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According to the UNCTAD World Investment Report 2024, Kenyan businesses are making headlines with their ambitious ventures into foreign markets, investing an incredible $1.31 billion (Sh169 billion) overseas in 2024, a 122.79% increase from the year before.

Industry titans like KCB Group, Equity Group, and Safaricom are leading the charge, targeting high-growth regions such as the Democratic Republic of Congo (DRC), Rwanda, and Ethiopia.

For instance, in the DRC, Kenyan banks like Equity BCDC and KCB’s Trust Merchant Bank have secured significant market share, with Equity BCDC alone reporting a $102 million net profit in 2023.

Safaricom’s venture into Ethiopia, despite initial losses, is projected to contribute 20–25% to its growth by 2026.

This outward investment wave, now rivalling 87.16% of Kenya’s $1.503 billion in foreign direct investment (FDI) inflows, signals a strategic shift. But what’s driving this trend, and what does it mean for Kenya’s economic future?

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Why Are Kenyan Companies Looking Abroad?

1. Tapping High-Growth Markets

Kenya’s domestic market, while robust, is maturing, with GDP growth projected at 4.5% in 2024, down from 5.6% in 2023. Neighbouring countries like the DRC, Rwanda, and Ethiopia offer faster growth and untapped potential.

The DRC, for instance, has become Kenya’s most profitable EAC market, with Kenyan banks earning $229 million in pretax profits in 2023. Ethiopia’s liberalising economy, including its new securities exchange and M-PESA rollout, presents a fertile ground for Safaricom.

2. Leveraging EAC Integration

The EAC, comprising Burundi, DRC, Kenya, Rwanda, Somalia, South Sudan, Tanzania, and Uganda, allows free movement of capital, goods, and services.

This integration has fuelled Kenyan investments, particularly in finance, telecoms, and energy. For example, KCB’s acquisition of a 76.67% stake in Rwanda’s Banque Populaire du Rwanda and Equity’s expansion in the DRC highlight how EAC membership facilitates cross-border growth.

3. Diversifying Risk

Kenya’s domestic challenges, including high public debt, fiscal consolidation, and climate shocks, create uncertainty.

By diversifying into faster-growing markets, companies like Safaricom and KCB cushion themselves against local economic volatility.

This strategy aligns with Kenya’s evolving role as an outward investor in tourism, manufacturing, retail, finance, education, and media.

Policy Shifts: Balancing Outward and Inward Investment

Kenya’s government is walking a tightrope, encouraging outward investment while enhancing its appeal to foreign investors. Recent policy changes reflect this dual strategy:

• Tax Incentives for Special Economic Zones (SEZs): A 10-year tax holiday for SEZ developers, along with exemptions on rent and licensing fees, aims to attract FDI.
• Significant Economic Presence (SEP) Tax: In 2024, Kenya replaced the 1.5% digital-services levy with a 3% SEP tax, targeting non-resident digital firms with significant economic activity in Kenya.
• Minimum Top-Up Tax: Aligned with the OECD’s Pillar Two framework, a 15% minimum top-up tax ensures multinational digital giants pay their fair share, addressing the challenge of taxing intangible services.
• ICT Sector Liberalisation: The removal of a 30% local equity requirement for ICT firms has drawn global tech giants like Amazon, Oracle, and Microsoft, boosting FDI in Nairobi’s tech hub.

These reforms have kept Kenya competitive, though FDI inflows remain relatively low at 10.3% of GDP, lagging behind regional peers.

Confidence or Caution? Decoding the Strategy

The outward investment surge could reflect confidence in Kenya’s corporate giants, who see themselves as regional powerhouses capable of dominating EAC markets.

KCB and Equity’s banking expansions and Safaricom’s telecom ventures further demonstrate this ambition.

However, it may also signal caution,a hedge against domestic risks like debt vulnerabilities, inflationary pressures, and subdued business sentiment following 2024 protests.

Kenya’s ability to remain an FDI magnet rests on its policy environment. While SEZ incentives and ICT liberalisation are promising, challenges like corruption, poor infrastructure, and a slow judicial system persist. Streamlining administrative processes and enhancing transparency could further boost inflows.

What’s Next for Kenya’s Global Ambitions?

Kenyan companies’ $1.31 billion bet abroad is a testament to their growing influence, but it raises critical questions:

• Can Kenya sustain this outward push while attracting sufficient FDI? With FDI inflows nearly stagnant, policymakers must ensure incentives like SEZ tax holidays and SEP taxes don’t deter foreign investors.
• Will regional markets deliver? The DRC and Ethiopia offer immense potential, but political instability and foreign exchange challenges could negatively impact returns.
• How will domestic stakeholders react? As giants like Safaricom and KCB prioritise foreign markets, local SMEs may demand more support to compete.

READ ALSO:Ethiopia Delivers Growth Without Profits for Safaricom

Join the Conversation!

Is Kenya’s outward investment boom a sign of economic strength or a response to domestic constraints? Can Nairobi remain East Africa’s investment hub while its giants conquer new frontiers?

Share your thoughts in the comments below, and let’s discuss the future of Kenya’s global economic strategy!

Ronnie Paul is a seasoned writer and analyst with a prolific portfolio of over 1,000 published articles, specialising in fintech, cryptocurrency, and digital finance at Africa Digest News.