Kenya attracts a number of our clients, thanks to its strategic location at the heart of the East African Community. Its increasing ties with China bode well for the country’s trade and investment. Kenya is also allied with the US as part of the Horn of Africa region. The country’s economy is broad-based, reducing its vulnerability to commodity price shocks. Technology stands out as a rapidly growing sector in Kenya.
We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 15 of Kenya’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert teams. We aim to keep you ahead of the curve, so you can do business with ease in Kenya.
Kenya Country Risk
Political instability will weigh on growth over the coming quarters, causing real GDP growth to dip below 6.0% in 2017 as levels of tourism and inward investment see mild decline. However, a more stable shilling and low inflation will boost production incentives amongst businesses as input costs are controlled in a climate of robust demand.
The general election scheduled for August 2017 will see the reduction in Kenya's fiscal deficit stall over the coming quarters, as the government looks to increase recurrent expenditure in an effort to buy votes and security. However, this will not deter from a general trend of fiscal consolidation over our longer-term outlook as the government peels back large-scale infrastructure spending.
Kenya's balance of payments will remain in good health over 2016 and 2017, as robust...
Kenya Operational Risk Coverage (9)
Kenya Operational Risk
Kenya Operational Risk
BMI View: Kenya's position as an economic and financial hub in East Africa is seriously threatened by its precarious security climate that is characterised by rising levels of crime and terrorism, which the security services, impeded by corruption, are struggling to contain. This poses a significant risk to the safety of foreign workers and business property, and has also had a severe impact on Kenya's tourism and retail industries, which previously offered one of the most promising opportunities for investment. In addition, businesses in the country are hindered by inefficient bureaucracy and high levels of tax. Consequently, the business environment in Kenya is not favourable to foreign investors at present. Nevertheless, bureaucratic reform and infrastructure developments should improve the ease of doing business...
Kenya Crime & Security
Kenya Crime & Security
BMI View: Crime and security threats pose the greatest risk to investors seeking to break into Kenya, or businesses already operating in the country. Crime and security risks in Kenya are driven mainly by the significant and rising threat of terrorist attacks, high levels of crime and rampant corruption within the security forces. Businesses face high operational costs arising from these security issues, combined with the growing cybersecurity risks. Although there is political will to deal with the insecurity in the country, the capacity for a comprehensive government response is limited. Kenya therefore receives a low score of 28.8 out of 100 for Crime and Security Risk, placing it in 29th place out of 48 states in the Sub-Saharan Africa (SSA) region. This is Kenya's worst score across BMI's Operational Risk Index, highlighting the terrorist threat as a...
Kenya Labour Market
Kenya Labour Market
BMI View: The main advantage for businesses in Kenya, in terms of labour market risks, is the quality and variety of options available in the workforce in comparison with two of its neighbours and closest competitors for investment, Uganda and Tanzania. Kenya benefits from better education, in terms of quality and enrolment rates, and more widespread literacy among the working population. This means that businesses in the country have less trouble finding adequately skilled staff, face lower costs in terms of training, and have to bring in fewer foreign workers than companies in Uganda and Tanzania. This makes Kenya an attractive location for investment in East Africa. However, we caution that substantial risks remain present in the labour force, mainly stemming from poor healthcare, high labour costs and powerful trade unions. In light of these considerations...
BMI View: A well-developed logistics network in comparison to its regional peers gives Kenya a significant advantage in its bid to become the primary trading hub in East Africa and bolsters its attractiveness to investors. The country's transport network is of relatively high quality and offers a variety of options for internal supply chains, including road, rail and air transport. Major investment in infrastructure projects is also underway, which will further diversify logistics options and allow the country to become the primary destination for international shipping in the region. That said, Kenya's logistics network remains beset by a number of risks which indicate that many improvements are still required. In particular, utilities...
