KENYA’S COMPETITIVENESS IN
BUSINESS
BY
JULIUS KIPNGETICH
MANAGING DIRECTOR
INVESTMENT PROMOTION CENTRE
AFRICA AT A GLANCE
• The continent’s size is to equivalent to
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USA
China
India
Argentina
Western Europe
New Zealand
Has a population of 740 million
Is endowed with vast natural resources
Has a huge debt
Has a small GDP size
2/3 of the population is young and dynamic
Its violent and turbulent past is coming to an end
Kenya at a glance
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Has a GDP of $11 billion
Population is 31.5 million
Per capita of $350
16% of the GDP is savings
75% of employment is in agriculture, 24% of GDP
Tourism earns Kshs. 24 billion, 12% of GDP
Manufacturing accounts for 14%, largest base in
COMESA
ICT is the fastest growing sector in the economy
Financial & diplomatic capital of the region
Aviation hub of the region courtesy of Kenya Airways
Busiest port of the region at Kilindini
Best educated workforce in Sub-sahara
Highest concentration of Olympians in the world
Kenya’s investment priority areas
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Agriculture and agro-processing
Tourism
Manufacturing
Professional services
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ICT
Financial & Banking
Medical
Trade
 Knowledge-based industries
 Privatisation of state enterprises
 Mainly infrastructure parastatals
Main Types of FDI
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Resource seeking
FDI in natural resources
FDI seeking low cost or specialised labour
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Market seeking
FDI into markets previously served by exports or closed
FDI by supplier companies following customers overseas
FDI aims to adopt products to local tastes or use resources
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Efficiency seeking
Rationalized or integrated operations leading to
cross-border specialization
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Strategic asset seeking
Acquisitions and alliances
Determinants of FDI inflows
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Political stability and predictability
Labour conditions
Legal environment
Size of the market
Openness of the economy
Infrastructure and other support services
Incentives
Degree of globalisation
DISTRIBUTION OF FDI INFLOWS2001
European Union
USA
Asia/Pacific
Latin America/
Caribbean
 Africa
 Japan
 Others
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44%
17%
14%
12%
02%
01%
10%
Africa’s top 10 FDI destinations
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South Africa
Morocco
Algeria
Angola
Nigeria
Sudan
Egypt
Tunisia
Ivory Coast
Mozambique
($ billions) - 2001
7
3
1.2
1.1
1.1
0.6
0.6
0.6
0.25
0.25
Inward FDI flows for Kenya, Uganda, Tanzania
& S. Africa ($ million)
Year
1998
Kenya
42
Uganda
210
Tanzania
172
S. Africa
561
1999
42
222
517
1,502
2000
127
254
463
888
2001
50
229
327
6,789
2002
50
275
240
754
Outward FDI flows for Kenya, Uganda, Tanzania
& S. Africa ($ million)
Year
1998
Kenya
14
1999
30
2000
Uganda
20
Tanzania
-
S. Africa
1,779
-8
-
1,580
29
- 28
1
271
2001
50
-5
-
- 3,180
2002
76
-14
-
- 401
KENYA’S COMPETITIVENESS AS
A PREFERRED FDI
DESTINATION
( 1 ) denotes negative perception and
( 4 ) denotes no impact on deciding investment
destination
Kenya’s competitiveness as a
preferred FDI destination
3
2.5
Corruption
2
Inadequate
infrastructure
Crime
1.5
1
0.5
0
Kenya
Uganda
Tanzania
Kenya’s competitiveness as a
preferred FDI destination
Contd.
2.5
Political
instability
2
1.5
Financing
1
Tax
regulations/high
rates
0.5
0
Kenya
Uganda
Tanzania
Kenya’s competitiveness as a
preferred FDI destination
Contd.
3
2.5
Inflation
2
Regulations for
starting business
1.5
1
Uncertainity on
costs of
regulations
0.5
0
Kenya
Uganda
Tanzania
Kenya’s competitiveness as a
preferred FDI destination
Contd.
4
3.5
3
Inadequate
education levels
Tribal conflicts
2.5
2
1.5
1
0.5
0
Kenya
Uganda
Tanzania
Kenya’s competitiveness as a
preferred FDI destination Contd.
3.5
3
2.5
Public health
concerns
Transfer costs in
exporting capital
Work ethics in
labour force
2
1.5
1
0.5
0
Kenya
Uganda
Tanzania
Kenya’s competitiveness as a
preferred FDI destination Contd.
3.5
3
Labour
regulations
2.5
2
Foreign
currency
regulations
Regulations on
foreign trade
1.5
1
0.5
0
Kenya
Uganda
Tanzania
Kenya’s competitiveness as a
preferred FDI destination Contd.
3.2
3.1
Safety or
environmental
regulations
Price controls
3
2.9
2.8
2.7
2.6
Geographical
location of the
firm
2.5
2.4
2.3
Kenya
Uganda
Tanzania
Average Score in competitiveness
2.7
2.6
2.5
KENYA
UGANDA
TANZANIA
2.4
2.3
2.2
2.1
COMPETITIVENESS
CORPORATE TAX RATES (%)
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Kenya
China
Indonesia
Malaysia
Philippines
Thailand
Vietnam
30
30
30
28
32
30
25
TELECOMMUNICATIONS
KENYA
SELECTED
COUNTRIES
US$/minute to US
 Private landphone
(Local calls 0-60 km)
US$ 0.02 per minute
 Trunk calls
US$ 0.08 – 0.25 per minute
 International calls - US
US$ 1.25 per minute
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Indonesia
Malaysia
Philippines
Thailand
China
Vietnam
1.00
0.24
0.30
0.56
0.25
1.30
WATER RATES
KENYA
SELECTED ASIAN
COUNTRIES
Water (US$/m³)
 0-10,000 litres
US$ 0.16 per 1,000 litres
 10,000 – 30,000 litres
US$ 0.24 per 1,000 litres
 30,000 – 60,000 litres
US$ 0.36 per 1,000 litres
 Over 60,000
litres
US$ 0.45 per 1,000 litres
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China
Indonesia
Malaysia
Philippines
Thailand
Vietnam
0.21
0.59
0.51
0.21
0.31
0.25
REASONS FOR KENYA’S LOSS OF FDI
COMPETITIVENESS
 Turbulent political environment in the last
decade
 Stand-off with development partners especially
IMF
 Low economic growth
 Corruption and insecurity
 Inadequate infrastructure supply
 Inefficient public service
 Low quality of life
 Lack of political will to change in the past
 Lack of enabling legal frame work
 Poor perception of Africa as a whole
Achievements since the
Government took over
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Smooth transition of power in 2002
Emerging positive image of Kenya worldwide
Restoration of relations with development partners
Increased confidence of the population and general
optimism about the future
Major review of govt policies in many sectors
Facing the excesses of the past & zero tolerance for
corruption
Widening of the democratic space
Conclusion of the constitutional talks
Inclusion in NEPAD group of 4
Increased interest in Kenya as a trade, investment
and tourism destination
What remains to be done
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Reorientation of the entire public service
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Retooling & separation
E-governance
Process thinking
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Investment code
Privatisation bill
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Electricity, oil & gas
Roads, railways & ports
Telecommunications
Security & safety
Passing of 2 crucial bills
Reduction of the cost of doing business
Privatisation of state enterprises
Widening & deepening of the fight against corruption
Debt restructuring & forgiveness
Positioning Kenya as the premier black Africa nation