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Kenya lagging far behind Uganda, Tanzania in attracting investment

Discussion in 'Kenyan News and Politics' started by Bantugbro, Sep 4, 2011.

  1. Bantugbro

    Bantugbro JF-Expert Member

    Sep 4, 2011
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    Kenya lagging far behind Uganda, Tanzania in attracting investment

    Kenya is the biggest loser in the battle for foreign direct investments (FDI) into the EAC region as more investors stream into Uganda and Tanzania.


    The FDI inflows to Kenya dipped to $133 million in 2010 from $144 million the previous year, according to a new report by the United Nations Conference on Trade and Development (Unctad).

    Kenya’s FDI inflow stood at a high of $729 million in 2007, signalling the magnitude of the slump in just three years. A dip in FDI inflows has various consequences including fewer new jobs as firms take on austerity measures such as freezes in hiring.

    “East Africa’s increase was modest (2.5 per cent), as inflows to the sub-region’s largest recipient, Madagascar, fell substantially (19 per cent). FDI to the sub-region’s two other large recipients, Uganda and the United Republic of Tanzania, have tended to be stable in recent years and held broadly steady in 2010,” the UN agency said in its World Investment report for 2011.

    In 2010, Uganda attracted FDI inflows worth $848 million, up from $816 million the previous year, while Tanzania realised $700 million last year compared with $645 million in 2009.

    Kenyan firms such as oil marketer Kenol Kobil are some of the biggest contributors to FDI growth in Uganda.

    Data from Unctad shows that KenolKobil had the second highest greenfield investment in Uganda in 2010 worth $1.7 billion in coal, gas and natural gas projects. This was the third highest investment in a greenfield project among poor countries worldwide in 2010.

    British firm Tullow Oil was the highest investor in greenfield projects in Uganda over 2010 with a portfolio worth $5 billion. Tullow also sank the resources into coal, gas and natural gas projects.

    Greenfield investments involve the creation of business operations rather than simply merger and acquisition (M&A) with existing firms.

    The Ugandan government estimates oil reserves in the Lake Albertine Basin at 2 billion barrels but says they could be much higher. This has triggered a scramble for this key resource, with multinationals and regional firms angling for stakes.

    KenolKobil announced in January that it had bought Phoenix Uganda Petroleum Ltd for an undisclosed amount to raise its capacity in Uganda. The deal involved a 1,800 metric tonne fuel terminal, a three-storey office block and three service stations in Uganda’s capital Kampala, bringing its total to 66 stations.

    Analysts have blamed Kenya’s lack of attractiveness for FDI on a myriad factors including political uncertainty, bureaucratic business approval processes and restrictive laws on foreign business ownership.

    The World Bank last year pointed out that restrictions on participation in business had seen foreign investors steer clear of Kenya.

    For instance, in Kenya, foreign capital participation in telecommunications is limited to a maximum of 70 per cent.

    However, the law provides foreign investors with a grace period of three years to build up the required domestic capital contribution of 30 per cent.

    In the transportation sector, there are ownership restrictions in railway freight, port and airport operation, in which foreign investment is allowed only up to 50 per cent.

    “On the other hand, unlike in most other countries covered by the Investing Across Sectors indicators, domestic as well as international passenger air transportation is fully open to foreign capital participation,” the Bank said.

    The tourism sector, one of the country’s most prosperous industries, is also fully open to foreign companies, as are other manufacturing and primary sectors.

    Analysts have also blamed delayed reforms of the bureaucratic process in business licensing and management. Kenya dropped to position 98 out of 183 economies surveyed in the World Bank’s 2011 ranking for ease of doing business globally.

    Slow licensing processes, complex taxation procedures and the high cost of registering property also contribute.

    Inexperienced local firms

    Investors have also cited Kenya as the most expensive destination for those aspiring to own property in the region. Investors part with 4.2 per cent of property value to cover cost of registration compared with Uganda’s 3.2 per cent Rwanda’s 0.4 per cent.

    UNCTAD said the flow of FDI into Africa also remains hampered by lack of experience among local firms. “The scope for joint ventures between domestic and foreign partners in the African context is often constrained by the absence of domestic partners with the required technical and financial capacity,” the agency said.

    The agency however pointed out that several joint ventures had begun yielding fruit as firms in the region tapped into the experience of multi and transnationals.

    “In manufacturing, Coleus Crowns (Uganda) provides a successful example of a joint venture at the intraregional level. It is a joint venture between the Madhvani Group (Uganda) and Coleus Packaging (South Africa), which began production of bottle crowns in 2007. Since then, it has succeeded in establishing itself as a supplier to major TNCs such as Nile Breweries (an affiliate of SABMiller), Pepsi Uganda and Coke Uganda. It also serves the regional markets in Burundi, Rwanda and the Sudan,” Unctad said.
    The East African: *- News*|Kenya lagging far behind Uganda, Tanzania in attracting investment

    Kuna thread moja nimeisoma humu ndani inayo rank best countries for investment in Africa placing Kenya third in Africa and on top of all EAC countries. Sijui vigezo gani vilitumika....

    NDINDA JF-Expert Member

    Sep 8, 2011
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    hiyi tuliweka kule SSC wakenya walisema wenyewe hawana mpango na FDI, kwani makampuni yao yanajitosheleza, na hawahitaji hizo,makampuni yao ndio yanayotoka nje kuinvest,
  3. Bantugbro

    Bantugbro JF-Expert Member

    Sep 8, 2011
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    Is it? sasa hayo makampuni ya kimataifa yanayoweka makao makuu huko hayaji na mtaji(FDI)? au ndio zinakwenda kwingine wao wanafaidi rent tu???
    Btw: hii habari imeandikwa na mKenya katika gazeti lao...
  4. P

    PauliMasao JF-Expert Member

    Sep 8, 2011
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    The tourism sector, one of the country's most prosperous industries, is also fully open to foreign companies, as are other manufacturing and primary sectors.

    Na sisi (TZ) tunaelekea huko, huko!