In 2020, Kenya faced the dual challenge of COVID-19 and a desert locust outbreak, but has managed to remain one of the most attractive investment destinations in the region
“We’ve been using drones to deliver blood to rural areas and to announce health messaging to the population reminding them to wear face masks and updating them on the latest cases.”
Prior to the COVID-19 pandemic, Kenya was the key investment destination in East Africa, with expected growth rates of above 5%, together with the country’s favourable weather and the political reconciliation that followed the disputed 2017 elections. Kenya has been propelled to first and fourth place in investment attractiveness in East Africa and Africa respectively.
Kenya is a relatively diversified market economy with consistently strong growth rates. The country has good telecommunications infrastructure, a robust financial sector, strong industrial base, and extensive aviation connections with the rest of Africa, Europe, and Asia. Mombasa Port is the major trade gateway to much of East Africa and plays a key role in the export market, especially to Asian markets.
The country’s economy benefits from diversity and sustained expansion in consumer demand, urbanisation, East African Community integration, structural reforms, and investment in infrastructure, including an oil pipeline, railways, ports, and power generation. Kenya has aspirations to reach 100% renewable energy generation by 2030. In 2017, the country’s president announced four priority sectors to anchor GDP growth, namely food security and agricultural productivity, affordable housing, universal healthcare, and manufacturing.
In 2020, Kenya faced the dual challenge of a desert locust outbreak and the COVID-19 pandemic, which impacted doing business. The hospitality and transport sectors were hardest hit, with freight and cargo delays for imports reported, negatively affecting the country’s balance of payments to date.
Kenya’s National Bureau of Statistics reported an economic contraction of 1.1% in the third quarter of 2020, compared to growth of 5.8% over the same period in 2019. The macroeconomic environment was fairly stable over the second half of 2020 as a result of the implementation in the first half of the year of various monetary and fiscal measures to mitigate the adverse effects of the pandemic. In December, the government announced the reversal of various tax reprieves to pre-COVID tax rates, namely corporate tax, individual income tax (PAYE), and VAT rates.
There were, however, sectors that performed well during the pandemic, including e-commerce, digital health, and insuretech. Modern warehousing complexes continued to receive increased demand from occupiers due to increased intra-regional trade and e-commerce activity over the last few years.
In April 2021, the International Monetary Fund Board approved SDR1.655 billion (about US$2.34 billion) of extended credit facility and extended fund facility arrangements for Kenya.
Investing in Kenya means foreign investors benefit from the same treatment as national investors. Multinational companies make up a large percentage of Kenya’s industrial sector, and the country is continuing to make improvements to its regulatory framework to boost its attractiveness as a destination for foreign direct investment.