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The US and UK’s new businesses in Kenya grew six-fold last year, pushing up total inflows in defiance of political jitters and terrorism threats. Some 22,136 new jobs were created through foreign investments.
Inflows from the two giant economies accounted for almost half of the foreign direct investment (FDIs) into the local market last year with private firms cold-shouldering poor diplomatic relations between Kenya and home countries.
The latest data from the Kenya Investment Authority (KenInvest) shows the level of FDIs stood at Sh84.7 billion last year, 68 per cent higher than 2012.
This is equivalent to two per cent of Kenya’s gross domestic product. Though still relatively low, the increase in capital injection into the economy is a potent engine for job spin-offs.
The data shows that investments by America and Britain totalled Sh37.3 billion, a significant climb from Sh5 billion the previous year. The FDI for 2012 stood at sh50.1 billion.
KenInvest managing director Moses Ikiara reckons the real value of new investments in the dozen months could be much higher given that not all foreign investors register with the agency.
The State agency tasked with attracting and keeping track of new investments said that inflows are set to grow with newfound investor confidence due to a robust economic climate.
“We are targeting over Sh150 billion in FDIs this year,” Mr Ikiara told the Business Daily, citing on-going infrastructure projects that will support growth. They include ports, roads and energy and telecommunications.
American and British corporates have in recent years made a beeline for Kenya, setting up their representative offices to anchor expansion into the eastern Africa region.
Last week, a US delegation comprising 15 organisations ranging from energy, agriculture, security and services was scouting for deals in the country.
Existing firms such as UK Group Diageo, the parent company of East Africa Breweries Ltd, Unilever and British American Tobacco have pursued brown-field investments setting up their own facilities and creating job opportunities for hundreds.
American communications firm WPP bought a 50.1 per cent stake in Scangroup.
IBM has recently shored up its investment in renewable energy in Kenya with Microsoft and GE also spreading their tentacles.
Canada, the country of origin of exploration firm African Oil which has interests in Turkana oilfields, injected Sh17 billion into the economy, the KenInvest data shows.
It jointly owns interests in Block 10BB with British Tullow Oil.
Analysts have partly associated the investment pattern to the recent discoveries of hydrocarbons and a vibrant mining sector.
The task now, they say, is for the government to conduct the tendering process in a competitive manner to attract best deals in the market.
“The mining sector is going to be a big source for FDIs in the coming years. But it will depend on how the government conducts the tendering which will determine the type of participating bidders and eventually who ends up with the contract,” said Robert Bunyi, an analyst at Mavuno Capital.
To sustain investor interest, Mr Bunyi said, the State should fast-track its commitment to lower the cost of doing business, largely tied to energy costs, which in the past has been blamed pushing out cash-rich foreign firms into neighbouring nations.
The high operation costs were partly blamed for UK-based Ariel detergent producer Procter and Gamble’s exit from Kenya to Egypt in 2001.
Last year, a report by the United Nations Conference on Trade and Development showed Kenya’s lagged in FDI compared with its preferred neighbours Uganda and Tanzania.
Mr Bunyi said that a stable foreign exchange regime provided investors with cover from losses during currency fluctuations.
Tanzania injected Sh5.7 billion in FDIs into Kenya during the period, the highest from an African nation.
– Business Daily