Despite Kenya being in the middle of a tumultuous political environment, in the month of February alone-the most curious thing is that notices of acquisitions and market entry by global firms have littered the Kenya Gazette.
‘American conglomerate United Technologies acquires 100 percent shares of aircraft component maker Rockwell Collins in Kenya, Swedish giant Omya (Sweiz) Ag gains approval to acquire a majority stake in Mavuno Fertilizer Limited. Kentegra Biotechnology seeks approval from the Agriculture and Food Authority for production, processing and export of pyrethrum…’ and the list goes on.
Additionally, a 2016 Common Market of Eastern and Southern Africa (COMESA) report showed Kenya leading the COMESA region in mergers and acquisitions, earning the commission sh314 million in transaction fees between December 2015 and October 2016.
International law firm Clifford Chance noted a continental shift on Mergers and Acquisitions in 2016 from West to East Africa at 50 percent increase.
Providing insight into why countries like Kenya-which has been dubbed the gate into East Africa, attract heavy investment despite their various challenges, Spencer Baylin, Clifford Chance Global Head of Emerging Markets said, “Risk mitigation strategies include investing in countries perceived to be regional hubs through which growth in nearby countries can be accessed.”
Kenya trails Ethiopia as East Africa’s second largest economy with the International Monetary Fund (IMF) estimating that the 2017 GDPs of the two countries will reach $75billion and $78 billion respectively. Yet, Kenya is classified as a low middle-income economy with a higher per capita income than Ethiopia, which is a low-income economy. In the eyes of investors, this sets Kenya apart.
Additionally, despite a politically heavy 2017, Kenya’s tourism numbers grew by 20 percent, a figure that displays Kenya’s potential and resilience, in turn, enticing investors to enter the economy with the hope that the country will experience growth.
Kenya’s economy is attractive because it is continuously opening up; improving ease in registering new businesses, guaranteed free remittance of dividends, interest and profit repatriation (conversion of profits to the currency of the investors’ home country) to foreign investors etc.
Recently, Kenya ranked as the third most competitive African economy behind Mauritius and Rwanda in the 2017 World Bank Ease of Doing Business Index. In the indexing, Kenya ranked well in regards to getting an electricity connection, protecting the rights of minority investors, accessing credit and reforms to business-set-up procedures, thanks to the new Companies Act 2015. Such feats contribute to attracting investment.
Reiterating on the impact of the reforms done in the country, Kenya Private Sector Alliance CEO Carole Kariuki said, “ the multiple impact of the changes is excellent not only for big investors who are looking to invest in the country but also for you and I who want to do business every day.”
All these factors play a role in bringing investors into the country, driving mergers and acquisitions; however, there is a still a whole lot more that needs addressing in order to competitively attract investment. Including decreasing the cost of doing business, improving infrastructure, increasing the quality of skills and reducing bureaucracy.