3 Reasons the Kenyan Economy Is Set to Boom

In this guest post, Robert Rayford of Dealmarket.com argues that Kenya merits a long look from global investors.

Throughout Africa there are a number of potential economic giants waiting to awaken from their collective slumbers and lay down a marker both on the continental and global stages. Due to the well-documented troubles encountered by the continent, be it famine, corruption, or something else, the potential for growth there is among the highest and most attractive in the entire world.

Kenya is one such country where all the stars appear to be aligning at the same time, so to speak, and the East African nation could be set to be the big African economic success story of the next decade.

What is happening, or has happened, in Kenya to leave it on the cusp of an economic boom period?

1. 2013 Elections

The prospect of peaceful democratic elections taking place in early 2013 is an important indicator of the potential of Kenya. While the country was wracked by violence following its 2007 election, a raft of reforms designed to safeguard citizen rights and check the power of elected officials has increased the likelihood of a peaceful vote. Thus, while the eyes of the world may be casting negative, nervous glances at the country come election time in March, the perception of risk appears to be greater than the actual risk.

2. Diversifying Exports

Kenya has done much work to move away from their reliance on tourism and tea exports. Although these are still huge revenue generators for the Kenyan government, natural resources and textiles are now being seen as having the potential to be just as lucrative, with the exploitation of these opportunities crucial to creating a stable and sustainable economy for the long-term.

Photo by Erik Hersman

3. Attractive Investments

Kenya as a whole is an attractive investment proposition for private equity firms. Generally speaking, this is down to the ability to acquire a quality product, and more of it, in the country, and at a cheaper price.

While there are concerns that many private equity investors are taking advantage of the country, for example buying fertile land from farmers at a reasonably cheap price, only to build property with a view to making a huge profit, many accept that this is an inevitable consequence in a country that aims to be fully industrialised by 2020. At the same time, the land being brought is generally that which has been historically used for growing coffee, a crop that has been in terminal decline in Kenya for most of the last century anyway.

The Future

The Tatu City development, being built outside of the Kenyan capital Nairobi, is the perfect example of where the country sees itself in the future, and shows why an economic boom here is inevitable. The development aims to create over 110,000 permanent jobs and permanently house 70,000 residents. With prospects that promising in contrast to a globally bleak backdrop, it is no wonder that so many investors are looking to Kenya, and Africa in general, for the future.

Comments

  1. Great analysis there. And can I add a fourth point, the growing population, projected to hit 77 Million by 2030. That is a huge market.

  2. Great article! I believe in the potential of Kenya 101%.

  3. I suggest actually coming to East Africa first … on paper its all very attractive, the affordability squeeze on the ground is tremendous just for the bare essentials of day to day life… add to that the ever growing and visible divide between those who have and those who don\’t and it little wonder the enormous tension you feel when you are on the ground. Remember unlike other east African countries Kenya, by virtue of on-going quasi colonialism , non-indigenous individuals own a disproportionately large amount of land (and wealth ) in Kenya… probably all legitimate of course, but try convincing a person barely on the bread line (which is the majority)… add to the mix a does of tribalism…. Kenya is a ticking time bomb.

    • Many thanks, local. I have visited East Africa and have felt some of the tension you refer to. My prediction, however, is that, having walked to the precipice in 2007-8, Kenya will avoid a repeat following the upcoming election. Memories of the violence remain fresh.

  4. Although the mentioned new constitution does bring some long overdue reforms and should in the long term lead to improved governance, I don’t think it will have mitigating effects on this years elections. Quite the opposite. Regional governance has created a range of new arenas for tribal conflicts over domination of constituencies.
    Ryan, I am aware that this is a predominantly investment-focused website, but I think you are very much underestimating the economic and political risks of the elections. However I am rather positive about Kenya’s long-term economic prospects, especially if they make it peacefully through the elections.

  5. I don’t know you well enough to call you naive. ;-)

    In general I do think that political risks are overrated in Africa, but not with the Kenyan elections. The 2 weeks in 2007/8 put the countries years back economically and that could happen again.

    Maybe read these two articles for more insights:
    http://www.cfr.org/kenya/electoral-violence-kenya/p29761#cid=soc-twitter-at-other_report-electoral_violence_in_kenya-010113
    http://africanarguments.org/2013/01/11/kenya%E2%80%99s-nigerian-future-%E2%80%93-by-ben-rawlence/

    Also it’s interesting to note that the stock market has not responded to the potential threat and gained strongly this year! I pray they are right, and if so I would consider opening a brokerage account there.

  6. Under the new constitutional order, there are key fundamental changes that put the country on a different path, and that gives investors comfort. The political risk element is still there, but the investing community see mechanisms to deal with any turbulence that may arise as a result of electoral events! A glance at the NSE performance especially since the second half of last year, confirms the growing confidence of investors especially foreign investors who have been net on the buy side! Jason, open your account and am sure you will enjoy the ride!!

  7. Thanks Mark, I am loving the optimism! I have noticed the strong influx of foreign capital. I think it also has to do with some institutions trying to get their money as far away as possible from the Euro zone. So lets see what happens now as the Euro seems on the up-beat. I will be in Tanzania next month and will also meet some contacts from Kenya there, so I will hear what they think.

  8. Rachel Kasumba says:

    Ryan, great site with useful content on topics that are still somewhat intimidating or a mystery to many people.

    I am optimistic that once the March 4th 2013 elections are over (peacefully), there will be nothing stopping Kenya from being fully industrialized by 2030.

    So for now, many stakeholders are all anxiously awaiting the outcome of these elections. Some have even taken precautions especially Kenya’s neighbors who rely heavily on her for trade and transport. Tanzania is getting business especially through her ports as an alternative to Mombasa.

    • Many thanks, Rachel. Are you optimistic that the Kenyan elections will be peaceful?

      • Rachel Kasumba says:

        Yes I am optimistic that the elections will be more peaceful compared to 2007. Several reasons 1) new constitution as Mark highlights 2) regular citizens (lower income) are more involved in ensuring they get leaders of their choice, if recent Nairobi governor results are any indication of what will happen on March 4th 3) computerised registration will minimize voter fraud allegations 4) the divide between rich and poor is widening as Local says. This is a global problem actually and I would like to assume that most Kenyans, at the end of the day, will base their decision on whether they are better off today than they were 5 years ago (to borrow the late President Reagan’s 1980 election slogan to the American people – in their case 4 years – which propelled him to the White House).

  9. Kenya is a great country, but in one thing it is lagging behind. Corruption. Like when we talk of investors buying land for cheap because corrupt government officials conned their own citizens. That’s a backward flow and not something that can take Kenya to the next step.

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