Kenya’s agribusiness and manufacturing sectors are the two prominent sectors with the potential to attract and build foreign investment into the country.
A tri-annual report on Foreign Direct Investment (FDI) trends, globally and in Africa released by the Stanbic Investment Management Services (SIMS) shows that though FDI flows into Kenya are low, agribusiness and manufacturing are key potential areas.
According to the SIMS report, despite a fall in global FDI in transport, ICT and financial services investments, FDI flows into Kenya’s agribusiness and manufacturing sectors rose sharply even as the 2008 global financial crisis took hold.
Presenting the report Monday in Nairobi, the SMIS team noted that agribusiness and manufacturing stands as the most prominent opportunity for attracting and building foreign investment flows, with the support of improved infrastructure and regulatory encouragement.
“According to the McKinsey Global Institute, Africa is home to 60 per cent of the world’s total uncultivated, arable land, and there is the opportunity,” said Abdi Khalid, presenting the SIMS report, “Already, a growing number of private equity funds are springing up to finance agricultural production in Africa.”
The team noted that Kenya should enhance its manufacturing capabilities for the regional market, strengthen its position as a regional services hub, reinforce the Agri-business success and improve infrastructure if it is to achieve its GDP growth targets.
According to Ernst & Young, FDI inflows to Kenya are forecast to average about $1.3 Billion over the next five years.
“FDIs as a source of more sticky capital remain underexploited, even though there remains a great potential if deliberate effort and initiatives are put in place,” said Anthony Mwithiga of SIMS
Between 2007 and 2008, SIMS noted that FDI in agribusiness in Kenya rose by 42 per cent, while FDI into Kenyan manufacturing rose by 87 per cent. At the same time, global FDI fell by more than 10 per cent.
After reaching a low in 2009, global flows have also been increasing, with last year marking a 17 per cent rise to levels now at pre-recession figures in terms of the value of foreign funds being invested.
Africa as a continent received the lowest share of Global FDIs (3.5% “) in 2011 mostly from the US, UK, France and China. Most of these were channeled into Egypt, Nigeria and South Africa which account for 80-85% of the continents’ FDI inflows.
The report noted that Africa still lacks enough capacity to attract FDIs due to political and macro-economic instability, inadequate physical infrastructure, shortage of skilled labour in key sectors, and poor governance and inadequate regulatory policy frameworks.
The report projected that China as the world’s second largest economy is likely to become a major FDI exporter.
image via greenpeace