Wholesale, retail trade grab bulk of foreign direct investment

An artiste's impression of Two-Rivers project

Foreign investors are placing most of their money in the country's wholesale and retail trade sector, findings of a new survey have shown.

About a quarter of all foreign capital inflows go into trading, way ahead of other critical sectors including manufacturing, according to the Foreign Investment Survey compiled by the Kenya National Bureau of Statistics (KNBS).

"We found that most of the capital inflows are invested in trade which is a very vibrant sector," Zachary Mwangi, the director general of the statistics agency said.

The survey looked at 2013 but the findings are reflective of the current situation, he added.

It is the third such survey done to inform the Government about the direction of international trade and the balance of payments. Interestingly, the repair of motor vehicles and motor cycles was the second most attractive segment for foreign capital with the financial services sector coming third.

More than 850 large firms were interviewed in the survey that also sought investor perception on investment climate. Foreign direct investment rose by a fifth in that year alone to Sh454 billion. More than Sh110 billion had been investment in wholesale and retail trade. Rising income levels for the average Kenyan have led to soaring consumerism in Kenya, which would inform the interest in the trade sector among foreign investors, as shown in the survey findings.

Official statistics indicate that the country has entered the lower middle income band helped by steady economic growth since the turn of the millennium. Change in the retail sector has been more dramatic in the past decade, with the emergence of the mall culture that has caught up in most urban centres.

Several malls are in different stages of construction in Nairobi alone, including the biggest one yet that would be taken up by a French retail chain in Runda. The World's largest retail chain Walmart has also been seeking to enter Kenya through its South African subsidiary Massmart with talk that it could acquire one of the leading supermarkets.

Internal business intelligence firm Euro Monitor has reported that Kenya's retail industry continued to record positive growth in 2014 and that its future prospects are favourable, underpinned by a growing middle-class. Grocery retailers are now stocking items such as clothing and footwear, consumer electronics and appliances, books, toys, personal and home care products, as well as household furniture and furnishings.

"Rising disposable incomes among Kenyans are largely responsible for the re-emergence of the middle class consumer who demands more than the usual grocery items," Euromonitor reported. More than half of the investors interviewed in the KNBS survey were concerned about security, counterfeiting, corruption and access to land – which they felt had actually been worse over the last two years.