Kenya's foreign investment slips as FDIs stagnate at Sh195b

New Wide Garments Kenya EPZ Limited in Athi River, Machakos County, on May 20, 2022. [File, Standard]

Kenya’s competitiveness as an investment destination in the region is being edged out by other economies as latest data shows foreign direct investment (FDI) to the country stagnated at Sh195 billion ($1.5 billion) as at the end of 2024.

One of the reasons, when compared to other economies, is the drop in mergers and acquisitions, which a United Nations agency report shows reduced by half.

The report by United Nations Conference of Trade and Development (UNCTAD), which assesses FDI inflows to the Common Market for Eastern and Southern Africa (Comesa) region, positions Egypt as the country that attracted the most investments in the year.

The report titled, 2025 Comesa Investment Report: Investment Trends and Policy Insights, indicates that Egypt had the highest number of greenfield projects, at 145, in the observed period. Kenya came second with 69.

A greenfield project, which is one of the measures used to determine the investment climate of an economy, is a development that starts from scratch. This means the land and necessary amenities for a business to thrive are undeveloped.

This is unlike brownfield project which is developed from already developed land, most times by re-developing or customising the same for the intended purpose.

The report says the value of cross-border mergers and acquisitions (M&As) in Comesa, which normally account for a marginal share of FDI activity in the group, declined by 25 per cent in 2024 to Sh195 billion, reflecting sharp drops in Egypt and Kenya in that order, partially offset by large transactions in Zambia.

It adds that FDI inflows in Kenya remained virtually unchanged in 2024, at Sh195 billion ($1.5 billion).

“However, all other investment indicators declined,” the report says. “Cross-border M&A activity declined by 51 per cent, from Sh15.2 billion ($117 million) to Sh7.5 billion ($58 million). The value of announced greenfield projects dropped by 80 per cent, from Sh1.2 trillion ($9.3 billion) to Sh247 million ($1.9 billion), while the number of projects fell from 85 in 2023 to 69 in 2024, representing a 19 per cent decrease.”

The report further shows a decline of the International Project Finance (IPF), with total value dropping by 49 per cent – from Sh299 billion ($2.3 billion) to Sh156 billion ($1.2 billion) – and the number of deals falling from seven to two.

As Kenya’s FDI inflows remained stagnant, Uganda recorded an increase of 10 per cent reaching Sh429 billion ($3.3 billion) even though the country witnessed a drop in the number of greenfield projects.

Uganda, however, witnessed a recovery in cross-border M&A activity from zero to Sh16.9 billion ($130 million).

“However, greenfield investment declined in both number and value, by 42 per cent and 78 per cent, respectively,” the report says.

The Democratic Republic of Congo (DRC) saw its FDI inflows increase from Sh338 billion ($2.6 billion) to Sh403 billion ($3.1 billion), a 21 per cent increase. Ethiopia also witnessed an increase of 22 per cent, from Sh429 billion ($3.3 billion) to Sh520 billion ($4.0 billion).

Egypt recorded the most jump in FDIs in the period, rising from Sh1.3 trillion ($9.8 billion) to Sh6.06 trillion ($46.6 billion). This shoot accounted for over 70 per cent of total FDI inflows in the Comesa region in the period.

“This surge was largely attributed to the Ras El-Hekma urban development mega project, which significantly boosted greenfield investment and project finance activity,” the report says.

This increase is also the reason the overall FDI inflows to Comesa increased by 154 per cent to Sh8.5 trillion ($65 billion) in the period.

Greenfield investment value in the country rose by 30 per cent, from Sh5.5 trillion ($42.0 billion) to Sh7.02 trillion ($54 billion), with the number of announced projects increasing modestly from 140 in 2023 to 145 in 2024.

The report adds that Egypt also led the region in IPF, which jumped from Sh3.4 trillion ($26 billion) to Sh8.97 trillion ($69 billion), marking a 163 per cent increase.

“The number of project finance deals also nearly doubled, rising from 41 to 76. However, cross-border M&A activity contracted sharply, falling by 89 per cent, from Sh234 billion ($1.8 billion) to Sh26 billion ($200 million),” the report says.