South African investment in Kenya increasing despite challenges

South African investment in Kenya is improving, after a troubled start years ago.

Kenya is the largest economy in East Africa and the gateway to the common market that includes Tanzania, Uganda, Rwanda and Burundi, whose combined population is about 140m, it is very hard for South Africans investors to ignore the Kenyan market whose middle class is growing fast and has substantial spending power.

The goal of South African investment in Kenya is to reach the East African market though Kenya which is a desirable investment destination due to a number of key factors that include:

• Educated and skilled man-power that has made the country the manufacturing, commercial and financial hub in Eastern and Central Africa.

• A fully liberalized economy without exchange or price controls. No restrictions on domestic and foreign borrowing by residents and non-residents.

• The most developed stock market in the Eastern and Central African region, that is, the Nairobi Securities Exchange (NSE)

• A leading tourism destination, which is still expanding. The country also boasts of high quality social amenities such as restaurants, hospitals and entertainment spots; a good reason why the country has the highest number of expatriates living and working in Kenya.

• Kenya tax treaties and investment promotion and protection agreements allows exports from Kenya to enjoy preferential access to world markets.

• Kenyans have enjoyed an increased degree of freedom since independence, with the country maintaining remarkable stability despite changes in its political system.

• Kenya is making efforts to lower the cost of doing business by conducting extensive business regulatory reforms intended to reduce the number of licensing requirements and to make the licensing regimes more simple and transparent and focused on legitimate regulatory purposes.

• Kenya is member of several trade arrangements and beneficiary to trade-enhancing schemes that include the Africa Growth and Opportunity Act (AGOA); ACP-EU Trade Agreement and Common Market of Eastern and Southern Africa (COMESA).

According to the minister of Trade and Industry in South Africa, Dr Rob Davies, between January 2009 and 2015 a total of 17 Foreign Direct Investment projects from South Africa into Kenya were recorded. These projects represent a total capital investment of 2.2 billion Rand which is an average investment of 118.89 million Rand per project. During the period, a total of 462 jobs were created.

However, these foreign investors face challenges while trying to enter the Kenyan market, for instance, the giant US supermarket Walmart, which as reported by the Financial Times, is said to have had difficulties entering the Kenyan market. Competition for a slice of Kenyan retail is so stiff that Walmart is locked out of Nairobi’s next two big mall developments, the Hub and Two Rivers Lifestyle Centre.

Being able to enter the market and acquire an outlet at the Garden City Mall along Thika road, their fear is that it will be over shadowed by the new malls, like Two Rivers which is projected be the biggest shopping mall in sub-Saharan Africa.