In the last two years Kenya has been ravaged by terror attacks, but paradoxically, lots of foreign firms have set foot in Kenya, not through speculating in stocks but real investment in brick and motor. Some of the firms that had long left have returned. They include IBM, BASF, Pepsi Cola, and many others. Newcomers include KFC, Massmart, and lots of other firms from the East and West.
Why are they returning when economic common sense tells us they should be leaving, because of terrorism and fear? Look at the malls coming up and the money spent. This is private investment, so due diligence must have been done. Are these investors seeing something we cannot see? While frozen in fear resulting from terror attacks, others are seeing opportunities, long-term. When the long shadow of terrorism is shortened through pacifying Somali or through internal reforms in security services, inclusion and international cooperation, you will find Kenya has become a different country.
You do not believe me? Check carefully who is buying out land in Kiambu and building up estates? If that is not to transformation, what is it? The once great coffee estates that separated Nairobi from peasants, are slowly being sold off. Who are the buyers and who are the sellers. Check carefully who the buyers are (we know the sellers).
The same applies to prime land outside Nairobi. Go through those adverts slowly and read between the lines. Given that prime land has traditionally been associated with power, does this mean that even power will shift? Enough digression. What is attracting these investors to Kenya? Constitutional reforms weakened the centre and made it easier for investors to deal with multiple entities, from governors to senators and MPs.
Contrast that with the past when everything had to go through the president. Given this widened democratic space, investors see prospects in far more places including outlying counties.
It is possible that with new constitutional dispensation, investors feel there is more freedom and can stay on and become part of the emerging new economy. Investors are not philanthropists, they go after the money. The rising middle class is attracting lots of them. The malls must have customers and eateries from KFC to SubWay and Teriyaki. Despite all the political noise and fog, the economy has expanded in the last decade or so, and there are enough people with disposal income.
Lots of investors might be preparing for the oil and gas economy. They may have learn from America’s constructive engagement with South Africa during the apartheid era. By working with South Africa, US was ahead of the others when Uhuru got to South Africa. These investors know that by setting up base in Kenya, they will have a head start when oil and gas starts flowing. Great investors are patient. Some observers have argued that these investors, particularly Americans have come to counterbalance the Chinese influence.
Am persuaded to believe that. A good example is that while the national government drives Chinese cars from Grandtiger to Cherry, and Yutong while county governments are driving American brands from Chevy to Ford. As we haggled over the constitution and other political issues, investors “walipitia katikati yetu.” The slowdown in growth of European and American economies means that investors had to look for places where returns are higher. Kenya and the rest of Africa were great choices. The returns are usually much higher, because it is argued that the risks are higher. Sometimes, it is not about risks, it is about tax regulations and co-opting the powers that be.
The most important explanation why investors are coming in droves is that too few people believe in this country and its future. Ask a random group of well-educated people including some leaders if they would want to leave Kenya and give me the answer.
We inundate our media with negative news which have made young people sceptical about the future. So, the few who believe in the future of this country, make money without competition, and make lots of money. Paradoxically, non-Kenyans seem to have more faith in our economic future than Kenyans. Add to localisation where young men and women are spending all their lives hanging around the counties from primary school and now to the university and you get very few risk takers.
Special treatment
The investors have returned because they have been invited. We are forever asking them to come to Kenya, and we even give them incentives. Their better perception of risks and the fact that they get special treatment, is another attraction. A Chinese or an American investor would get access to any office in this land, better than myself-even if I declared myself an investor.
Where do we go from here? Investors will continue flocking to this country and making their money. It is hoped that will spill over to the grassroots, but remember the investor or the entrepreneur takes 70 per cent of the profits, if the tax rate is about 30 per cent.There might be terrorism and unhealthy politics but the economy still runs and the basic human needs and wants will need to be satisfied. Those who see through the political fog and through the long shadow of terrorism will reap big in the long run. Will you join them?
— The writer is senior lecturer, University of Nairobi School of Business.
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