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How Ruto US visit raises the country global rating as investment centre

Politics

By Macharia Kamau | May 26, 2024

**President William Ruto sits on Joe Biden's seat in the Oval Office, White House, Washington, on May 23, 2024.** [PCS, Standard]

As the dust begins to settle on President William Ruto’s visit to the US, Kenyans are keen to see the tangible benefits of the trip, which was overshadowed by the controversy of the over $2 million-a-day jet expenses.

President Ruto and his entourage secured deals worth hundreds of billions of shillings but also pitched Kenya as an ideal investment destination hoping to attract more US firms to set up base in the country. The money from the deals secured, which will be in the form of loans, a few grants and, US firms investing in the country, was around infrastructure, e-mobility, education and ICT industries.

There were, however, missed opportunities whereby sectors such as agriculture, which is the largest contributor to the Kenyan economy, got little mention both in terms of local investments and possible access to the American market by farmers. There was also little lobbying for the extension of the African Growth and Opportunity Act (Agoa), which offers many products from Kenya and other African countries preferential access to the US market but expires next year.

One of the major pronouncements was that the US will designate Kenya as a major non-Nato (North Atlantic Treaty Organisation) ally. It will be the first for a sub-Saharan country. This is largely on account of Kenya’s strategic positioning in the region and also due to the role that it has been playing in stabilising the region, which has resulted in higher levels of trust by the US. It however requires higher levels of commitment by Kenya to its relations with the US.

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According to the US Department of State, Major Non-Nato Ally (MNNA) is a designation under American law that provides foreign partners with certain benefits in the areas of defence, trade and security cooperation. It adds that while MNNA status provides military and economic privileges, it does not entail any security commitments to the designated country. There are 18 countries designated as MMNAs.

Ken Gichinga, Chief Economist at Mentoria Economics, noted that this was a major pronouncement but added that Kenya will have to figure out how to balance the relations that it has with other countries particularly Western rivals China and Russia.

“From a geopolitical perspective, the US declaring Kenya as its first non-Nato ally in Africa is very significant and will have implications moving forward. From a security point of view, there will be a lot more exchange of information, and training and Kenya will have a lot more access to Nato techniques. The US might get a base in East Africa,” he said.

“Kenya might have to appear balanced in front of other partners… It is something Kenya will have to figure out how to juggle. I think Kenya will continue to play in that spot of being in the middle but being declared a non-Nato ally is a heavy pronouncement.”

One of the largest deals, perhaps, was the commitment by US firm Everstrong Capital to build the 440-kilometre Nairobi – Mombasa Expressway. The firm signed a project development agreement with the Kenya National Highways Authority (Kenha).

The four to six-lane dual carriage is projected to cost $3.6 billion (Sh470 billion at current exchange rates). It is expected to reduce travel time between the two cities to about four and a half hours from the current 10 hours that motorists take to cover the distance. It will be done through Public Private Partnership model.

As a PPP project, Everstrong Capital is expected together with its partners in a consortium, to design, source for funds and build the road. It will also operate the road for 30 years during which it will be charging motorists to use the road to recover funds used in construction and maintenance of the road.

Firms that expressed interest in investing in the country include Microsoft and G42 which will put up a $1 billion (Sh130 billion) data centre that will be built at the Kengen Green Energy Park at Olkaria. The data centre will run on 100 per cent renewable geothermal power at the Olkaria Geothermal fields in Naivasha.

Beverage maker Coca-Cola also announced that it planned a Sh23 billion investment over the next five years to expand its operations in the country.

President Ruto attracted criticism over the use of a private jet that reportedly cost Sh200 million during the four-day visit. And while the goodies bagged from the US might eventually justify such spending, analysts note that this is a bit on the more extravagant side.

“The cost of the jet on the one hand is reflective of luxury, ravishingly which is counter to the petition to live within our means. The bottom line might take a while for us to have a look at what we have spent on this visit and the returns. It might be early to pass adverse judgement,” said Barrack Muluka, a social and political analyst.

“The concern must remain. Those who tell us to live within our means, must demonstrate that they are living within what we consider to be within our means.”

Kenya and the US signed a framework for cooperation to support new partnerships between universities and industry. The move according to USAID is expected to drive innovation, research and job growth in STEM-related fields in Kenya and globally.

USAID announced nearly $32 million (Sh4.16 billion) investment in Kenya’s education system. Kenyan firms, a number of them in the start-up phase, got a boost, with a number of them bagging billions of shillings in cheap loans but also grants to support their growth.

These include those playing in the country’s electric mobility sector. The US International Development Finance Corporation (DFC) announced more than $250 million (Sh32.5 billion) new financing package for Kenya.

The financing includes a $10 million (Sh1.3 billion) cheap loan to BasiGo, the firm that has been working with matatu sector players to introduce electric buses on Kenyan roads.

DFC also said it has recently announced “a $10 million (Sh1.3 billion) loan to Roam Electric Ltd to support the design and development of electric motorcycles and buses as well as charging stations for motorcycles and buses throughout Kenya”. The financing by DFC also includes a $51 million (Sh6.6 billion) loan to M-Kopa Kenya.

It also includes a $180 million (Sh23.4 billion) commitment to Acorn Holdings Limited that will finance the construction and operation of new, affordable student rental housing in Nairobi and across Kenya.

Despite the hundreds of billions of shillings that will flow into the country in cheap loans and planned new investments, there were missed opportunities. Analysts said these include little talk of partnerships in the agriculture sector, both in terms of upping the capacity of the Kenyan sector that is still largely rainfed and adoption of mechanisation as well as opening up of the US market to Kenyan farmers beyond the traditional flowers, tea and coffee exports.

“I was hoping to see more talks on agriculture and hopefully America opening up its market to Kenya. It is sensitive but it is an area that can have a huge impact for local farmers,” said Gichinga of Mentoria Economics.

And while the US Congress will decide on whether to extend Agoa which expires next year, the Kenyan officials may have drummed it up a little bit. Analysts also note that Kenya should have negotiated for debt relief.

“We could have gotten better results. One of these may have been debt relief as a key aspect of this relationship between Kenya and the US… there could have been more discussions on possible debt restructuring. There could have been more talks on access for farmers, agro-processing and manufacturing,” said Steve Biko Wafula policy, governance and research analyst.

Kenya hopes to get more American firms to invest in the country. President Ruto severally pitched Kenya, with renewable energy being one of his key selling points, aware that many firms are looking to reduce their carbon footprint.

“Net zero requirements are part of what businesses are thinking about today. If you are looking for a destination that will not only give you an investment opportunity but it will also help you green your business, it is the reason why you should invest in Kenya,” he said.