Kenya: Investing in Kenya
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 World Investment Report 2023, FDI flows to the country increased by almost 64% in 2022, reaching USD 759 million, still below the levels recorded before the pandemic. At the end of the same period, the total stock of FDI stood at USD 11.2 billion, accounting for a mere 9.7% of the country’s GDP. 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 fiber optics. Kenya is also a regional leader in clean energy development with more than 90% of its on-grid electricity coming from renewable sources. Notably, the services sector has played a significant role in attracting FDI, outperforming industrial sectors in greenfield FDI attraction between 2018 and 2022. As per the World Bank, in the first half of 2023, inward FDI contracted by USD 27.0 million, potentially reflecting increased global and domestic uncertainty.
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, 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 infrastructure, 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%). Continued restrictions on FDI persist in critical sectors like business services and financial services. The complexity of entry and licensing procedures, alongside variations in processes across counties, further inhibit FDI. Streamlining administrative procedures, including digitalization and enhancing the one-stop-shop for foreign investors, can facilitate increased FDI. According to Transparency International, Kenya currently ranks 126th out of 180 economies on the 2023 Corruption Perception Index. Kenya ranks 100th among the 132 economies on the Global Innovation Index 2023 and 120th out of 184 countries on the latest Index of Economic Freedom.
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.
Country Comparison For the Protection of Investors | Kenya | Sub-Saharan Africa | United States | Germany |
Index of Transaction Transparency* | 10.0 | 5.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 10.0 | 3.5 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 9.0 | 5.5 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
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.
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Latest Update: May 2024