Successfully investing in Kenya

published on May 16, 2018

 

How do you assess the current economic situation in Kenya?

Kenya is a regional trade hub in East and Central Africa and – together with the East African Community (EAC) – forms one of the largest economic areas on the African continent. With its strategic location as an access point to several landlocked countries such as Uganda, Rwanda and South Sudan, Kenya is also a perfect location in terms of logistics. For this reason, Kenya's capital city of Nairobi – next to Lagos (Nigeria), Johannesburg (South Africa) and Dubai (UAE) – is increasingly establishing itself as an important location for international companies to start business in the whole of Africa.
 
By adopting its first own constitution, Kenya has introduced a decentralised government system and shown that democratic elections are possible. This was again confirmed by the 2017 elections which were reviewed by the Supreme Court after they had been challenged by the opposition coalition NASA. Afterwards, the new peaceful elections took place. In a joint statement by Heads of Mission in Kenya, the transparent legal process and the parties’ respect for the Court’s decision were praised as factors that reflect the strength of Kenya’s democracy. Meanwhile, the ruling political party and the opposition have been working together to implement the political agenda for growth and development in Kenya.

How would you describe the investment climate in Kenya? Which sectors offer the largest potential?

The political stability and favourable legal framework conditions ensure investor-friendly climate. Currently, Kenya ranks 80th out of 190 countries in the World Bank's “Ease of Doing Business” ranking. This is attributable, among other things, to beneficial legislation, including the Companies Act 2015 and the Special Economic Zones Act, or tax reliefs for manufacturers in Kenya. Also the new rules on the protection of foreign investments in form of the “Investment Promotion and Protection Agreements (IPPAs)” ensure greater legal certainty.

 

In addition, investor sentiment improved in Kenya after the bill proposing the introduction of a requirement where at least 30 per cent shares would have to be held by a local entity for a foreign investor to be allowed to incorporate a company had not been approved.

  
Emphasised should be also the extraordinary start-up mentality and enthusiasm for innovation, especially in Nairobi as the location. Kenya has a very modern IT infrastructure and invests heavily in promoting the numerous companies from this branch of industry, most of which are based in Nairobi. This positively affects also other branches of the service sector.


What challenges do German companies face during their business ventures into Kenya?

It is relatively easy to enter the Kenyan market and e.g. to form a company here. Meanwhile, it has even become possible to establish a company online.

The official language of business in Kenya is English, which makes it much easier for a German entrepreneur to operate on this market. Furthermore, Kenya and Germany signed the Double Taxation Relief (effective since 1979) 45 years ago.
 
Nevertheless, it is still quite a challenge for a market entrant to navigate through all applicable laws and procedures. This applies also to the official economic area of the East African Community (EAC) where hardly any uniform regulations, taxes and control mechanisms could be implemented despite harmonisation efforts and plans.
 
Finally, it should be mentioned that corruption is still very widespread in Kenya, plaguing especially the public sector.
 

What branches of industry are crucial to Kenya's population?

The energy industry whose growth and success have a direct impact on the quality of life of the Kenyan population is undoubtedly one of those to be mentioned. About 50 per cent of the population has no access to electricity. There are regular power outages due to problems with the power distribution systems.
 
Due to energy deficits, private electricity producers are offered particular invectives in Kenya. Thus, Kenya has already created important framework conditions for private providers (such as feed-in contracts with a term of up to 20 years).


In your opinion, how will Kenya develop?

Kenya is strengthening its position as an engine and source of ideas for the development of the economy in East Africa and will continue to play a leading role in the economic area of East and Central Africa.
 
For example, with its M-Pesa model, Kenya is a pioneer in mobile banking. Anyone who has a SIM card for a mobile phone can open an “account” on their mobile phone. Over the last 10 years, the number of account holders has increased from 50 to 90 per cent of the population. A large part of the citizens, who otherwise would have never had the chance to hold their own bank account, were enabled by this technology to participate in Kenya's economy - as an individual, but also by establishing small businesses. Already 90 per cent of the restaurants in Nairobi use M-Pesa for accepting payments. Also payment transactions relating to online company formation are already handled via M-Pesa. The model has become a success story also outside of Kenya, which is hardly surprising.

 

Kenya's growing middle class will inevitably lead to further growth in demand for consumer goods.

Already since 2016, Volkswagen has been manufacturing VW Polo Vivo at its local sites in Kenya. Increased government interest in promoting renewable energy, the real estate market, infrastructure and the IT sector will attract more and more investors to Kenya in those branches of industry.


 

 

 Cultural characteristics

 Contact

Dr. José A. Campos Nave

Managing Partner

+49 6196 7611 4702
+49 6196 7611 4704

Send inquiry

 How we can help

 Further Information

We use cookies to personalise the website and offer you the greatest added value. They are, among other purposes, used to analyse visitor usage in order to improve the website for you. By using this website, you agree to their use. Further information can be found in our data privacy statement.
Deutschland Weltweit Search Menu