Kenya's foreign investment inflows in 2017 soar 71pc defying Africa slump

Friday June 8 2018

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Foreign direct investment (FDI) in Kenya soared to $672 million last year. PHOTO | FILE  

By KEVIN J KELLEY
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Foreign direct investment (FDI) in Kenya soared to Ksh67.7 billion $672 million last year, a United Nations agency reported on Wednesday.

That robust 71 per cent increase contrasted starkly with a 22 per cent drop in FDI in Africa as a whole and a 23 per cent fall-off globally.

Kenya's strong performance was due mainly to “buoyant domestic demand and inflows into ICT industries,” the UN Conference on Trade and Development said, referring to information and communication technology.

The Kenyan government also provided additional tax incentives to foreign investors, Unctad noted.

Political uncertainties

Kenya's attractiveness last year as a destination for foreign capital is especially noteworthy given the political uncertainties associated with the pair of disputed presidential elections.

Among the companies undertaking major expansions in Kenya in 2017 were South Africa's Naspers, MTN and Intact Software — all part of the ICT industry.

US tech firms Boeing, Microsoft and Oracle also directed substantial sums of money into Kenya, along with Johnson & Johnson, a pharmaceutical firm.

The United Kingdom's beer producer Diageo further boosted FDI in Kenya's consumer sector.

Positive 2018 outlook

The outlook for the current year is also positive for Kenya, Unctad suggested.

The UN agency pointed to completion of the Mombasa-Nairobi section of the standard-gauge railway as one of the major infrastructure projects in Africa that is likely to boost economic growth and generate additional FDI flows in 2018.

Ethiopia remains a magnet for foreign investment in East Africa despite a 10 per cent decline last year.

It absorbed nearly half the $7.6 billion invested in East Africa in 2017, making Ethiopia the second-biggest recipient of FDI in Africa after Egypt.

The $3.6 billion in foreign investment that poured into Ethiopia last year far surpassed the $672 million attracted by Kenya.

Africa itself is expected to reverse last year's negative FDI trend, Unctad said.

Modest recovery

It forecasts a 20 per cent increase, to $50 billion, in the amount of new foreign investment in 2018.

“The projection is underpinned by the expectations of a continued modest recovery in commodity prices and macroeconomic fundamentals,” the report said.

“In addition, advances in inter-regional cooperation, through the signing of the African Continental Free Trade Area (AfCFTA) agreement could encourage stronger FDI flows in 2018.”

The global tumble in FDI reflected unease over the possibility of US-instigated trade wars, as well as concerns about the potential unsustainability of national debt in some countries, an Unctad official noted.

The slump is also due to a decrease in the rates of return on foreign investments, the report said.

“The global average return on foreign investment is now at 6.7 per cent, down from 8.1 per cent in 2012,” Unctad observed.

“Return on investment is in decline across all regions, with the sharpest drops in Africa and in Latin America and the Caribbean.”