Foreign Direct Investment inflows into Kenya declines after COVID-19 disruption

Foreign Direct Investment inflows into Kenya are on a rebound after a lull experienced in the last three years

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Foreign Direct Investment inflows into Kenya are on a rebound after a lull experienced in the last three years’ courtesy of global economic slowdown triggered by COVID-19 pandemic outbreak.

According to the Kenya Investment Authority (KenInvest), the Foreign Direct Investment prospects point at a steady recovery to pre-pandemic levels, a trend expected to hold as the new government lays out its vision and earmark strategic sectors that are fronted to deliver the realization of the country’s economic blueprint come the year 2030.

According to KenInvest’s Acting Managing Director Ms. Olivia Rachier, foreign investors have been developing keen interest in key areas of enabler as well as productive sectors of the economy such as green energy, infrastructure, agricultural value chain, oil & gas as well as the information technology space.

This is bolstered by the government’s intent to pursue a strategic approach of sustainable energy production in a bid to respond to challenges brought about by climate change. This is key to positioning Kenya among the integral players and respondents to the global rallying call of saving the globe from the effects of global warming, the Ag. Managing Director added.

The pandemic not only battered Kenya’s FDI stock but sent the entire global market place back to the drawing board with respect to strategizing on investor targeting as foreign investorsadopted a wait and see attitude aimed at capital preservation.

As the pandemic continues to subside, the impact it has had on economies is far from being mitigated. This is complicated further by the Russia-Ukraine hostilities. Some countries are however coming up with innovative ways of building back better as others apply the building forward smarter mantra.

In the African context, Kenya continues to align her policies to the modern investment climate demands in a bid to position herself as a leader in investment attraction and retention. The county’s seamless political transition during the just concluded general elections is a testament of its resolve to claim Kenya’s leadership position as a haven where investors are assured of security of their investments.

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Given that an estimated 42% of the country’s GDP is derived from climate-sensitive sectors such as agriculture, manufacturing and tourism, an effort towards promoting responsible production and sustainable energy generation is a welcome relief to Kenya.

In the long run, the country will be able to manage with ease the effects of drought and floods for the benefit of continued growth of the aforementioned sectors and associated ones. The trickle-down effect will have a positive impact on the overall economic performance.

Ms. Rachier confirmed that the improved business environment brought about by government interventions in response to changes in investor needs has started bearing fruit.

This is evident considering the frequency and number of registered interests from investment groups as well as source country enquiries and investor aligned delegations that the Authority continue to receive.

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Investment related statistics compiled by the Authority at the thick of COVID 19 pandemic paint a promising picture of the country’s potential of dislodging comparator economies as a preferred investment destination in Africa post pandemic.

During the year 2021, KenInvest registered and facilitated 167 foreign investment projects worth Kshs. 47.44 billion, an encouraging feat during such an unpredictable period.

Sectors that drew more interest were energy, construction, finance and manufacturing. The promising achievement notwithstanding, the overall FDI attracted may be much higher for the period under review given that the data presented emanated only from companies that registered with the Authority.

The difference on the actual and presented value of investment by KenInvest is brought about by the option available to investors of either registering or not registering their companies with the authority as per the provision of Investment Promotion Act of 2004 from where the investment promotion agency draws its mandate.

Currently, KenInvest is in the process of organizational revitalization by coining a new strategic plan to reinvigorate its approach towards investment promotion, facilitation and policy advocacy, the three pillars that anchor the Authority’s mandate.  The state corporation envisages that through this approach, it will contribute extensively to the Government’s aspirations of economic development, under the Bottom-Up Economic Model and overall sustainable economic growth.

Ms. Rachier affirmed that the 3 functions of investment promotion, facilitation and policy advocacy will be integrated in the key sectors that form the core pillars of the Government’s economic development plan to bring them up to productive phase through investment inflows.

These sectors include agriculture, housing and settlement, healthcare, manufacturing, and the creative economy. Involving micro, small and medium enterprises (MSME) in the value chains of the said sectors will be pivotal to the realization of the governments dream of an inclusive growth.

“Pre and post investment facilitation is critical towards making Kenya a global leader in investment attraction and facilitation, as it ensures timeliness in investment implementation continuum from the time an enquiry is received to the time the investment is operationalized. We will proactively support investors through all avenues available to address their concerns whenever need arises” Ms. Rachier said as she elaborated on the value of integrating KenInvest in productive sectors of the economy.

The Ag. Managing Director noted that Netherlands and Mauritius were among the fast rising source countries for Kenya’s foreign direct investments, joining the traditional FDI source powerhouses that include the United Kingdom, United states of America from the western part of world and China and Japan from the East.