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Britons floor the Chinese in race for local investments

By Dominic Omondi | May 16th 2019
An employee makes notes in front of an electronic stock information screen inside the Nairobi Securities Exchange Ltd. (NSE), in Nairobi. (Courtesy)

Close to a third of foreign investment in Kenya in 2017 came from Europe, with the UK leading the pack, a new report has shown.

Surprisingly, China - Kenya’s largest bilateral lender and main source of imports - had a negligible share at 0.8 per cent, having invested Sh11.2 billion over the period.

This is according to a survey on foreign investments done by the Central Bank of Kenya (CBK), Kenya National Bureau of Statistics (KNBS) and Kenya Investment Authority (KenInvest)

“United Kingdom (UK) was the main source of investment within the EU, accounting for 16.8 per cent and 15.8 per cent of the total foreign liabilities in 2016 and 2017, respectively,” reads the report that compared foreign inflows in 2017 and 2016.

The UK has since voted to leave the European Union in what has come to be known as ‘Brexit’.

Investors from the UK pumped about Sh217.8 billion into the Kenyan economy in 2017.

The survey reinforces the findings in another report by property consultancy Knight Frank, which showed that of the more than 700 separate inward investment projects in Africa in 2017, half originated from companies domiciled in the US, UK, France, China or Germany.

“Contrary to popular belief, the dominant source of that investment was not China but rather the US,” read part of the report titled Africa Horizons.

However, the inflow of Chinese investments into Kenya and Africa has been rising.

Kenya, South Africa, Morocco, Nigeria and Ethiopia accounted for just over half of the projects undertaken by the Chinese on the continent over the period.

Investors from Kenya’s former colonial masters mainly put money in the financial and insurance, manufacturing, information and communication, as well as the transportation and storage industries, according to the report.

South Africa, which has in recent times been pouring billions of shillings into the banking, insurance and real estate sectors, came in second with a share of 12.4 per cent. The US was third with 11.6 per cent.

Regionally, Europe was the dominant source of investments, with a share of 29.7 per cent and 28.8 per cent of the total stock of foreign liabilities in 2016 and 2017, respectively.

Africa had a share of 20.8 per cent and 21.9 per cent in 2016 and 2017, respectively, while America had 12.1 and 11.7 per cent, respectively.

International financial institutions like the World Bank and African Development Bank (AfDB) had a share of 15.2 per cent, while other countries not stated took up 12.7 per cent of foreign investments.

The survey also indicated that overall, net inflows increased by 68.7 per cent from Sh51.2 billion in 2016 to Sh86.4 billion in 2017.

“The increase was attributed to a 39.5 per cent growth in foreign direct investments (FDI) net inflows to Sh68.7 billion in 2017.”

The report also shows that foreign investors moved their cash from the stock market to long-term debt as the Government’s appetite for loans continues to hit the Nairobi Securities Exchange (NSE).

FDIs shot up due to increased inflows of long-term debt as portfolio investments declined in what was attributed to a decrease in equity and investment fund shares.

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