India surpasses China as Kenya’s leading Asian investor

India has overtaken China as Kenya's leading Asian investor, capturing 51.7% of the market share, according to Kenya's 2023 Foreign Investment Survey Report. The report revealed a 17.9% growth in foreign liabilities from 2020 to 2022, primarily fueled by an 11.6% increase in Foreign Direct Investment (FDI). In a surprising turn of events, China slipped to third place with a 12.2% share, while India's presence surged to the top. To gain deeper insights into the intricate landscape of foreign investment in Kenya and the underlying factors behind these shifting dynamics, CNBC Africa's Tabitha Muthoni engaged in a conversation with Churchill Ogutu, an Economist at IC Asset Managers. Churchill Ogutu shed light on the foreign investment scenario and the impact of India's emergence as the top investor in Kenya. He highlighted the historical ties between India and Kenya, citing the significant Indian community in the country and the longstanding relationship that dates back to the construction of the railway in Kenya. Ogtu noted a substantial inflow of FDI from India into Kenya, particularly emphasizing investments in the IT and health sectors. The robust presence of Indian investments in these areas reflects India's global dominance in these industries and Kenya's benefiting from this expertise. Additionally, the discussion touched upon the growth in Kenya's foreign liabilities, driven by FDI. Ogutu underscored the long-term stability that FDI brings to an economy compared to portfolio investments, which are more volatile. He elaborated on Kenya's ambitious target to boost FDI to $18 billion by 2028, emphasizing the government's strategy to prioritize stable FDI inflows to mitigate currency volatility and spur economic growth. The conversation also delved into the significance of Europe and Africa as key sources of foreign liabilities in Kenya. Ogutu highlighted the trade dynamics with Europe, particularly in commodities like flowers and tea, while attributing Kenya's FDI gains from Africa to its regional affiliations and commercial ties. The integration within the East African community and strategies surrounding trade were emphasized as pivotal in attracting investments to Kenya from these regions. Moreover, the discourse extended to the impact of Kenya's growing foreign assets on trade within the country and the opportunities and challenges faced by Kenyan businesses venturing into other East African markets. Ogutu pointed out the opportunities for Kenyan businesses to expand into neighboring countries within the East African community, exemplifying the banking sector's acquisitions and Safaricom's investments in Ethiopia as successful ventures. While challenges such as perceived threats from Kenyan businesses exist, the overall reception in the wider East African market has been positive, showcasing Kenya's role as a regional powerhouse and facilitator of expertise across borders.