German firms find Kenyan market hard to operate in

Most German firms find Kenya’s business environment one of the biggest risks to their growth, according to a new survey.

However, a majority are also optimistic with 73 per cent of the 41 companies surveyed expecting better prospects in the next 12 months.

The Business Outlook Survey of Germany covered five key areas, including the current situation, business expectations, economic growth, employment and investment.

The firms were also surveyed on what they view as risks to their business operations in the country, with six in 10 citing a tough business environment as their biggest risk to operations.

Slightly over half of them said financing was a challenge for them while low demand for their products came third.

Interestingly, quite a number of them interviewed by the Delegation of German Industry and Commerce in Kenya thought the exchange rate was a major risk, despite the shilling being stable for the better part of the year.

Other risks included trade barriers, legal uncertainty and lack of skilled labour, lack of infrastructure, price of energy and raw materials, and the high cost of labour.

However, with most of the firms being bullish about their operations in the country in the near future, the authors of the survey said the potential for future German businesses in Kenya is bright. “Kenya has had political difficulties in the past but continues to evolve through devolution,” said Maren Diale-Schellschmid, Country Director, Delegation of German Industry and Commerce in Kenya.

“In addition, embracing technology in business services, welcoming economic policies and a push to increase trust by fighting corruption are some of the reasons Kenya is growing in business interest.” Six in 10 of the firms surveyed were satisfied with Kenya’s economic growth while another 29 per cent expected even higher growth.

Germany is one of Kenya’s key bilateral partners. Last year, most of the tourists were Germans, about 762,700 according to official data.

Exports to Germany, however, have continued to decline, with Kenya selling goods worth Sh11.7 billion in 2017 compared to Sh11.8 billion a year before.

The value of imports from the European country for the last five years has averaged Sh40 billion annually.

This week, Kenya secured Sh49 billion from Germany which will be used to support various

Government initiatives including good governance, devolution, food security and drought resilience programmes. Kenya’s economic growth has bounced back from a sluggish 2017 which was characterised by drought, protracted electioneering period and a credit crunch.

German firmsKenya’s business environmentBusiness Outlook Survey