Before you vote: The truth about foreign direct investment

A container terminal at Mombasa Port .

Photo credit: File | Nation Media Group

Has Kenya’s foreign direct investment grown?

 “In 2015 alone we saw a 50 per cent rise in FDI projects. Foreign direct investment was $500 million (Sh51.5 billion) in 2013 but it rose to $990 million (Sh102 billion) in just one year. Last year Kenya leapt 28 places on the World ranking for Ease of Doing Business,” -   President Uhuru Kenyatta, statement at G7 meeting in Italy on May 26, 2017

Foreign direct investment (FDI) net inflows doubled from Sh44.3 billion in 2013 to Sh92 billion in 2014, according to data from the Kenya National Bureau of Statistics (KNBS). The following year the increase was a modest 16 per cent to Sh107 billion.

A review of FDI data by Nation Newsplex reveals that the figures on FDI inflows by the United Nations Conference on Trade and Development (UNCTAD) are slightly higher, but the pace of increase is the same as that of KNBS. 

According to UNCTAD, FDI doubled from Sh53 billion in 2013 to Sh108.2 billion in 2014. The following year it again increased by more than a third (37 per cent) to Sh148 billion.

In 2015, Kenya recorded one of the biggest increases in FDI in Africa, with project numbers rising 49 per cent to 85, according to the Africa Investment Report by the Financial Times.

This increases imply Kenya has an improved business environment, a situation that the World Bank’s Ease of Doing Business index confirms. According to the 2017 index, Kenya climbed 21 places from the previous year to rank 92 out of 190 economies. 

The country was the third-most reformed with a score of score of 3.52. In the 2016 report Kenya improved 28 positions, from 136 in 2015 to position 108.

The report compares countries with each other in terms of business regulations and their enforcement. Factors considered include how easy it is to start a business, acquire construction permits, get electricity, register property, get credit, trade across borders, protect minority investors, pay taxes, resolve insolvency and enforce contracts in 190 countries.

While President Kenyatta is right that Kenya has seen a jump in FDI and improvement in the business environment, the country has not attracted significant foreign investment in production capacities, according to the World Bank.

FDI in high-productivity sectors stimulate productivity in the economy as technologies and knowledge spill out to domestic firms. The country also still has some way to go to improve its ease of doing business ranking in the world.