Nairobi: Inflows of foreign direct investment (FDI) to Kenya could match those of Tanzania and Uganda beginning next year aided by growth in agriculture and manufacturing besides opportunities created by the discovery of oil in Turkana, analysts at Stanbic Investment Management Services (Sims) have said.
FDI inflows into Kenya are projected to average $1.3 billion (Sh108 billion) annually for the period 2013-2018, placing the country at par with its two regional rivals who have over the years attracted more investors due to their vast natural resources such as gas and oil.
“There is a push towards value addition in agriculture and expansion of manufacturing to serve the region and this could help tip the scale alongside the expected investment in oil,” Mr Ken Kaniu, a senior investment manager told a media briefing in Nairobi on Monday.
Data by Stanbic Investment show Kenya’s FDI inflows between 1996-2003 averaged $39 million a year, while inflows to Tanzania and Uganda surged to $280 million and $220 million, respectively.
A dip or slow growth in FDI inflows has a raft of potential effects including fewer new jobs.
Analysts at Stanbic, however, said the investment scale is likely to tip in favour of Kenya assisted by the oil discovery and new opportunities in the expanded regional market.
“Tanzania and Uganda mainly banked on natural resources such as oil and gas and Kenya has since joined that league and we could see a shift,” Mr Kaniu said.
Britain’s Tullow Oil early this month announced it had found more oil at Ngamia-1 well in Turkana. Tullow said it had encountered an oil column (net oil pay) in excess of 100 metres across multiple reservoir zones in the Ngamia-1 well.
The well has so far been drilled to a depth of 1,515 metres. Tullow said in March it had encountered in excess of 20 metres of net oil pay after drilling a depth of 1,041 metres.
Mr Anthony Mwithiga, the chief investment officer at Stanbic Investment, said that other than oil Kenya could also boost its fortunes by improving on the business environment and upgrading its physical infrastructure.
“Kenya needs to increase its savings and investments from 15 per cent in 2011 to excess of 30 per cent to allow for the targeted 10 per cent annual growth that is necessary to attract FDI,” the official said.
Export Processing Zones
Mr Mwithiga said Kenya would also have to diversify its FDI targets within the Export Processing Zones (EPZ) to get better returns. “Agoa (Africa Growth and Opportunities Act) -related investments represent 80 per cent of Kenya’s FDIs. The country should diversify to attract new lines of investment,” he said.
Kenya trade with America is mainly anchored on Agoa, which was crafted to supplement US trade with developing nations and sought to expand duty-free benefits that were once available under the Generalised System of Preferences (GSP).