Kenya woos international investors to finance Sh790 trillion big-ticket projects

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State woos international investors to finance Sh790 trillion big-ticket projects

It has not escaped the attention of many that enthusiastic foreign investors made a beeline for Nairobi last week eager to clinch deals in Kenya, which is considered the financial and business hub of the East African region.

These investors are positioning themselves to or have already clinched lucrative contracts for several mega projects in Kenya.

The list of projects covers the entire spectrum of the economy, from infrastructure and energy, to transport, irrigation and the building of resort cities.

These projects the Government has lined up as part of its long-term development plan, Vision 2030, are worth an estimated Sh790 trillion.

Kenya has been singled out for its geographic location, educated population and big plans for energy, roads, rail, ports and other infrastructure projects that are either in the pipeline or at various stages of completion.

 Encouraging exploration

The East African region in general has been gaining even more investor attention after a devastating Ebola outbreak hit parts of West Africa.

Further, discoveries of large volumes of gas and oil have made the region the new darling of investors.

For instance, in a statement earlier this month, Elisabeth Proust, the CEO of Total Upstream Company in Nigeria raised concern that Nigeria was no longer the preferred destination for oil exploration in Africa.

Instead, she said, this honour went to East Africa, which Ms Proust partly attributed to the region’s roll out of attractive terms and incentives designed to encourage exploration.

Kenya boasts other attractive assets, including a liberalised economy and growing domestic market.

“Further, the Mombasa Port has a unique advantage that enables connections with markets such as the United States, United Kingdom, Asia, Middle East and the European Union. This is a vantage position even for enterprises seeking markets in the hinterland of Africa,” said East African Affairs, Commerce and Tourism Cabinet Secretary Phyllis Kandie.

The port handles imports such as fuel and consumer goods, for Uganda, Burundi, Rwanda, South Sudan, Democratic Republic of Congo and Somalia, as well as exporting the region’s tea and coffee produce.

But while Kenya has plenty going for it, there are concerns over growing insecurity in parts of the country, including the coastal area known for its sandy beaches and other tourist attractions.

Further, the country’s ambitious electricity generation plan aimed at increasing power supply by 5,000MW by 2017 has been tainted by squabbles over tender and contract awards. Court cases challenging winning bids have stalled some projects, threatening to derail production schedules.

Nonetheless, “These are exciting times to live, work and invest in East Africa. The political leadership in the region is visionary with economies growing at between 5 and 8 per cent and infant mortality across the region on the decline. This is the time to not only invest but also influence East Africa’s future,” said Amb Richard Sezibera at the inaugural Kenya International Investment Conference (KIICO) held last week in Nairobi.

An increasing number of multinationals are looking at Kenya as the gateway to the East African common market. This realisation is driving the Government’s efforts to make the country an attractive investment destination and solidify its position as a regional hub.

 Regional trade

Top on the list of the big-ticket projects Kenya has lined up include the standard gauge railway, which, on completion, will boost regional trade. The line will run from Mombasa to Nairobi and then extend to Kampala, Kigali and Juba. It will also lower freight transport charges and reduce train transit time from an average 30 hours to eight.

“Our projection is that [the railway line] will cut the cost of doing business in Kenya and the region,” said President Uhuru Kenyatta at the KIICO forum.

Kenya has also set aside billions of shillings for the addition of 5,000MW of electricity to the national grid in the next 36 months. This will lower costs of electricity by almost 50 per cent.

“We are also digitising land registries, accelerating business licensing and improving public service delivery through Huduma centres,” said Mr Kenyatta.

Business Beat spoke to some of the investors and industry stakeholders who made up the more than 1,400 international and local investors who attended the two-day KIICO, for their views on Kenya’s investment, business and regulatory environment.

“We are excited about the many investment opportunities that remain untapped. The country will benefit from impressive growth, especially if there is collaboration among all the players to exploit the country’s unlimited possibilities,” said Ashok Shah, the managing director of Infinity Industrial Park.

