NAIROBI, Kenya, Apr 13 – Insecurity will not derail investments coming to Kenya with the positive economic drivers outshining the challenges, a new report says.
Cytonn Investments says the terrorist attacks will cause sporadic disruptions and uncertainty in the short-term.
The firm in its latest report says in the long term the country has a positive investment potential as long as the government curbs the recurrence of the terror attacks.
“However, we make the big assumption that the government will quickly, aggressively and, most important, appropriately, act to contain insecurity so that acts of terrorism such as those in Mandera and Garissa do not become the norm, ” the firm said.
According to the report, Kenya is one of the last markets where investors can consistently access GDP growth of six percent to eight percent per annum over the next decade.
In addition, the report states that Kenya has a very young population, 42.1 percent is below the age of 14 and 32.8 percent of the population is between the ages of 25 and 54, with a median age of 19 years.
The large portion of the population is only now entering the workforce and gaining the ability to potentially invest in the economy, grow consumption expenditure and provide a whole new market for investors focused on servicing them in sectors such as middle-income housing real estate.
With the attractive returns, a limited supply of housing, and a growing and more educated population, the Kenyan economy has many and diversified investment opportunities to propel its growth.
“The real estate market has also shown resilience to the insecurity in Kenya. Global real estate markets have entered bubble territory or collapsed in recent years, yet the Kenyan market has remained strong, driven by demand from the lower to middle income segment.”
“In particular, land prices have risen by 535 percent over the last seven years, driven by high demand and a more expansive infrastructure scheme, which has increased accessibility countrywide, as well as allowed investors to make returns of 24 percent per annum over the last five years, ” the report indicates.
Meanwhile, investments into private companies and expansion by companies in Kenya has continued with Wrigley (a US based chewing gum maker) breaking ground on a new Sh5.8 billion factory in Mavoko on a 20 acre piece of land and it aims to double its production capacity as it relocates from the Industrial Area.
READ: Global Giant expands gum factory in Kenya
Fanisi Capital has injected $2.1 million (Sh111.6 million) into European Foods Africa Limited, a local firm processing and distributing pizza, berries and juices. Fanisi’s equity and debt stake in the company will be used to expand the distribution channels.
Fanisi’s stake in European Foods in addition to its existing investments in a Kenyan meat processor and a Rwandan grain handler indicates that Fanisi is bullish on the agro-business and food-processing sector.
Cytonn Investments also closed its Private Placement Offer that valued the company north of Sh1 billion. Cytonn intends to use the proceeds towards add-on acquisitions that provide complimentary services and yield synergies within its portfolio and towards developing its affiliate company Cytonn Real Estate. We saw very good appetite from both local and global high net-worth investors.
Norfund, Norway’s development fund, is partnering with Britain’s development fund CDC to buy a stake in Globeleq Africa in a plan to increase its investment in Sub Saharan Africa up to three-fold in the next five years.