Kenya flag Kenya: Investing in Kenya

Foreign direct investment (FDI) in Kenya

FDI in Figures

Foreign investments in Kenya remain relatively weak considering the size of its economy and its level of development. Nevertheless, Kenya is one of the largest recipients of FDI in Africa. According to the figures from UNCTAD's 2021 World Investment Report, FDI flows to Kenya declined to USD 717 million in 2020 (compared to USD 1 billion in 2019), following the global economic crisis triggered by the Covid-19 pandemic. The total stock of FDI stood at USD 10 billion in 2020. According to UNCTAD’ Investment Trends Monitor, global FDI flows rebounded strongly in 2021, but FDI flows to African countries (excluding South Africa) rose only moderately. In recent years, the ICT sector has attracted the most FDI, thanks to the arrival of fibre optics. The other sectors targeted by FDI are banking, tourism, infrastructure and extractive industries. The United Kingdom, the Netherlands, Belgium, China and South Africa are the main investors in Kenya.

The Kenyan government has been actively taking measures and implementing reforms to attract FDI. As a result, the country made progress in the Doing Business ranking published by the World Bank. The country was ranked 56th worldwide, for the ease of doing business in 2020 Doing Business Report of the World Bank. This represents an improvement from 2019 edition when the country was ranked 61st. The country has improved in making the dealing with construction permits more transparent. Kenya also improved the reliability of electricity supply by modernizing its existing infrastructure. Registering property, getting credit, protecting minority investors, tax payment and resolving insolvency are the other aspects where the country has made notable changes.

The development of public-private partnerships as part of the 'Vision 2030' strategy should also have a positive influence on FDI inflows. Kenya plays a pivotal role in the East African Community, acting as a regional economic hub. It benefits from a strategic geographic location with sea access, a growing entrepreneurial middle class, a diversified agriculture and expanding services sector, and recently discovered hydrocarbons resources. Nevertheless, numerous obstacles to investment persist, notably the country's poor-quality infrastructures, skills shortages, instability related to terrorist risk and political, social and ethnic divisions, ineffective rule of law and corruption. In 2020, in the wake of the pandemic, Kenya introduced local participation requirements in various sectors, including insurance, telecommunications and ICT services.

 
Foreign Direct Investment 201820192020
FDI Inward Flow (million USD) 1,1391,098717
FDI Stock (million USD) 8,5469,29310,010
Number of Greenfield Investments* 659542
Value of Greenfield Investments (million USD) 1,7753,861502

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Kenya Sub-Saharan Africa United States Germany
Index of Transaction Transparency* 10.0 5.5 7.0 5.0
Index of Manager’s Responsibility** 10.0 3.5 9.0 5.0
Index of Shareholders’ Power*** 9.0 5.5 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

Return to top

What to consider if you invest in Kenya

Strong Points
Kenya's economy has many strong points in terms of attracting FDI:

- It is a market economy and functions as the commercial, economic, technological and logistic hub of East Africa;
- It is a regional financial centre, has a strong industrial base and well-developed road infrastructure
- In urban areas, Kenya also has a young, well-educated and English-speaking population
- Kenya has vibrant horticultural and tourism sectors, although the latter is volatile, subject to domestic political stability and regional security concerns.
- Regional energy sector has a significant potential (including offshore gas fields), with direct (exploitable reserves within Kenya’s territory) and indirect (inputs through and exports from Kenyan ports) benefits;
- Finally, foreign investors benefit from the same treatment as national investors from administrative and judicial authorities.
Weak Points
Among the factors which may discourage FDI in the country are:

- High level of corruption;
- A slow judicial system;
- High unemployment and poverty;
- Recent security issues related to terrorism and crime;
- Inter-ethnic tensions;
- Costly skilled labour;
- high costs of energy, instability of the electricity distribution system and poor infrastructure;
- Recent uncertainty concerning the capital constitution of foreign companies and administrative difficulties in obtaining work permits;
- Foreigners are not permitted to own land in Kenya (they can rent land for 99 years);
- Finally, in order to benefit from certain government incentives, foreign investors must invest a minimum of USD 100,000.
Government Measures to Motivate or Restrict FDI
In April 2013, the Government passed a law on public-private partnerships (PPP) in order to attract foreign investment in the infrastructure sector. The Government has put in place an extensive programme of privatisation in various sectors, such as food processing, construction, equipment, education and energy. The special economic zones and export processing zones benefit from targeted incentives. The Mining Law has recently been amended to limit foreign participation in the oil, gas and minerals mining sectors. However, in 2015, that law was amended in order to increase the attractiveness of the investment climate in the extractive industries.

A new Company Act, promulgated in 2015, was supposed to compel a foreign company to reserve at least 30% of its capital to Kenyan citizens. However, that clause was suspended. Despite these questions which remain unresolved, the law modernises registration procedures and operations for companies. In 2015, the Business Registration Services (BRS) Act set up the Business Registration Service. This new law supervises company registration and assigns to counties the registration of the name and concepts of a company, which cuts costs of registering a company. The Kenyan Government also introduced the Insolvency Act in 2015 in order to improve the legal framework in case of bankruptcy of a company.

In 2017, the government announced the development of the project Kenya Investment Policy to strengthen the creation of an environment conducive to investment growth. The policy provides for the revision of legislation affecting the entire investment network.

Bilateral investment conventions signed by Kenya
Kenya has signed 20 bilateral investment conventions.

Find out more about Investment Service Providers in Kenya on GlobalTrade.net, the Directory for International Trade Service Providers.

Return to top

Any Comment About This Content? Report It to Us.

 

© Export Entreprises SA, All Rights Reserved.
Latest Update: April 2022

Return to top