Political risk highest for Kenya in regional business survey

Perceived political instability and risks are taking their toll on Kenya’s business and investment environment.

According to the latest Kenya Business Leaders Confidence Index by research firm Synovate, perceived political risks have been on an upward trend, even though fewer foreign investors consider Kenya an unattractive investment destination compared with July last year.

The study reveals that most business leaders in Kenya — 76 per cent — consider political instability to be the main risk to their businesses currently.

In a clear signal that the business community is ripe for the merger of the East African Community economies in July, 56 per cent of Kenya’s businesses are intending to expand into Tanzania and Uganda while 50 per cent want to invest in Rwanda.

Thirty-two per cent are planning to invest in Burundi and 18 per cent in Southern Sudan.

Even as other East African countries eye investment opportunities in Tanzania, the country’s business fraternity seems to appreciate the fact that the increased competition is posing a danger to its business returns.

Over 27 per cent of the country’s business leaders told Synovate that competition is the major risk facing them while 18 per cent think that the major risk is posed by cheap imports and poor state of roads and communication network.

Despite the country being set for elections before the end of the year, many of the businesses — 95 per cent — think it will not have a major impact on their operations.

It is due to this stability that apparently over 22 per cent of business leaders say the country is a “very attractive” investment location.

In Uganda, which goes to the polls next year, competition is considered the biggest business risk at 49 per cent followed by political instability at 35 per cent.

The poor state of infrastructure comes in at 25 per cent.

Despite these challenges, more than 65 per cent of business leaders perceive Uganda as a “moderately” attractive business destination while 25 per cent say it is “very” attractive.

More than 47 per cent of Ugandans see Rwanda as the most viable place to establish their subsidiaries followed by Burundi at 35 per cent. Only 12 per cent perceive Kenya, Southern Sudan and Tanzania as an investment destination.

According to Synovate’s managing director George Waititu, Uganda has a business confidence level of 66.3 per cent, Kenya 69 per cent — the highest in the region and Tanzania has 61 per cent.

The study, targeting top business leaders, was carried out in Kenya, Uganda, Tanzania and Ghana between March 21 and March 25.