1. Bridging the knowledge gap between perception
& reality of the economic potential of Kenya
JUNE 2015
2.
3. House of Major Limited (HoM) is a strategy and
communications firm based in Nairobi, Kenya with
a core competence on doing business in Kenya.
The scope of HoM’s capacity cuts across collabo-
rative and integrated disciplines including media
relations, regulatory advisory, organizational mod-
elling & re-modelling, market research, reputation
management, supply chain and market entry strat-
egies.
The firm is fluent in doing business in Kenya and
through its growing links to the wider African con-
tinent, HoM remains fully abreast with continental
decisions and their implications to the Kenyan
market.
HoM has consulted and managed clients across
industries and has direct links to critical institutions
such as Kenya Private Sector Alliance (KEPSA),
Kenya Chamber of Commerce, Investment Kenya
and various key ministries and parastatals to
ensure the valued integrity of our research and
recommendations are appropriately advocated.
Regardless of which growth indicator and the
source of the data, the consistent outcome high-
lights the continued economic growth of Kenya
and its growing influence on the continent.
This document works to highlight the significant
opportunities in Kenya for economic investment
to both local and foreign investors. The 2015
Attractiveness Survey by Ernst &Young highlights a
concerning gap which would be inexcusable in
other market entry assessments. Out of 10
regions, the survey found that those investors
already established in Africa, identified Africa as the
most attractive investment destination in the
world. Conversely, those respondents not estab-
lished on the continent, ranked Africa as the
second worst destination for investment. This
polarising level of optimism is unfortunately not a
surprising outcome but one that needs addressing
for the continued development of the continent.
This paper will aim to fill the gap specifically for
Kenya to local, continental investors and beyond.
About House of Major Purpose of the Publication
4. Structure & Content
Kenya’s Growth Story
Skilled Workforce & theTechnology Sector
Kenya Government’s Role
Foreign Direct Investment & the US Dollar
Nairobi Securities Exchange Performance
Final Word
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6. Kenya’s Growth Story
Immediately known for its long distance athletes and
tourism, Kenya has over the past 2 decades grown into one
of Africa’s leading economic hubs and strategic access for
organisation’s looking to grow in the region.
Kenya’s economic significance coincides with the turn of the
century. According to the IMF April 2015 World Economic
Data, Gross Domestic Product (GDP) from 2000 to 2014
has grown over 330% since with continued year on year
forecasted growth above any of the East African Communi-
ty member states and the traditional BRICS economies at
11% per annum. Though most of the consensus locally
projects the trend at >7% per annum the undoubted factor
is the significant growth of the Kenyan economy.
This expansion in wealth in Kenya has seen the recalculated
Gross National Income (GNI) of $1,160 catapulting Kenya
into the definition of a Middle-Income economy and Africa’s
8th largest economy. Kenya’s poverty levels are reducing
from the latest World Bank report; currently estimated at
between 34% and 42% from a high of 47% in 2005.
The pace at which Kenya is reducing poverty, especially in its
highly concentrated rural areas, needs to increase by a
further percentage point per annum if Kenya is to curtail
poverty in the country by 2030, according to the study.
It is however encouraging to investors that there is a signifi-
cant growth of the middle income population in Kenya
whose disposable income have also increased consistent
with the GDP rate.
Kenya’s population growth rate is one of the fastest in the
world and forecasted to continue above comparative
averages.
The consensus is the government of Kenya addressed the
population challenges later than it should have (early
2000’s). It nonetheless has accelerated infrastructure invest-
ments to curb the strain of the population explosion.
In-spite of the infrastructural delays, Kenya’s GDP per
Capita is forecasted to continue to grow and firmly establish
Kenya as a Middle Income economy before 2020.
Increasing urbanisation rate in Kenya has supported the
growth of the middle income groups though the govern-
ment is still faced with the challenges of ensuring inclusive
growth of the economy.
Kenya has challenges to continue to reduce poverty levels
at a faster rate and contain the concerns with urbanisation
to further enhance the growth of the country and region.
7. Skilled Workforce & theTechnology Sector
To exploit the economic growth investors’ opportunities
exist in Fast Moving Consumer Goods (FMCG), real estate
and the financial sector. Kenya has been held as the bench-
mark globally over the use of mobile money transfer. Indica-
tors state that Kenya’s mobile access & utilisation has grown
considerably to 80 per 100 inhabitants but mobile money
movements such as MPesa, has transformed the pace and
accessibility of Kenya’s capital.This has given birth to its own
mobile money transfer ecosystem creating employment for
agents amongst others as over 26 million transactions are
undertaken in a 3 month period according to the Commu-
nications Authority of Kenya.
