Lower power prices to woo investors: Report

Research by Standard Chartered Bank indicates that the expected drop in the cost of electricity will enhance Kenya’s attractiveness as an investment destination.

The October Business Sentiment Indicator (BSI) report released on Monday also cites ongoing infrastructure projects and declining international oil prices as factors that will positively influence those seeking to set up shop in Kenya.

“Kenya hopes to attract new foreign direct investments (FDI) to its industrial zones, boosting activity. Given a stronger supply side boost to growth based on improvements in infrastructure, we expect the BSI to pick up further over the coming months,” the report says.

GEOTHERMAL POWER

The cost of electricity is expected to fall by some 30 per cent at the end of this month following the commissioning last month of a scheme for the generation of 140 megawatts of geothermal power.

This is set to reduce reliance on the diesel-driven thermal generators.

Companies operating locally and those that have terminated operations, have on many occasions, cited high energy costs as one of the main hindrances to foreign investment.

The global competitiveness ranking by the World Bank, which measures countries’ reforms in the business regulatory environment released last week, also names high electricity costs, among other factors, as hampering business in Kenya.

ONGOING CONFLICT

According to the BSI, demand for the country’s exports is threatened by the conflict in South Sudan, which is among Kenya’s leading export markets, and a global decline in demand.

Some 33 per cent of those interviewed in the survey reported a reduction in the availability of credit in October, compared to only five per cent in September.

This is in spite of the adoption of the Kenya Banks Reference Rate, which is meant to enhance transparency in pricing of loans.

The Business Sentiment Indicator report shows that more than half of the respondents said that they paid higher interest rates.