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Kenya

Executive Summary

Kenya has a positive investment climate that has made it attractive to international firms seeking a location for regional or pan-African operations. In the World Bank’s 2018 Doing Business report, Kenya moved up 12 places, ranking 80 of 190 economies reviewed, and Kenya was among the report’s top 10 reformers in 2017. In the last three years, it has jumped 56 places on this index. Year-on-year, Kenya continues to improve its regulatory framework and its attractiveness as a destination for foreign direct investment. It has a strong telecommunications infrastructure, a robust financial sector, extensive aviation connections within Africa and to Europe and Asia, and plans for direct flights to the United States in 2018. Mombasa Port is the major trade gateway for much of East Africa. Kenya’s membership in the East African Community (EAC), as well as other regional trade blocs, provides growing access to larger regional markets.

In 2017, Kenya instituted further business reforms: simplifying registration procedures for small businesses; improving access to credit information; reducing the cost of construction permits by eliminating clearance fees from the National Environment Management Authority and the National Construction Authority; enhancing electricity reliability by investing in distribution infrastructure and establishing power restoration squads; easing the payment of taxes through the iTax platform; and establishing a single window system to speed movement of goods across borders and reduce import document processing time. Other steps Kenya took in 2017 to improve its business environment included: passage of the Movable Property Securities Bill (2017); passage of the Nairobi International Financial Centre Bill (2017); passage of the Kenya Trade Remedies Bill (2017); passage of the Companies Amendment Act (2017); progress on draft legislation on the Financial Services Authority Bill to promote financial sector reform; and progress on the draft Copyright (Amendment) Bill (2017).

Kenya’s macroeconomic fundamentals remain among the strongest in Africa, with five to six percent GDP growth, four to eight percent inflation, shrinking current account deficits, improving infrastructure, and strong consumer demand from a growing middle class. A prolonged and acrimonious national election period during the second half of 2017 raised business anxiety and created a drag on growth but, following the elections, business and investment began to quickly recover. During his inauguration in November 2017, President Kenyatta outlined his second term development agenda, seeking to provide universal healthcare coverage; establish national food security; build 500,000 affordable new homes; and increase employment by doubling the manufacturing sector’s share of the economy.

The World Bank’s annual Kenya Economic Update, released in April 2018, cited short term economic risks to Kenya’s continued growth, including that: the Government of Kenya (GOK) may not continue needed fiscal consolidation; the GOK may not remove the current interest rate cap, exacerbating an ongoing credit squeeze; and the possibility of further drought. These same factors weighed on growth in 2017. At the same time, Kenya’s medium-term economic outlook appears strong. There has been great interest on the part of American companies to establish or expand their business presence and engagement in Kenya. Sectors offering the most opportunities for investors include: agro-processing, financial services, energy, extractives, transportation, infrastructure, retail, restaurants, technology, health care, and mobile banking.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 143 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report “Ease of Doing Business” 2017 80 of 190 http://www.doingbusiness.org/rankings
Global Innovation Index 2017 80 of 127 https://www.globalinnovation
index.org/analysis-indicator
U.S. FDI in partner country (M USD, stock positions) 2016 USD 396 http://www.bea.gov/
international/factsheet/
World Bank GNI per capita 2016 USD 1,380 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD
Investment Climate Statements
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