Kenya Trade & Investment
Kenya Trade & Investment
B MI View: Although Kenya's economy is one of the best developed in Sub-Saharan Africa (SSA), we highlight that the country's investment and business environment is hindered by high levels of tax and bureaucracy, widespread corruption in state institutions, and poor enforcement of intellectual property protection. Therefore, while the government is open to foreign business ventures, and there are opportunities for investment, particularly in the manufacturing industry, potential returns may be limited. Consequently, Kenya performs poorly overall in the BMI Trade and Investment Risk Index, with a score of 37.7 out of 100 ranking it...
Kenya Industry Coverage (15)
BMI View: Kenya will continue to underperform its regional peers with regard to the development of its agricultural sector. Despite COMESA granting a one-year extension to the sugar import safeguard, which will provide a short-term boost, we expect the country's sugar sector to remain regionally inefficient and therefore to post very limited growth over the coming years. However, we continue to forecast steady coffee production growth due to relatively high domestic prices and improvement in husbandry techniques.
Key BMI Forecasts
Corn production growth 2013/14 to 2018/19: 7.2% to 3.0mn tonnes. Corn production growth will be fairly limited as subdued prices relative to previous years will limit plantings, while yield growth will be poor.
BMI View: The removal of the new tax policy for imported used vehicles implemented in 2015 will provide a boost to passenger vehicle first registrations. Commercial vehicles will outperform, growing at 13.7% in 2016 as the booming construction industry continues to drive sales in the segment.
|Commercial Vehicle Sales Outperform Due to Booming Construction Industry|
|Total Vehicle Sales, Commercial Vehicle And Passenger Vehicle Growth Rates (2014-2020)|
|f = BMI forecast. Source: KNBS,...|
Kenya Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Food & Drink
Kenya Food & Drink
BMI View: Kenya's booming consumer outlook will encourage investment in the food and drink industry over our five-year forecast period. Rising disposable incomes will boost higher spending across a wider range of food segments, with the uptick in non-essential products as well as a growing demand for convenience foods. Growth in modern food & drink market is increasingly supported by rapid expansion in the formal retail sector.
|Food and Drink Spending|
|f = BMI forecast....|
Kenya Freight Transport
Although Kenya's real GDP grew 5.8% year-on-year (y-o-y) in Q2 2014, according to data released by the Kenya National Bureau of Statistics and reported by Reuters, the country's freight industry will nevertheless face headwinds in the form of the poor performance of Kenya's key export sectors over the coming years.
Kenya's key export sectors will continue to post relatively weak growth over the medium term, exerting a drag on the country's trade balance, as well as the freight industry. We predict that the deficit - and the wider current account deficit - will gradually narrow towards the end of our 2014 to 2018 forecast period due to slower import growth.
Figures from the Central Bank of Kenya (CBK) indicate that export revenues were, in local currency terms, 3.3% lower in the first six months of 2014 than in the same period in 2013. The falling value of the Kenyan shilling means that shipments fell by 5.0% in US...
Kenya Information Technology
BMI View: The IT markets in Ghana, Kenya and Nigeria all contracted sharply in 2014 and 2015 as a depression in the commodities complex hurt economic performance and resulted in steep currency depreciation against the US dollar that eroded already weak purchasing power. This was due to a re-evaluation of previous optimism regarding their economic growth trajectory and IT markets, as a lack of structural and institutional strength was laid bare. The fortunes of the three markets are however not tied that closely, with Ghana and Nigeria being more susceptible to further negative shocks in the short-term if the commodities markets take another turn downwards. However, under our core scenario we envisage improved performance over the medium term...
BMI View : Kenya's construction industry will record robust growth over our forecast period, driven by investment into transport networks, expansion in the power sector and the growth of Nairobi's real estate sector. Foreign direct investment, particularly from China, will spur growth, although we highlight pressure on the government budget will weigh on the potential of the market.
Latest Updates And Structural Trends
We maintaining our forecast for 9.7% real growth in 2016, 8.6% over the next five years and 6.8% over our full forecast period up to 2025. Expansion will be driven by investment into power and transport infrastructure and as well as Nairobi's growing real estate sector. The nominal industry value is expected to rise from an estimated USD3.1bn in 2015 to...
