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 2022 World Investment Report, FDI flows to Kenya declined to USD 448 million in 2021 (compared to USD 717 million one year earlier), their lowest level in the last five years. In the same period, the total stock of FDI stood at USD 10.4 billion, accounting for a mere 9.5% of the country’s GDP. According to the latest Foreign Investment Survey published by the National Bank of Kenya, the main investors in the country are the United Kingdom (13.5%), Mauritius (11%), the U.S. (10.3%), South Africa (9.8%), and France (5.2%). The majority of FDI stock is concentrated in finance and insurance (one-third of the total), followed by information and communication (16.1%), wholesale and retail (15.4%), and manufacturing activities (14.8%). In recent years, the ICT sector has attracted the most FDI, thanks to the arrival of fibre optics. Kenya is also a regional leader in clean energy development with more than 90% of its on-grid electricity coming from renewable sources.
The Kenyan government has been actively taking measures and implementing reforms to attract FDI. 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 hydrocarbon resources. Furthermore, the country has a developed financial sector and strong telecommunications infrastructure, and provides both fiscal and non-fiscal incentives to foreign investors. 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. Local participation requirements are mandatory in various sectors, including insurance (at least one-third), telecommunications and ICT services (minimum 30%). According to Transparency International, Kenya currently ranks 123rd out of 180 economies on the 2022 Corruption Perception Index and 135th out of 176 in the 2023 Index of Economic Freedom. In 2022, some concerns were raised after a newly opened Chinese-owned supermarket was forced to suspend operation indefinitely amid an uproar from competitors over low-priced goods.
|Foreign Direct Investment||2020||2021||2022|
|FDI Inward Flow (million USD)||717||463||759|
|FDI Stock (million USD)||10,010||10,473||11,232|
|Number of Greenfield Investments*||44||41||69|
|Value of Greenfield Investments (million USD)||758||2,171||2,011|
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.
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.
Any Comment About This Content? Report It to Us.
© eexpand, All Rights Reserved.
Latest Update: September 2023