful Links

KenInvest
Kenya Industrial Estates
Export Processing Zones Authority Website
Business Daily 
Kenya Vision 2030

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