Kenya’s population with access to internet stands at 64.3
per 100 inhabitants though a significant population, estimat-
ed at 70% of internet users, utilise their mobile phones to
access the internet. The growth and importance of the
mobile phones and accessibility to high speed internet in
just over 15 years, has seen Kenya’s technology sector
surface to be dubbed “SavannahValley” with key technology
MNCs, including Google and Cisco Systems, basing their
regional headquarters in Kenya.
Kenya’s technology savvy population serves as a key innova-
tive resource that can tap into the growing population of
the region with solutions catered to the masses.
Kenya’s population demographic is one of the most oppor-
tune for investors.The young population and the reducing
dependent population means Kenya will continue to have
one of the most active population ratios over the next 30
years. 60% of the population is under the age of 24 with a
near equal split of gender.
The country still has challenges to rural education accessi-
bility, with culture & poverty playing critical inhibiting factors.
The country still has challenges to rural education accessi-
bility, with culture & poverty playing critical inhibiting factors.
However, at the turn of the century, education was made
free to all in primary levels which has enticed a growing
primary education rate that improves the overall skill levels.
The World Economic Forum report on Kenya ranks the
country’s quality of education system a respectable 30th
out of 144 nations studied. Moreover, Kenya consistently
ranks in the top 3 in Africa over the volume of students
who pursue higher education in Australia, UK and the USA.
Additionally, increasing government investment in health-
care and economic growth, should appeal to the investment
community over Kenya’s productivity potential. Further key
opportunities for investors are in the outsourced service
industry. Kenya’s educated young workforce, English fluency,
geographic time neutral zone (+8 hours from Summer EST
& -5 hours from Singapore, Beijing) and regional leading
fibre optic penetration serving the EAC, Kenya is ripe to be
an outsourcing hub.
KONZA TECH CITY – $14.5B
KONZA IS A PLANNED SMART CITY 60KM SOUTH OF
NAIROBI,WITH AN INTEGRATED URBAN INFORMATION
& COMMUNICATION TECHNOLOGY AIMED TO HOUSE
& FOSTER KENYA’S GROWING TECHNOLOGY SECTOR
8. Kenya Government’s Role
Kenya’s political maturity was visible in the peaceful 2013 General Elections where there were
the country’s firsts in live political debates, legally contested and decided presidential decisions
and since then, a transition to a 47 county as part of the country’s ambitious decentralisation
of governance.
A key expansion for investors in the government setup is the Ministry of Industrialisation &
Enterprise Development whose one of 6 mandates is the Development of Micro, Small and
Medium Enterprises and Buy Kenya policy.With the growth of Kenya and forecasted opportu-
nities, investment in Kenya has never been more enticing.The maturing political landscape,
regional influence, infrastructural development and burgeoning educated population, invest-
ments in the agricultural, manufacturing, services and technological industry is ripe for both
exports & imports.
The increasing accountabilities of the Ministries are in place though Kenya still ranks a mediocre
16, on the World Bank Group’s Ease of Doing Business report from the 47 Sub Saharan
African countries in the report. However, the government has taken proactive steps in tandem
with the World Bank and the Private Sector to significantly improve the ease of doing business
in Kenya. Led by the Ministry of Industrialisation & Enterprise Development, the Government
of Kenya has in July 2015 announced the significant changes already made to improve the rank-
ing with a target of aTop 50 Global Ranking by 2020. Key changes in place are through intensi-
fied technology adoption and faster processing & execution in Kenya Power, the Kenya Trade
Network, Ministry of Lands and Nairobi City County with more scheduled. Kenya’s ranking in
the next Ease of Doing Business ranking will undoubtedly see a significant leap.
The government is further conscious of the need for data and information.There have been
significant steps taken and visible progress in the information accessibility and credibility off the
Kenyan ministries websites.The data and analysis held therein are current with a key aim to
drive knowledge regards to the potential of the Kenyan market.
Lodok
Lapssett Railway
LEGEND
Lapssett Highway
9. Foreign Direct Investment & the US Dollar
According to Ernst & Young, since 2007, Foreign Direct Invest-
ment (FDI) projects in East Africa have grown at a Compounded
Annual Growth Rate (CAGR) of 19.9%, the strongest in Africa.
FDI in Kenya is trending with the global pace though increasing
interest in the region over the raw materials potential, especially
in Oil & Gas, will continue to drive investments in Kenya to exploit
both the competitive skilled workforce and further enhance
inevitable local content requirements.
