Invest in Kenya: East Africa’s Powerhouse
Kenya is the largest and most advanced economy in East and Central Africa. Its GDP accounts for more than 50 per cent of the region’s total and in terms of current market prices, its 2014 GDP stood at $58.1 billion.
Kenya’s strong growth prospects are supported by an emerging middle class and an increasing appetite for high-value good and services.
Kenya’s favorable business environment and strong economy has allowed many companies to reduce operation costs and thus growing their profit margin.http://www.invest.go.ke/why-invest-in-kenya/
Kenya has successfully positioned itself as one of the foremost destinations for private energy investment in the region. IPPs were first introduced in Kenya in 2000 as part of an emergency plan to ensure electricity supply during droughts. They have since become a permanent fixture in the country’s energy landscape. In 2018 Kenya had 11 IPPs with a combined capacity of 1,000 MW, accounting for nearly a third of the country’s installed capacity.
Some state-owned entities like KenGen and Kenya Power (formerly KPLC) are partly privatised while the government retains majority share of ownership. KenGen, along with the IPPs, have long term PPAs with Kenya Power as the single buyer of electricity in the market. The country has about 30 private companies providing off-grid electrification through minigrids and standalone systems.
Kenya’s energy sector has a healthy surplus of installed capacity relative to the country’s peak demand. In 2018, peak demand reached 1,800 MW with capacity exceeding that by nearly 1,000 MW. The country has successfully adopted more renewable energy than many in the region, with less than 60% of its electricity mix derived from fossil fuels and large hydro. Industrial uses account for over half of all electricity consumption, followed by residential use which accounts for about a third.
Urban areas are mostly electrified while only two thirds of rural areas have access to electricity. Nationally, one quarter of the population remains without electricity, equivalent to 3.5 million households. Tariffs are highest for low voltage domestic and small commercial users, at an average of around €c12/kWh, which may impede affordability for some.
Kenya is targeting universal energy access by 2022. Peak demand is anticipated to increase to 10 GW by 2025, and an additional 7.2 GW will be added to installed capacity to meet this demand.
The country has a long and generally successful track record of private sector participation in the energy sector. Private companies are allowed to generate electricity, which they can sell to government-controlled entities for transmission and distribution, or use toward rural electrification in mostly off-grid areas. Private investment is also allowed in state-owned energy sector companies, albeit only as a minority shareholding.
Despite having made significant progress in infrastructure development in recent years, Kenya’s transport infrastructure is inadequate to meet the country’s needs. The country’s infrastructure
indicators may look relatively good compared to other low-income countries in Africa, but they remain below the levels found in Africa’s middle-income economies, like Egypt or Nigeria.
Bringing Kenya’s infrastructure up to the level of the region’s middle-income countries could boost annual growth by more than three percentage points. Kenya’s development plans include significant improvements to roads, railways, seaports, airports, water and sanitation, as the country attempts to increase its competitiveness in the global market. Road and rail connections with neighboring countries are still limited, but Kenya could be an important regional hub for air
transport, railways, and ports in the years to come. Kenya’s population and agricultural activity are heavily concentrated in the southern half of the country, along the corridor linking Mombasa
to Nairobi and then on to Kisumu and into Uganda.
Kenya’s infrastructure backbones– including the country’s principal road artery and its major power transmission and fiber-optic backbones – have followed this route. The northern half of the country, by contrast, is sparsely populated and characterized by fragmented infrastructure coverage.
Kenya is increasing investment in transport infrastructure, both through direct budgetary allocations and by partnering with the private sector, as part of efforts to improve connectivity and strengthen the country’s logistics network.
Investment in transport with private participation (current US$) in Kenya was reported at 575970000 USD in 2020, according to the World Bank collection of development indicators, compiled from officially recognized sources.
Kenya has a well-developed building and construction industry with quality engineering, building and architectural design services.
With a fast growing population, and increasing demand for affordable housing, opportunities exist in the construction of residential, commercial and industrial buildings. Investors can also manufacture and supply construction materials and components for the sector.
Kenya’s construction industry is currently booming. The Kenyan government has invested heavily in the construction sector in order to upgrade infrastructure such as road networks while also providing new residences for locals (who are supported by banks in obtaining loans to buy apartments/cars).
The real estate and construction industries, according to the Kenya National Bureau of Statistics, have been some of the main drivers of economic growth in Kenya for the past five years, suggesting that the country’s construction industry is well-developed. Construction of residential, commercial, and industrial buildings, including prefabricated low-cost housing, is becoming more feasible as the population increases.
According to the country’s economic outlook, the construction industry is one of the main areas that will and is attracting investors to the country. There are numerous investment opportunities, especially in the areas of slum and informal settlement upgrading, urban renewal, middle and low income housing development, and the manufacture and supply of building materials and components.
Infrastructure growth is a key component of Kenya’s Vision 2030, and GDP From Construction in Kenya increased to 83989 Million KES in the third quarter of 2020 from 72888 Million KES in the second quarter of 2020. According to the Kenyan National Bureau of Statistics’ (KNBS) Economic Survey, approximately 148,000 people are formally working in the domestic building and construction industry.
