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AfricaMoney | November 6, 2016

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Kenya, SA shining: building bridges, nurturing innovation

Kenya’s ambassador to South Africa, Patrick Wamoto, recently wooed investors, leading a business delegation to the East African commerce hub, to illustrate its importance as a gateway to commerce in the region.

Wamoto said the country’s investment policy was guided by “Vision 2030”, which is anchored in macroeconomic stability, governance reforms, wealth creation and infrastructure development.

With the controversial Uhuru Kenyatta taking over as president from Raila Odinga, Wamoto took out time to assure potential South African investors that the Kenyan government guaranteed the safety of their investment. In the process, he also set Kenya up as a rallying point vis-à-vis Zimbabwe where President Robert Mugabe used the “indigenization” policy to rob multinational firms of their local assets.

While South African firms have not found it easy to get even a toe-hold in this East African economy, those that have weathered the tough start have reaped rich dividends. To illustrate, the largest financial services provider in South Africa, the Standard Bank, stuck it out in Kenya – in a marked contrast to the brewing and bottling major, South African Breweries, and the casual dining restaurant group, Nandos, which chickened out of their Kenyan outings The South African bank now sees its Kenyan foray as opening up an avenue into the rest of the region, with offices lined up for Ethiopia and the Ivory Coast, in West Africa.

However, while Wamoto went all out in his efforts to paint Kenya as an attractive destination for investors, he failed to assuage his own countrymen’s fears on facing intensifying competition with global majors. As more companies from South Africa, China and former colonist Britain try to use Kenya as a foothold to enter the rest of the region, local entrepreneurs face more and more entry barriers.

That the East African country gives more than in takes under its trade partnership with its southern neighbour is yet another cause for concern for Kenya’s private sector. According to the 2012 Economic Survey in Kenya, the East African country’s imports from South Africa have more than doubled to Kenyan Shillings (Sh) 71 billion ($811.9 million) in 2011 from Sh35.4 billion ($404.9 million) in 2007. However, the value of exports has risen only marginally to Sh2.8 billion ($32 million) from Sh2.3 billion ($26.3 million) in the same period. And, with the Central Bank of Kenya reporting a trade deficit of Sh 82,680.73 million ($946.53 million) for Kenya this July – in line with persistent trade balance deficit over a long period of time –  boosting ties with major trade partners takes on a critical aspect for the gateway to East Africa.

However, even as the going appears tough for local firms, the East African economy promises a bright future to its investors. In the recently released Global Competitiveness Index (GCI), the World Economic Forum ranked Kenya 96th, awarding it one of the best rankings among East African middle-income economies. While Kenya lags far behind South Africa which stood at the 54th spot in the GCI rankings, it has moved 10 places up while its southern neighbour has fallen a notch. It may also be noted that the World Bank’s “ease of doing business” ranks Kenya as the best out of 46 countries in sub-Saharan Africa, while it only cedes place to South Africa when it comes to ease of obtaining business credit.

Meanwhile, in yet another indication of a boom in the business hubs of Kenya and South Africa, software application developers from the two countries notched up maximum representation at a Pan-Africa launch pad event for emerging technologies that links the innovators with venture capitalists.

Out of the 40 applicants, South Africa will launch 12 start-ups; Kenya will launch nine while Nigeria and Egypt will launch four and five start-ups respectively.

The finalists were picked from a record 300 technology start-ups from 24 African countries that applied to launch at the DEMO Africa event.

The DEMO Africa 2013 conference, to be held from October 24 to 25, has already captured the interest of global giants such as Intel, Microsoft, and Nokia, with the finalists getting a chance to present their ideas to potential investors at the forum.

Image: A new client at South Africa’s Standard Bank learns how to use mobile phone banking, Source: Reuters

Source: Sunday Times (Business Times), Business Day

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