TRADE: Kenya Woos Investors

By IPS Correspondents Reprint | | Print |

Joyce Mulama

NAIROBI, Sep 11 2003 (IPS) - For years investors boycotted Kenya and went to do business next door in Uganda and Tanzania.

Their reason: poor governance and corruption.

Now the new government of President Mwai Kibaki, which came to office in Dec. 2002 on the back of improving Kenya’s image, is planning to host a major conference to attract investors.

Kenya’s Minister of Planning and National Development, Anyang’ Nyong’o, said the National Investment Conference-2003, which will be held in November, will explore opportunities both at home and overseas.

It will also provide a platform for investors to discuss with government the creation of new projects and widening existing ones.

The decision to organise the conference comes in the wake of last week’s report which listed Kenya as one of the countries in Africa that lagged behind in investment inflows. According to the World Investment Report released Sep. 4, Kenya recorded only 50 million U.S. dollars in Foreign Direct Investment (FDI), the lowest compared to neighbours Uganda and Tanzania.

Uganda did well in East Africa, attracting 275 million U.S. dollars in investment inflows. Tanzania followed with 240 million U.S. dollars.

Dennis Kabaara, the Chief Executive of the Nairobi-based Institute of Economic Affairs (IEA), has attributed Kenya’s poor performance to the country’s "weak governance" over the past few years and unclear investment strategies.

"Kenya needs to have an investment strategy supported by an economic strategy. Other countries are designing programmes to attract foreign capital," he says.

The UN Conference on Trade and Development (UNCTAD) report indicates that the continent’s FDI inflow slumped from 19 billion U.S. dollars in 2001 to 11 billion U.S. dollars last year.

Kabaara believes the main cause of the decline was "less cross-merger activities and acquisition of properties".

Others attribute the slump to Africa’s unending problems. "Poor governance leading to corruption and poor infrastructure are responsible for the decreasing decline in investment flow," remarks Noella Mutanda of the Investment Promotion Centre (IPC), a government department.

The UNCTAD report underlines that expanded extraction of natural resources, particularly petroleum, may be a major initiative in recovering the continent’s investment flow.

Fr Joachim Omollo, a lecturer at Tangaza College in Nairobi, disagrees. "The only way forward is for the West to help us extract our resources and let us retain them. Unless this happens, the FDI will continue declining further," observes the Catholic clergyman. "Unless Third World countries realise that they are being taken for a ride and fight for their raw products, their economies will not improve."

Additional strategies to put back on track the flow of investment include adoption of privatisation programmes and improved regional and free trade initiatives.

Kabaara, who gave a brief analysis of the report during the launch, consented that serious privatisation programmes would indeed woo investment.

South Africa, Morocco and Nigeria are likely to privatise their major public enterprises, according to the report. This is exhibited by the fact that South Africa was the highest FDI recipient in 2001. It received 6.8 billion U.S. dollars.

Angola followed with 2.1 billion U.S. dollars. In fact, Angola falls under countries, which attract foreign investment due to their possession of petroleum and oil deposits. Others include Chad, Sudan, Equatorial Guinea and Mauritania.

Economists say an increase in FDI will translate into a rise in economic performance, which in turn will attract more investors.

Mbugua Kinuthia, a blacksmith in Nairobi, does not understand why African countries should rely on foreign investment. Governments, he suggests, should strive to promote the jua kali (informal) sector.

"This is one area they should develop because the performance of the economy is directly dependent on this local sector," he says. "After all, even the giant economies of the world started from the jua kali point."