BMI View: We maintain our bullish outlook for the Kenyan insurance sector as a whole, with the non-life insurance sector in particular expected to post robust and explosive growth over the course of our forecast period out to 2020. Increases in average household income rates, as well as wider economic growth, is driving demand for a number of products, including property, health and motor insurance. At the same time, improving awareness of the benefits of various life products, as well as an expansion in the number of products available in the market, is contributing to growth of the life sector - though we note that widespread poverty remains a serious hindrance to growth potential.
Kenya Medical Devices
BMI View : We expect Kenya to be the fastest medical device market in Africa and the third fastest in the Middle East & Africa region over the 2014-2019 period, with growth being driven by good economic performance and increases in health expenditure. Almost all medical devices are imported, as domestic production is limited to basic consumable items. Demand for medical devices remains high as many health facilities require modernisation.
Pharmaceuticals & Healthcare
Kenya Pharmaceuticals & Healthcare
BMI View: It is vital that companies that are looking to sell non-communicable disease therapeutics work alongside the public sector and focus on physician education and patient awareness in a market that has traditionally focussed on infectious diseases such as malaria, tuberculosis and HIV. Besides challenges related to diagnosis, care and treatment, there is a lack of understanding and knowledge about diseases such as diabetes and cardiovascular disease among healthcare professionals and the general population, and a perception that such diseases are not as critical as other diseases affecting the country.
Headline Expenditure Projections
Pharmaceuticals: KES73.34bn (USD750mn) in 2015 to KES84.04bn (USD830mn) in 2016; 14.6% growth in local currency terms and 10.8% in US dollar terms.
BMI View: Kenya's overall power generation will grow over 50% from 2016 to 2024, at an annual average rate of 5%. Total generation in 2016 will be 11.8TWh, which will increase to 17.9TWh in 2024. These increases will be largely due to a significant boost in non-hydropower renewables capacity through the Olkaria geothermal and Lake Turkana wind farm projects
BMI View: Kenya will emerge as the fifth largest geothermal market in the world by 2020, as the strong project pipeline gradually materialises and the government prioritises the exploitation of its vast geothermal resources. A large project pipeline across the geothermal, solar and wind segments will more than double the country's renewable power generating capacity over our 10-year forecast period.
BMI View: It is estimated that formal retail now accounts for 30% of the total Kenyan retail sector, contributing KES440bn to the country's GDP and employing nearly 200,000 staff. This contribution is expected to rise significantly as formal shopping floor space is set to double in coming years. However, overall household income levels in Kenya remain very low, supporting demand for the most essential goods and services.
|Headline Household Spending|
|e/f = BMI estimate/forecast. Source...|
BMI View: We continue to hold a positive and favourable outlook for the Kenyan mobile telecommunications market. The Kenya mobile market grew significantly faster in H1 2015 and we have positively revised our forecasts for the mobile market in our Q1 2016 update. The mobile penetration rate remains low and there is significant room for growth. Recent consolidation in the market is driving operators to focus more on high quality networks, product and service innovation. Mobile financial services will be a key driver of subscriptions and revenue growth, with Equitel's entry into the market bringing consumers and businesses a wider range of payments, savings and loans services. In the wireline sector, strong competition from well funded players is also supporting continued investment in next generation networks and the launch of converged services. Meanwhile, Kenya&#...
BMI View: Kenya's tourism sector is currently going through a slump. Traditionally the country has been a popular tourist destination due to its abundance of safari options and its beautiful beaches. Over the last few years however, Kenya has been the victim of a number of high profile terrorist attacks that have left many potential tourists with insecurities about the safety of travel. In the short term this will cause inbound tourist numbers to continue to decrease. The government are, however, making great efforts to improve national security in a bid to change its international image and the perceptions of some of its key markets, especially Europe (recently, both the UK and US lifted travel advisories against areas of Kenya). For these reasons we forecast that arrivals will pick up in the mid- to long-term and begin to steadily increase. International tourism...