Successfully investing in Kenya

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​​​last updated on 7 June 2024 | reading time approx. 4 minutes

 

    

   

How do you assess the current economic situation in Kenya?

Kenya's economic growth is expected to grow by 5.5 percent in 2024 (The National Treasury). This will be fuelled by broad-based private sector growth, robust performance of the services sector and continued recovery in agriculture sector. 
  
It will be further reinforced by the Government’s Bottom – Up Economic Transformation Agenda (BETA) geared towards economic turnaround and inclusive growth with a focus on interventions that:
  • reduce the cost of living
  • increase employment
  • incentivize investment and production
  • achieve more equitable distribution of income
  • enhance social security
  • expand tax base for more revenue
  • increase foreign exchange earnings
  
The outlook is, however, subject to considerable risks, including the effects of prolonged global conflicts on commodity prices, tight global financing, unpredictable climatic conditions and slow global economic recovery. Possible risk mitigation measures, such as, diversifying exports and market destinations, enhancing domestic resource mobilization, deepening financial sector reforms and accelerating structural reforms, may be required.
  
Nevertheless, we are confident that the measures introduced by the government will have a positive impact on Kenya's economic growth.​
  

How would you describe the investment climate in Kenya? Which sectors offer the largest potential?

Kenya is an economic powerhouse in sub-Saharan Africa. With its skilled workforce and good infrastructure, the country remains a very attractive location for international investors.
   
The above-mentioned BETA agenda focuses on the following five economic sectors where growth is anticipated: 
  • Agriculture
  • Economy of micro, small and medium-sized enterprises
  • Housing & Finance
  • Health service
  • Digital Data Superhighway and Creative Industries
  
It is also expected that the government will also invest heavily in these sectors with the aim of promoting their growth. Measures have already been taken in the agricultural sector by making subsidized fertilizers available to farmers. The Government is also in the process of reforming the National Health Insurance Fund to meet the urgent needs of Kenyans at the bottom of the socioeconomic structure by actualizing its purpose as a social medical insurance facility. In addition, the government has continued to invest in the Hustler Fund and Financial Inclusion Fund providing low interest loans to individuals and small and medium-sized enterprises.

In addition, Kenya welcomes climate-resilient development initiatives and investments in renewable energy, including the production of green hydrogen. The country has set itself the goal of achieving 100 percent green energy by 2030 and increasing its grid capacity from the current 3 gigawatts to 10 gigawatts by 2040.

   

What challenges do German companies face during their business ventures into Kenya?

Key challenges include:
  • Weakening consumer spending due to the rise in commodity prices;
  • A different legal system (common law);
  • Vulnerability of the economy to internal and external shocks;
  • An ever-evolving tax policy framework in Kenya, as is common in the developing world. 
  

Are there any developments for further investor-friendly regulations?

Despite the current administration’s focus on boosting revenue collection, a lot of measures have been put in place to enhance tax administration effectiveness and uniformity. The deployment of the eTIMS (tax invoicing) technology is set to assist the Government in the tax revenue target of 20 percent of GDP (Gross Domestic Product).

Nevertheless, a raft of investor incentives are due for enactment under the Finance Bill 2024. They range from tax base and rate reductions to levelling of rates for some tax regimes. The corporate tax rate is set to reduce to 25 percent from 30 percent. All withholding taxes for non-residents are also set to be aligned. There is also an effort to ease the pressure and burden of tax collection across the board by rationalizing tax exemptions for corporates and individuals and phasing out of preferential corporate tax rates.

Carbon tax measures are also expected to review taxes on electric powered vehicles and increase taxes on vehicles that use fossil fuels.

Finally, the residential real estate sector is set to benefit from a new 40 percent expense deduction under a new simplified tax regime. Currently landlords are subject to a 7.5 percent income tax on the gross rent collected. Kenya will also reintroduce the minimum tax requirement in line with the global trends under the OECD Inclusive Framework. Minimum tax was outlawed by the courts and it is expected that necessary remedies will be enacted in line with the court ruling.​

    

How do you think Kenya will develop?

The focus will be on inclusive growth at all income levels. We can already see that this goal will be achieved through the implementation of the BETA agenda. 
  
Support should also continue being given to micro, small and medium-sized enterprises, as they are among the main drivers of the Kenyan economy. 
   
In addition, the government should encourage and support investment in sustainable agricultural enterprises. Investments should also be made towards averting the effects of climate change so that there is continued growth in the agricultural sector. International collaborations supporting good corporate governance also remain an integral part of Kenya’s economic growth.
  
Kenya is on the right track to achieve economic growth and further development.​

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Penninah Munyaka

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