After the chaos: What next for business in Kenya?

Source: Exec Digital UK

Date :11/02/2008 11:03:19

Despite recent electoral unrest, Exec considers if Kenya can continue to compete for UK investment

By John O’Hanlon

Even for those of us old enough to remember the pre-independence struggles that brought Jomo Kenyatta to power, the recent electoral strife, with images of bloodletting, tribal polarisation and even talk of genocide, came as a shock. Kenya has had elections before, and President Moi’s defeat by Mwai Kibaki in 2002 was taken on the chin by the former, if with bad grace.

When Kibaki was declared winner of the presidential election of December 27 and 28 last year, following an unexplained delay, by a tiny margin and amid allegations of vote rigging, dissent quickly turned to violence between Kibaki’s supporters and those of Raila Odinga’s ODM party. Many people were killed, atrocities committed, villages depopulated. “It was completely unexpected,” agrees John C Small, chief executive of the Eastern Africa Association. “But I think the Kenyan institutions are strong enough to survive short term disruption to production in limited areas.”

A temporary setback

Those of us who have become used to seeing Kenya proclaimed as the country of origin on fresh vegetables, or are aware that a large percentage of the cut flowers or tea we buy comes from Kenya may have developed an image of a country heavily dependent on agriculture.

But Kenya differs from all of its neighbours in having a solid financial and communications infrastructure. While it’s true that Kenya lacks the mineral resources of its neighbours like Tanzania and the Democratic Republic of Congo, its service sector has grown by five percent since 2000. Including the tourism business that is Kenya’s largest dollar earner, service now accounts for nearly 60 percent of GDP. In December 2007 France Telecom paid $390 million for a 51 percent stake in Telekom Kenya, the most recent manifestation of febrile interest in this sector on the part of both indigenous and overseas investors.

Small says Kenya should not be underestimated. Unlike most of its neighbours it is not in any way dependent on international aid – on the contrary it is the second largest investor in both Tanzania and Uganda. Since Mwai Kibaki took over from Daniel arap Moi in 2002, the economy has been on an upward path, he says, thanks largely to a hands off policy that has encouraged entrepreneurship and the private sector in general and despite a persistently strong currency against the dollar.

“Kenya even compares well with South Africa,” he says. “And it’s in stark contrast to all of its immediate neighbours. Nairobi is the only feasible location for an East African stock exchange that would serve Comesa (the common market for Eastern and Southern Africa) countries, and it is an attractive place for international companies to set up their headquarters because of the very skilled and experienced people there, the prevalence of higher education, and the old-established professional infrastructure.”

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