Understanding Kenya’s investment landscape

Kenya's investment landscape is experiencing a significant shift, with the country's commitment to attracting foreign direct investment and boosting key sectors. Abubakar Hassan Abubakar, the Permanent Secretary, State Department for Investment Promotion, Ministry of Investment, Trade, and Industry in Kenya, sheds light on the recent developments and incentives put in place to attract investors. Over the past year, Kenya has seen a rise in foreign direct investment (FDI), with approximately 750 million U.S. dollars coming into the country. The government has set an ambitious target of reaching 10 billion U.S. dollars per annum in FDI, with expectations of doubling the investments in 2023. Some of the key sectors attracting investments include manufacturing, industrial activities, and export-oriented businesses. To bolster investor confidence, Kenya has implemented regulatory policies and incentives to create a more business-friendly environment. One of the major challenges faced by foreign investors was the liberalization of capital controls. The government has taken steps to open up various sectors of the economy, such as the ICT sector, allowing foreign investors to have 100% ownership of companies. President Ruto's administration has removed the requirement for foreign investors to part with a 30% shareholding to locals in certain sectors. Additionally, the government has prioritized the establishment of special economic zones (SEZs) as a tool to attract foreign investment. These SEZs focus on industrial activities and export-oriented businesses, with the aim of increasing manufacturing and export percentages of GDP. The global macroeconomic conditions have also played a significant role in shaping Kenya's investment landscape. Investors are increasingly focused on sustainability and are more intentional in their investment decisions. The Kenyan government has responded by incorporating sustainability issues into its investment promotion plan, making the country more attractive to sustainable investors. The recent tax changes under the Finance Act 2023 have also impacted the investment landscape in Kenya. The government has introduced tax incentives to attract investments in key areas such as agricultural transformation, health, affordable housing, digital space, and SME development. For example, tax incentives have been provided to encourage value addition in products like tea and coffee, reduce taxes on imports for construction of hospitals and pharmaceuticals, and incentivize the assembly of mobile phones. The private sector has welcomed these tax incentives, as they make Kenya a more competitive and attractive destination for investment. Overall, Kenya's investment landscape is evolving, with the government's focus on creating a conducive environment for investors and boosting key sectors to drive economic growth and development.