The sector’s players range from local micro-enterprises to international multinational civil engineering and construction behemoths. Despite the fact that building and construction contractors must be licenced with the National Construction Authority (NCA), a large number of unregistered contractors work in the informal sector
Kenya has the highest literacy rate in Africa, and its population is renowned for being well educated and hardworking. One benefit for international investors is that everybody speaks English, which is the universal language. This makes it easy for newcomers to understand and adjust to their new surroundings.
As a result of its optimistic rising economy, natural reserves, and a healthy workforce that can be easily interacted with, Kenya serves as a good starting point for beginning business in Africa.
According to a recent BMI Research report, the local construction industry will expand by 8.7 percent this year and will remain stable until 2026, with an average growth rate of 6.2 percent â€“ putting Kenya ahead of all Sub-Saharan African countries.
Kenya’s construction market is expected to grow significantly by 2026. Significant funding for the sector will come from the Kenyan budget, which will be backed up by foreign investment in the country’s expected infrastructure growth.
Manufacturing is key sector in Kenya’s economic development, in both its contribution to national output and exports, and for job creation.
Key targets and specific goals have been set to steer industrial growth. These include the development of Special Economic Zones, industrial parks and clusters, and niche products.
There are a wide range of direct and joint-investment opportunities in this sector, including agro-processing, garments, the assembly of automotive components and electronics, plastics, paper, chemicals, pharmaceuticals, metals and engineering products for domestic and export markets.
The Vision 2030 aims to transform Kenya into “a newly-industrializing, middle-income country providing a high quality of life by 2030”. The industrial sector has been identified as key to addressing incidences of high poverty levels, unemployment, disparities in regional development, and meagre foreign exchange earnings from exports of primary or semi-processed agricultural produce. The industrial sector also has strong linkages with other sectors and its growth will positively affect the other sectors. The sector, despite its potential, has not been dynamic enough to function as “the engine for growth” for the Kenyan economy as has been the case of the newly industrializing economies of South East Asia such as Indonesia, Malaysia, Thailand, Singapore and Korea.
The Government of Kenya in recognition of the role of private sector in spear heading Industrialization has put in place a policy frame-work to foster the creation of a Conducive environment for private sector participation in the economic development. Kenya is located on the eastern coast of Africa, bordering Somalia to the east; Ethiopia to the north; Sudan to the north-west; Uganda to the west and Tanzania to the south. The Indian Ocean lies to the south-east. Kenya’s geographical position makes it a major gateway for trade in the Eastern and Central Africa region. Kenya has a total area of 582,650 sq km out of which 569,250
sq Km is land and 13,400 sq Km is under water. Kenya has a population of approximately 36 million people with a national literacy rate of over 78%. Kenya has abundant, skilled and educated labor.
Kenya has become the global technology hub of choice when it comes to attracting the strategic business activities of ICT companies in emerging markets. Kenya is the regional leader in ICT in East and Central Africa and considered as one of thee top innovation hubs in sub-Saharan Africa.
Kenya has become a preferred destination for investors in various industries and an ICT hub in the region. Favorable government policies and exciting digital scene among other factors have contributed to the growth of the ICT market.
Kenya’s continuing economic growth provides unique opportunities for investment in the ICT sector. This is reinforced by a string of global indexes, some of which are cited below, that depict the country as a leader in both Sub-Sahara Africa and the East African Community (EAC) in the areas of;
- labor market efficiency;
- financial market development; and
- business sophistication
Among lower-middle-income economies, Kenya is particularly notable for its resiliency and its ability to exploit opportunities. Indeed, not only does the 2015 Change Readiness Index highly rate its enterprise capacity to withstand shocks, it also ranks high on the mean years of schooling index for its students.
What’s more, Kenya ranks ahead of every other EAC country and well above the Sub-Saharan average on the Index of Economic Freedom, raising the country’s profile as an attractive investment destination. The city of Nairobi in particular has been named as one of the top 100
outsourcing destinations in the world.
The Kenyan healthcare system can be split into three subsystems, being the Public Sector, Commercial
Private Sector, and Faith Based Organisations (FBOs). The Public Sector is the largest in terms of the
number of healthcare facilities, followed by the Commercial Private Sector and the FBOs. There is a large
disparity among these health facilities, especially in rural areas.
The Total Health Expenditure (THE) has increased over the years by about 33% in a 2 year timeframe to
KES 234 billion or USD 2,743 million in 2012/13. Health financing is mixed and receives funds from
taxation, the National Health Insurance Fund (NHIF), private health insurances, employer schemes,
Community Based Health Financing (CBHF), user fees (out of pocket expenses), development partners
and Non-Governmental Organisations (NGOs).
The Kenyan healthcare sector is experiencing exciting times. The middle class in Kenya has been
growing, together with the economy, increasing the demand for quality accessible health services. The
private sector has been vibrant with increased investments. At the same time, 32.5 million Kenyans lack
any form of basic insurance and are treated in ill-equipped and poorly staffed facilities. Kenya’s health
sector faces enormous deficiencies in coverage and infrastructure.