TRALAC - Trade Law Centre

Kenya’s neighbours

Monday, 14 January 2008

Source: The East African

Plummeting confidence in Kenya’s economy could enhance Tanzania’s and Uganda’s comparative attractiveness to foreign investors, the head of Corporate Council on Africa suggested last week.

“Those who have been looking at Kenya may now look more seriously at other countries in the region,” Council president Stephen Hayes said in an interview. He cited Tanzania and Uganda as the likely alternate destinations for Americans seeking opportunities in East Africa.

Post-election violence is likely to delay decisions to invest in Kenya by 12 months or longer, Mr Hayes predicted. And failure to staunch the bloodshed soon “could kill new investment in Kenya altogether,” he warned.

That assessment was echoed last week by Florida-based money manager Robert Levitt, who controls a $425 million portfolio of investments, mainly in developing countries.

“When blood is on the streets, we prefer the comfort of home,” Mr Levitt told Forbes.com last week.

The Fitch Ratings agency also warned that economic damage would worsen unless Kenya’s political and social instability is soon resolved.

“The negative implications of the political violence will be greater the longer the impasse continues,” said Richard Fox, head of Africa and Middle East sovereign ratings at Fitch.

Nervousness about Kenya’s prospects could thus serve to accelerate a long-term trend that has seen foreign investment shrinking in Kenya and growing sizably in Tanzania and Uganda.

American businesses put down new stakes worth $68 million in Kenya in 2006, according to the US Commerce Department. That total represented a drop of 113 per cent from the previous year, when Kenya attracted $145 million in US private investment.

Uganda, by contrast, saw direct investments from the US climb by 14 per cent during the same period — from $12 million in 2005 to $14 million in 2006.

The increase was even sharper in Tanzania’s case, from $21 million in 2005 to $35 million in 2006 — a jump of 40 per cent.

Mr Hayes described the flow of US capital to Tanzania as a “boom.” Tanzania, he said, “has been doing a lot of the right things to attract business, including transparency with contracts.

“There have clearly been discussions among businesses for some time about the declining business climate in Kenya,” said Mr Hayes.

And it is not only Americans who are making these calculations. New investment in Kenya from all foreign sources totalled $46 million in 2004, according to a report by the Kenya Investment Authority cited in an article by John Koigi in the October 2006 edition of myafrica.wordpress.com.

The comparative figures in that same year were reported as $237 million for Uganda and $270 million for Tanzania.

But investments in Kenya’s textile sector may remain stable, Mr Hayes suggested. He said that capital drawn to companies specialising in clothing and apparel exports to the US could remain in place due to the continuing trading advantages offered through the Africa Growth and Opportunity Act (Agoa).

The turmoil of the past two weeks “may not undercut what Agoa has achieved,” Mr Hayes said. “It’s future investments that are really in question.”

The Corporate Council on Africa includes among its members many of the biggest US companies doing business on the continent such as Boeing, Cargill, Cisco, ExxonMobil, General Motors, Coca-Cola and Starbucks.

The council regularly sponsors events in the United States intended to encourage greater US investment in Africa’s growing economies. Next month, for example, it will convene a first-ever US-Africa Tourism & Sports Seminar in New York.



“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Kenya’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.