Foreign investors’ interest in decline, State data shows

Technicians at the KVM assembly plant in Thika mount an engine on the chassis of a Hyundai light truck. The number of new foreign firms registered in Kenya has dropped since 2014.

The number of new foreign companies registered in the country has declined sharply since 2013, signaling a tough business environment.

Latest data from the Kenya National Bureau of Statistics (KNBS) shows that 125 companies were registered in 2016, a decline of 68 per cent compared to 2013 when 400 foreign companies were registered.

This brings into question the Government’s efforts to attract foreign direct investments (FDI), including policies aimed at improving the business environment.

Generally, the data paints the grim picture of a decline in the country’s attractiveness to business, with the number of registered local companies also taking a nosedive.

There were only 33,382 local companies registered in 2016, a decline of 88 per cent, from the 281,973 companies that were registered in 2013.

Since 2013, the private sector has taken a beating, with companies issuing profit warnings and laying off workers in droves.

An analysis of the performance of listed companies in Kenya by our sister publication, Financial Standard, found that 2013 was their best year.

The financial results of the 56 companies found that cumulatively, they have lost Sh61.27 billion in earnings.

According to Statistical Abstract 2017 by KNBS, registration of foreign companies picked in 2011, with 150 foreign and 225,048 local companies registered.

Local companies

This improved in 2012 to 233 foreign and 252,023 local companies, before climbing to a peak of 400 and 281,973 respectively in 2013. And then things started going bad in 2014.

Johnson Nderi, the corporate finance and advisory manager at ABC Capital, however says while the numbers point to waning optimism, the report cannot be interpreted in isolation.

“Because of increased enforcement of tax laws there can be some decline but it doesn’t explain everything,” he said, noting that FDI had improved both through acquisitions as well as greenfield investments.

Greenfield is a form of investment where a parent company builds its operations in a foreign country from the ground.

A report by Barclays showed that Kenya attracted a total of 40 FDIs, coming fifth behind South Africa, Morocco, Egypt and Nigeria.