Worsening level of corruption, and tax administration challenges have been cited by investors as some of the key areas of concern eroding Kenya's competitiveness for Foreign Direct Investments. 

According to the 2024 Foreign Investment Survey Report, the cost of electricity and a shaky political environment are also key areas of concern that are increasingly affecting the flow of foreign capital into the country.

The study by the Kenya National Bureau of Statistics (KNBS) collected data on the stock of Foreign Assets and Liabilities for the years ending 2022 and 2023 as well as transactions in 2023, and investor perceptions on the business environment in 2024.

The survey adds that foreign investors with presence in Kenya are also concerned about the increasing prevalence of counterfeits across industries in East Africa's largest economy.

What's more, the 2024 Foreign Investment Survey Report states "insecurity and transport infrastructure were rated as moderate areas of concern."

Cost of doing business

It adds, "respondents indicated the most important support services from the government that would facilitate investment and or reinvestment in Kenya are reducing the cost of doing business, improving ease of doing business, provision of sector specific incentives and market access."

The survey shows that 70.1 per cent of the respondents cited electricity supply as the highest cost of enabling business services in the country. 

Similarly, investors cited access to financial services, immigration services and single business permits in Kenya as highly costly in enabling business services at 58.5, 55.8 and 51.8 percent, respectively. 

Meanwhile, when asked why they preferred setting up shop in Kenya, up to 22.9 per cent of the respondents the country provides highly skilled and productive workforce.

At the same time, 17.1 per cent indicated market access, 17.1 per cent cited ease of doing business while 14.3 per cent indicated Kenya as a logistic hub as the main determinants for their decisions to invest in Kenya. 

"Other determinants included macroeconomic stability (8.6 percent), technology advancement and innovation (8.6 percent), access to e-government services (5.7 percent) and political stability (5.7 percent)," the report notes in part.

Additionally, Respondents were asked to indicate the mode of entry of their enterprises with 66.4 per cent disclosing that they started as greenfield investments, 18.6 percent as brownfield investments, 8.8 per cent as mergers and acquisitions. 

What's more, 3.5 percent and 2.7 percent started as Private Public Partnerships (PPPs) and joint ventures, respectively.

Kenya's source of FDI

According to 2024 Foreign Investment Survey Report, Europe posted the largest share of foreign liabilities to Kenya, accounting for 32.9 percent and 35.0 percent of the total stock of foreign liabilities at the end of 2022 and 2023, respectively.

"This was primarily attributable to the United Kingdom and the Netherlands, which accounted for 46.4 percent and 17.3 percent, of the total stock of foreign liabilities from Europe, respectively, at the end of 2023."

During the period under review, Africa powered by foreign investors from South Africa, DRC and Mauritius emerged as the second largest source of foreign liabilities in Kenya, accounting for 26.4 percent of the total stock of foreign liabilities at the end of 2023. 

Survey shows that those from Asia dipped from KES231.8 billion at the end of 2022 to KES217.9 billion at the end of 2023 and accounted for 9.3 per cent of the total stock of foreign liabilities at the end of 2023, majorly boosted by India, UAE and China. 

For the U.S., British Virgin Islands and Canada, the stock of foreign liabilities in Kenya increased by 7.1 percent to KES212.1 billion at the end of 2023 and accounted for 9.1 per cent of total stock of foreign liabilities in 2023.

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