In 2014, FDI to Kenya doubled from 2013 according to the
African Development Bank (AfdB), as investment continues to
defy security concerns from Somalia.
In 2009, China surpassed the US as Africa’s key trading partner
and in 2014, Kenya tied for second attracting 9.4% of the Chinese
investment into the continent after South Africa. Kenya continues
to diversify its FDI sources with Middle East interests compound-
ing the traditional European and intra-Africa investment while
initiatives as part of Kenya’sVision 2030, continue to encourage &
attract investors.
The pace at which Kenya is reducing poverty,especially in its highly
concentrated rural areas, needs to increase by a further percent-
age point per annum if Kenya is to curtail poverty in the country
by 2030, according to the study.
It is however encouraging to investors that there is a significant
growth of the middle income population in Kenya whose dispos-
able income have also increased consistent with the GDP rate.
Kenya’s population growth rate is one of the fastest in the world
and forecasted to continue above comparative averages.
Kenya still has challenges with corruption and the ongoing securi-
ty apprehensions which it is collaborating in tandem with western
intelligence to suppress.These are likely the main viewpoints in
front of investors not present on the continent, while those work-
ing in Africa understand that in established markets, such as
Ghana, Nigeria, South Africa, Morocco, Tanzania, Rwanda and
Kenya, those are the exceptions than the norm and should not
derail the significant opportunity to create value from the next
market frontier.
In 2015, FDI to Africa is expected to grow by 12% ($55 billion).
The development of the Tripartite Free Trade Zone that would
link 26 African countries carrying a combined $1.2 Trillion GDP
announced June 2015, will only further improve the ease of doing
business on the continent, accessibility to more than 600 million
inhabitants and stimulate intra-Africa trade.
Diaspora are also increasing the level of remittances back to
Kenya.The Central Bank of Kenya identified that remittances from
the diaspora was at a record high $1.4 billion in 2014 and though
there is a proportion focused on family up keeping, investment by
the diaspora into Kenya has grown significantly and encouraged
further by government–friendly policies. Kenyan Embassies are
also playing a significant role in engaging with Kenyans abroad.
The strengthening US Dollar against most of the major currencies
has generally received mixed views across the globe.This should
be seen as a key catalyst for investment in Kenya factoring the
increasingly skilled labour.The US Dollar has appreciated against
the Kenya Shilling, not due to a weakening Kenyan economy but
rather a consequence of improving US trade balance driven
mainly by the growing US energy supply. As such, this should
entice investment and be seen as an opportunity to both invest in
the market and also as an export hub to the continent. The
Diaspora community should also take this as opportunity to
heighten investment back to Kenya while the cost of exploring
Kenya’s famedTourism industry should be lower.
10. Nairobi Securities Exchange Performance
The Nairobi Securities Exchange (NSE) is one of Africa’s
most active & best performing exchanges. Commenced in
1954 as a Stock Exchange, it changed its name to the Secu-
rities Exchange in July 2011 emphasising on its financial
maturity and delving into a full service securities exchange
supporting trading, clearing, settlement of equities, debt,
derivatives and other associated instruments. In 2014, the
NSE joined Johannesburg Stock Exchange in being the only
exchanges in Africa that are self-listed.
In 2014, East African markets were the top performing in
Sub Saharan African markets while only Kenya, Uganda,
Tanzania and Malawi had positive dollar-term returns in
sub-Saharan Africa.This challenge was mainly driven by the
stronger US Dollar against most currencies. Relative to
other security exchanges in Sub Saharan Africa, the NSE’s
performance over a medium-long term continues to
outperform its peers and can be benchmarked globally.
From 31st December 2009 to 29th May 2015, the listed
companies have had an average return of 135% to its inves-
tors with an average shares traded of 675,332 per listing
over the duration. 53% of the firms had positive returns to
their investors relative to the 32% that had a negative
percentage gain over the same period. The continued
strong performance, maturity and independence of the
NSE is a key attraction for investors.
11. Final Word
Kenya’s economic potential is significant and the necessary infrastructures required for
growth are in development or already in place. Security is a factor which the government
is firmly tackling and the state’s strategy on the topic needs continuous monitoring.
The political climate is increasingly pro–business and the economy is visibly vibrant. Chal-
lenges with poverty levels are apparent but the growing educated middle class is generat-
ing optimism and stimulating the economy.The country’s growth trends are positive im-
material of which indicator is utilised; the public & private sectors’ are active in seeking the
opportunities borne from Kenya’sVision 2030 and positioning themselves to profitably re-
alise the country’s immense potential.
