Ernst & Young index ranks Kenya fourth top investment hub in Africa

By LILIAN OCHIENG'
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A labourer supervises the ongoing construction of the Standard Gauge Railway (SGR) in Voi on February 10, 2016. The SGR is 70 per cent complete for the distance to Nairobi. PHOTO | JAMES EKWAM | NATION MEDIA GROUP

Country benefits from strong economic growth and prospects, with good progress in infrastructure.Kenya is the top most preferred investment destination in East Africa, with the majority of venture hunters attracted to good infrastructure and ease of doing business, says a new report.

The Ernst & Young (EY) Africa attractiveness index released last week puts the country at fourth position on the continent after South Africa, Morocco and Egypt.

The survey states that Kenya benefits from strong economic growth and prospects, with moderate performance in infrastructure.

According to Mr Michael Lalor, EY lead partner Africa Business Centre, the evaluation “provides a useful starting point for analysis and helps enable a strategic dialogue on growth priorities and investment criteria.”

Kenya beat its East Africa neighbours in the ranking, followed by Rwanda in position nine, while Tanzania and Uganda took 12th and 13th positions, respectively.

Rwanda, although small in market size, has a strong track record in enabling business, social development and economic management — which sustained its performance.

On macroeconomic resilience, Tanzania and Uganda rank very high, the report says.

However, they are “relative under-performers on other longer-term focused dimensions.”

SHILLING'S FLUCTUATION

The ranking comes in the wake of Kenya’s macroeconomic challenges in 2015, marked by fluctuation of the shilling against the dollar.

More economic bumps across East Africa were a result of a general slowdown in emerging market economies, stagnation in most developed economies and higher borrowing costs locally.

Nonetheless, investors still flocked to Kenya.

The majority of  investors, the report indicates, were eyeing private equity and grants meant to fund public infrastructure projects such as the Standard Gauge Railway and the Lamu Port South-Sudan-Ethiopia transport corridor.

The proposed Sh400 billion crude oil pipeline was also a major attraction to investors, who streamed in to benefit from Kenya’s impending oil resources.

The trend is attributed to government policies on investment that encourage those coming in by guaranteeing them a 10-year tax holiday upon setting up shop.

Investors are also allowed to repatriate all the profits.

The EY report says Western Europe and intra-African investors remain the largest sources of foreign direct investments (FDI) into the region.

It adds that traditional investors, including those from North America and the Middle East, have reshaped attention on Africa, especially the East Africa Community.

Those from the US, France, the United Arab Emirates (UAE), Portugal and China were particularly active in investments last year.

While Kenya and Rwanda enjoyed good FDI inflows, the report states there was a marginal slip in investors’ perceptions of Africa.

“Investor perceptions of Africa reached their lowest level since 2011. When asked about Africa’s attractiveness over the past year, only 53 per cent of the respondents said it had improved, down from 60 per cent in 2014,” says the report.

It backs statistics by the International Monetary Fund (IMF) that shows Africa’s baseline projection for 2016 at 3 per cent from the forecasted 6.1 per cent in April 2015.