Kenya’s government policy encourages investment, offering foreign businesses a positive investment climate. Foreign companies are already securing deals with government to work on infrastructure projects, and investing to improve Kenya’s transportation network.
This positive investment environment also offers businesses in various sectors the opportunity to take advantage of business expansion prospects.
Some of the opportunities available for investment include:
Manufacturing, food and consumer goods processing have become important sub-sectors. The capacity of Kenyan garment factories has grown markedly in recent years due to FDI from Asia and the Middle East, as well as support from the export development zones.
There is no local upstream industry, however, so manufacturers have to import fabrics, which results in longer lead times. Other challenges include the high labour costs and the unreliable energy supply that forces factories to use very expensive generators.
In March 2012, the Lamu Port–South Sudan–Ethiopia Transport and Economic Development (LAPSSET) infrastructure development project was announced. The project includes the construction of infrastructure across many areas, including transport, energy/power, water supply and treatment, the oil industry, healthcare, education, telecommunications, retail, and hotels and tourism.
The Power Africa project, which was launched by Barack Obama in 2013, aims to help provide electricity to two thirds of the 800 million people in sub-Saharan Africa without electricity. It will also add ten gigawatts of electricity generation capacity through co-operation between US government agencies and the private sector.
In the information and communication technology (ICT) domain, the biggest construction opportunity is the IT business hub Konza City. Also known as Africa’s Silicon Savannah, Konza City is valued at US$14.5 billion.
Economic activity in Kenya is dominated by the services sector, including banking, a well-developed retail sector, a relatively sophisticated and growing telecommunications sector, and a developed tourism sector.
Retail & wholesale sector
The wholesale and retail sector has been sustained by the increasing urbanisation in the country; a growing middle class; and the changing lifestyle of Kenyans with their demand for shopping. All of this has resulted in the construction of more malls in Kenya and outside the country’s boundaries.
The ICT sector is one of the fastest-growing sectors in Kenya. There has been continued growth in mobile voice, mobile data/internet and mobile money transfer services. At the end of 2014, penetration of mobile (82.6% vs 76.9% at the end of 2013), internet (64.3% vs 52.3% at the end of 2013) and fixed and wireless broadband (9.9% in 2014 compared to 5.9% in 2013) showed there was still opportunity for growth and for companies to enter the market.
Government has been investing in the telecommunications industry to help make Kenya a hub of telecommunications innovation. There is also more focus on generating policy and legislation to support the growth of the ICT sector.
The development of the country’s oil sector has the potential to take the economy onto a higher growth trajectory. Factors that could limit the effects of lower oil prices on domestic oil investment include:
- The onshore nature of the country’s oil resources – it is much less expensive to both explore and drill onshore than offshore; and
- Less exploration activity globally. This will increase competition among oilfield services and infrastructure companies as they try to get business from the few regions that are still involved in oil-related activities.
The most positive signs of investment sentiment come from the companies that are driving the oil sector in Kenya at the moment – Tullow Oil and Africa Oil. They still plan to drill six basin openers in Kenya, and more than a dozen other wells, including exploration wildcats and appraisals. But despite the many positives, there are still significant risks to the development of Kenya’s oil sector.