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Kenya is a hotspot for investment – will it last?


In recent years Kenya has seen much foreign investment – it appears to be the favoured child of the East African region. Nairobi in particular, with its growing middle class and expatriate community, has become a hub for global investment, able to sustain international retail brands and mega shopping malls. Analysts are now asking if foreign investment will wither after the September 2013 attack at an upmarket Nairobi shopping mall and in the wake of renewed security fears or march on regardless.

What the analysts have to say

According to Sheel Gill, head of transaction and restructuring at KPMG East Africa, Kenya is likely to come out of this stronger than it did after the 7 August 1998 bombing at the US Embassy in Nairobi, an attack in which more than 200 people died. “It is actually too early to tell whether deals will abort or will be postponed. For the transactions that I am working right now, none of my clients have called and said: ‘We are pulling out as a result of the incident,’” said Gill. “What I have noticed though, is that some investors have pushed back their meetings … they have not cancelled it, they have just pushed back their trips to Nairobi.”

“When you look at the stock market [i.e. Nairobi Securities Exchange], it’s not gone down,” said Gill, adding that the Kenyan currency has also not been affected by the attacks.

Job Muriuki, principal at the Nairobi Securities Exchange-listed Centum Investment Company, told How we made it in Africa that financing of shopping malls in Nairobi will not slow down because of the attack at Westgate.

Construction continues

One of the largest shopping mall construction projects underway in Nairobi is the Garden City development, a 130,000m2 mixed use development which will host the largest retail centre in East Africa. The KSh 27bn (US$311m) project is funded by London-based private equity firm Actis.

“If you were to compare the number of class A shopping malls in Nairobi vis-à-vis the total population, if you compare to any upcoming, developing city, it’s actually very, very low,” said Muriuki, but he adds that the “alternative to not going to a shopping mall is to go back 20 years to people doing [their shopping] on the street. We can’t go backwards in time.”

Muriuki is however also on record saying that the design, security features and installations of malls constructed in the future “will change to cater for terrorism as a threat, but I don’t see people stopping to build shopping malls because of the attack”.

“In private equity we take a very long-term view to investment,” says Muriuki. “So, we are looking at an investment period between five to 10 years. There are still 40 million healthy Kenyans who need to eat every day. So, unless we were to have a very serious calamity, like civil war, I don’t think that [attack] will fundamentally change the appetites of everyday Kenyans. People will still eat every day, they will need to drink their soda [and] they will still need to use their mobile phones.”

The impact of Kenyan politics on investment

There have also been concerns that the charges against Kenya’s President Uhuru Kenyatta and Deputy President William Ruto at the International Criminal Court (ICC) will have an effect on the willingness of investors from Europe and the US to invest in the country. ICC prosecutors allege the two men orchestrated ethnic violence after Kenya’s disputed 2007 presidential election in which 1,300 people were killed and over 300,000 displaced.

In the run-up to the presidential election of March 2013, US top diplomat for Africa Johnnie Carson warned Kenyan voters that “choices have consequences”. In January 2013 the British Government said it would only maintain “essential” contacts with the two if they won the elections.

“I think that once we get over the ICC case and it works in our favour we will actually see a huge increase in investment,” said Gill. “We have got a lot international investors who are just waiting for the ICC cases to clear.”

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David Okwara

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