Kenyan Firms Dominate East Africa’s Cross-Border Investments

Nairobi, Kenya

Kenya has been attracting the the least Foreign Direct Investment from its East Africa neighbors, despite spreading its investments across the region’s economies.

Intense competition in Kenya, long business start processes and higher expenses haveseen Tanzania , Burundi, Uganda and Rwanda stay away from puttingtheir money here and at times invest amongst themselves.

A new World Bank report titled ‘De-Fragmenting Africa’ shows how Kenyan companies have been channeling out investments, deepening regional trade integration and creating jobs across EAC, but not receiving much. Kenya has invested extensively in the retail sector, manufacturing, banking and other financial services sectors , media, distribution, among other sectors in the region.

For instance in the retail and distribution the book reads,”Foreign direct investment(FDI) is starting to play an important role in the distribution sector of most East African economies. The largest businesses operating in the formal sector of all countries except Kenya tend to be companies with substantial foreign equity”. Kenyan (and South African ) chains dominate the supermarket segments in Uganda, Rwanda and Tanzania.

According to the World Bank, Nakumatt, Tuskys and Uchumi put in about $28 million(Sh2.34 billion) between 2002 and 2009 in the region.This may be more now as Uchumi and Nakumatt have opened more branches in Tanzania and Rwanda respectively. “By contrast, the Kenyan market has been challenging to foreign investors indistribution services,” says the report. Kenyan-based banks KCB,Equity Bank, Fina Bank, Commercial Bank of Africa, DTB have also made progress in the EAC banking sector.

In 2009 Equity bank completed the acquisition of Uganda Microfinance in a deal worth US$26.9 million(Sh2.2 billion) Non-banking financial companies like APA Insurance, Insurance Company of East Africa (ICEA), Jubilee , Phoenix of East Africa, Real Insurance and UAP and some stockbrokers like Dyer and Blair Investment Bank, Faida Securities and Kingdom have invested in EAC. “The estimated number of Kenyan insurance company branches within the region is about 30. There are no Tanzanian or Ugandan insurance companies witha regional presence,” says World Bank.

Deacons Kenya Limited has set aside $10 million(Sh 830 million) in regional expansion and has already opened in Uganda and Rwanda. Nation Media Group and KenolKobil have strong operations in the region. Bidco oil a fewyears back put in about $10 million (Sh830 million) in setting up an oil processing mill in Uganda and more in buying palm oil plantation firm. On the other hand,Uganda’s top edible oils manufacturer, Mukwano Oil has a processingfactory in Tanzania but only a storage facility in Mombasa.