Investors Finding their Way Back to Kenyan Market
Kenya’s economic growth is expected to strengthen to 5.5 percent already this year, supported by resilient performance in tourism and recovery in the agricultural sector.
In a report, Finnfund, a Finnish development financier and impact investor, highlighted that lower inflationary pressure and robust remittances to Kenyan households will also bolster consumer spending, representing a key driver for growth over the next few years.
The report stated that while Kenya’s economy has been hit by several shocks in recent years, it has remained a relatively attractive base for businesses and investors in the region.
However, external pressures, monetary tightening, and a fragile fiscal landscape have weighed on its business environment, according to Finnfund insight, adding that business sentiment was negatively impacted by social unrest which transpired during 2024.
“Overall, we believe that Kenya’s improved external position will support investor confidence and strengthen its ability to access international financing.
“This is already evidenced by strong investor demand observed in its recent USD 1.5 billion Eurobond issuance in February—its second issuance since the beginning of last year,” describes Finnfund´s economist Tangeni Shatiwa.
Prior to 2024, Kenya’s external position was considerably weak, limiting its ability to access external financing. On this front, the country has made strong progress over the past year.
Its external deficit narrowed to 3.6 per cent of GDP in 2024, compared with 4.4 per cent in 2023. Strong inflows from its bilateral and multilateral lenders have boosted foreign exchange reserves.
According to Shatiwa, Kenya can capitalise on recent trade policy changes coming out of the USA. While there are some concerns that the recent changes in US trade policy pose a key external risk for many African countries.
“We believe that Kenya is well-positioned to reach a trade deal with the USA, as it is considered to be one of its key allies in the region. Moreover, Kenya´s export dependency on the US is low, and its textile exports to the US face a relatively low reciprocal tariff of 10 per cent, which could make them more competitive than Chinese products.”
Shatiwa sees many promising sectors in which to invest in Kenya. For example, Kenya’s ICT sector has been a key source of the country’s dynamism and innovation in recent years.
Finnfund has invested in the ICT sector through Twiga Foods, a mobile-based platform that connects small farmers with retailers, and Kasha Technologies, an e-commerce platform that leverages technology to digitise the provision of healthcare and other products. Finnfund has also invested in Kentegra Biotechnology Holdings, which supports smallholder pyrethrum farmers and provides them with a drought-resistant income source.
“While Kenya´s economy has been hit by several shocks in recent years, it has remained a relatively attractive base for businesses and investors in the region.
“Despite the slowdown in Kenyan economic growth to 4.7 per cent last year, it outperformed Sub-Saharan Africa on average, which highlights the strengths of its dynamic services-led private sector relative to peer countries,” summarises Shatiwa. Naira Gains N13 as Offshore Inflows Boost Optimism in FX Market