The company is planning to invest Sh6.5 billion to establish a 200-acre industrial park in Ruai, Nairobi County.

The main concerns investors raised were corruption within Government, insecurity and the high costs doing business.

British High Commissioner to Kenya Christian Turner termed corruption and insecurity the main hindrances to increased investment.

“It is known Kenya has been a victim of security threats, for instance, terrorism attacks, and corruption within its governance systems, and these are inhibiting economic growth.”

Robert Tashima, the regional editor for Africa at Oxford Business Group, observed that this is the time for investors to reap from Kenya, “thanks to the growing consumer market brought about by a growing population that now stands at Sh41.8 million, with an annual growth rate of 2.7 per cent”.

Mr Tashima, who together with other professionals compiled a report on the status of investment opportunities in Kenya, said the country will continue to thrive because of its attractive demographics and flexible labour force.

“Kenya is a powerhouse with the largest economy in the region, it has been expanding ties with both Western and Asian countries and plays a key a role in regional peace-keeping efforts.”

European Union (EU) Head of Delegation Lodewijk Briet said the country is developing well, but requires support from other partners.

He added that Kenya must tackle barriers to trade, corruption in Government ministries and related agencies, and ensure business registration is efficient.

“Our appeal as EU is that Kenya must ensure that bottlenecks to trade, such as VAT refunds, are dealt with, in addition to providing crucial amenities such energy, infrastructure and water. This will enable investors carry out their business,” he said.

 Global businesses

Owing to increasing consumption and a drop in energy costs, which often account for the bulk of a business’ running expenses, more manufacturing companies are expected to establish a presence in Kenya to tap into the regional market.

Already, global businesses, particularly those in the extractive industry, have begun setting up base in Kenya.

For instance, a German company has opened a Sh1.17 billion (10 million euro) production plant for construction chemicals in Kenya to tap into the booming real estate and infrastructure sectors.

Swiss African Business Circle (SABC), a group of 100 companies based in Switzerland, also participated in the investment and trade conference, and its managing director, Thomas Seghezzi, said the firms are more than willing to invest in Kenya.

“We have listened to the Government appeal and soon we will announce our decision as regards investing in Kenya. Indeed, this region has a lot of potential,” said Mr Seghezzi.

Excia Japan, an auto association company, through its local subsidiary Excia East Africa, said it is ready to expand its operations in the country, particularly in the counties.

The company’s MD, Yoshikazu Matsumbo, said Kenya, like any other market, has its challenges, but with support from other players, attracting investors should be easy as it has plenty of positives.

 Growth leaders

In the last seven years, Kenya has benefited from investments made by 14 companies considered to be the continent’s growth leaders.

According to a recent Ernst & Young survey, the companies have collectively made more than 200 foreign direct investments (FDIs), with a combined value of Sh1.8 trillion, creating 33,000 jobs.

“Under Vision 2030, the Government seeks to make the country more competitive, a logistics hub and increase savings and investments,” said Gituro Wainaina, acting director general of the Vision 2030 Delivery Secretariat.

Kenya Investment Authority (KenInvest) Managing Director Moses Ikiara added that the Government is appealing to investors to agree to joint ventures to help the country deliver on its planned mega projects.

Businessman Chris Kirubi explained that although Kenya’s population is second to Tanzania’s in the region, aggressive economic activities and a hardworking population have made Kenya the dominant economy in East Africa.

The country contributes more than 40 per cent of the region’s gross domestic product (GDP).

Mr Kirubi added that Kenya is experiencing a rising trend in urbanisation, an aspect that is contributing to the increase in demand for high-value goods.

Equity Bank Chief Operation Officer Julius Kipng’etich added: “We [have] treasures that have not received the attention they deserve ..... The scramble for these goldmines, especially because of aggressive marketing, has caught the eye of many investors.”

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