Kenya attracts a number of our clients, thanks to its strategic location at the heart of the East African Community. Its increasing ties with China bode well for the country’s trade and investment. Kenya is also allied with the US as part of the Horn of Africa region. The country’s economy is broad-based, reducing its vulnerability to commodity price shocks. Technology stands out as a rapidly growing sector in Kenya.

We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 15 of Kenya’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert teams. We aim to keep you ahead of the curve, so you can do business with ease in Kenya.

Country Risk

Kenya Country Risk

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Core Views

  • The long-expected collapse of President Uhuru Kenyatta's trial at the ICC will ease tensions between Kenya and its Western allies, but could strain relations within the ruling party.

  • The politicization of sharp ethnic divisions remains the key threat to Kenya's long-term political stability. Terrorism linked to Kenya's military involvement in Somalia is likely to remain a risk, but it does not pose a systemic threat to political stability.

  • Kenya's tense security situation will not prevent economic growth from accelerating in 2015 and 2016. Consumer spending and capital investment will drive economic expansion, which will average 6.5% per year between 2015 and 2019.

  • A combination of accelerating economic growth and systemic under spending by government agencies will cut Kenya's fiscal deficit...

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Kenya Operational Risk Coverage (9)

Kenya Operational Risk

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The main advantage for businesses in Kenya, in terms of labour market risks, is the quality and variety of options available in the workforce in comparison with two of its neighbours and closest competitors for investment, Uganda and Tanzania. Kenya benefits from better education, in terms of quality and enrolment rates, and more widespread literacy among the working population. This means that businesses in the country have less trouble finding adequately skilled staff, face lower costs in terms of training, and have to bring in fewer foreign workers than companies in Uganda and Tanzania. This makes Kenya an attractive location for investment in East Africa.

Kenya has two key advantages in terms of education that enhance the quality of the country's labour market in comparison to Uganda and Tanzania. The first of these is better secondary school enrolment rates, which means that there will be a larger pool of workers with more advanced...

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Kenya Crime & Security

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Since the mid-2000s Kenya has faced increasing levels of crime and terrorism, fuelled by ethnic and religious tensions, high unemployment, and unrest in Somalia spreading over the border. Foreign workers and tourists in Kenya face a wide range of risks due to high levels of crime, violence related to terrorist activity, and the lack of capacity within the security services. Kidnapping remains a threat to foreigners, and there is also the potential that they will be a target for other forms of terrorist attack. Kenya scores very poorly in the overall BMI Crime and Security Risks Index. Its score of 24.6 out of 100 ranks the country 37 th out of 44 states in Sub-Saharan Africa (SSA).

BMI considers interstate conflict to pose the smallest direct risk to foreign workers in Kenya, because the country has close ties with its neighbours, particularly those joining it in the East African...

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Kenya Labour Market

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The main advantage for businesses in Kenya, in terms of labour market risks, is the quality and variety of options available in the workforce in comparison to two of its neighbours and closest competitors for investment, Uganda and Tanzania. Kenya benefits from better education, in terms of quality and enrolment rates, and more widespread literacy among the working population. This means that businesses in the country have less trouble finding adequately skilled staff, face lower costs in terms of training, and have to bring in fewer foreign workers than companies in Uganda and Tanzania. This makes Kenya an attractive location for investment in East Africa.

Nevertheless, the large number of health issues, high minimum wages and reasonably high unionisation of the labour force in comparison to other countries in Sub-Saharan Africa will pose risks to businesses. In addition, while education in Kenya is good by regional standards, the quality of...

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Kenya Logistics

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A well developed logistics network in comparison to its regional peers gives Kenya a significant advantage in its bid to become the primary trading hub in East Africa and bolsters its attractiveness to investors. The country's transport network is of relatively high quality and offers a variety of options for internal supply chains, including road, rail and air transport. Major investment in infrastructure projects is also underway, which will further diversify logistics options and allow the country to become the primary destination for international shipping in the region. In addition, the government is attempting to streamline trade bureaucracy, which will reduce costs and import and export lead times. Risks to businesses in Kenya from its poorly developed utilities infrastructure lower the country's overall Logistics score, however we highlight that issues remain less serious than in many neighbouring countries. Kenya therefore performs reasonably well in the...

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Kenya Trade & Investment

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Although Kenya's economy is one of the most well developed in Sub-Saharan Africa (SSA), BMI highlights that the country's investment and business environment is hindered by high levels of tax and bureaucracy, widespread corruption in state institutions, and poor enforcement of intellectual property protection. Therefore, while the government is open to foreign business ventures, and there are opportunities for investment, particularly in the manufacturing industry, potential returns may be limited. Consequently, Kenya scores poorly overall in the BMI Trade and Investment Market Risks Index, with 31.8 out of 100 meaning the country comes in behind its neighbours Tanzania, Uganda, and Rwanda, in 28 th place out of 44 countries in Sub-Saharan Africa.

The government of Kenya is generally welcoming to foreign direct investment (FDI), although the country has not historically received as...

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Kenya Industry Coverage (15)

Agribusiness

Kenya Agribusiness

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BMI View: The key development in Kenya's agricultural sector over 2015 will be the abolition of the safeguard protecting unlimited amounts of duty-free sugar imports into the country from COMESA countries. As Kenya's sugar industry is uncompetitive relative to its regional neighbours, we believe that this will greatly stunt growth of the country's sugar sector. Over the long term, we believe Kenya's corn sector shows the most potential for growth, owing to regional currency stability which will encourage input usage, as well as support schemes for the government. We continue to forecast steady coffee production growth in 2014/15 due to relatively high domestic prices and improvement in husbandry techniques, while the crop will also receive a boost from a recent spike in global coffee prices.

Agribusiness Market Value
BMI Market Value By Commodity (...

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Autos

Kenya Autos

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We hold an upbeat outlook for the Kenyan automotive sector as a result of its accelerating private consumption rates, rising fixed investment and the country's status as the commercial hub of the fast-growing East African Community (EAC). In light of this, BMI forecasts that total first vehicle registrations growth over the period 2015-2019 will average 10.0%, with significant upside risks to our forecast.

We believe rising private consumption will account for the bulk of real GDP growth in Kenya. With consumption forecast to increase by 4.9% in 2015 and 6.0% in 2016 on the back of strong consumer spending fundamentals, we expect passenger car demand will remain strong.

With our Country Risk team forecasting 12.7% growth in fixed investment, we anticipate expanding demand in the commercial vehicle segment. With a growing inflow of capital and increased business spending including investments into...

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Commercial Banking

Kenya Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Food & Drink

Kenya Food & Drink

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The outlook for Kenya's food and drink industry continues to be positive, with strong growth expected over the short-to-medium term. The success of premium-chain coffee shops highlights the likelihood that premiumisation will play a major part in the growth of many segments of the Kenyan food and drink industry. Going forward, the mass grocery sector is likely to be a key growth area with foreign investment from South African retailers likely over the next year or two.

Headline Industry Data

  • Per capita food consumption (local currency) is forecast to increase by 9.2% in 2014. Over the five years between 2013 and 2018, we are forecasting a compound annual growth rate of 9.3%.

  • Mass grocery retail sales (local currency) are forecast to increase by 33.0% in 2014. Over the five years between 2013 and 2018, we are forecasting a compound annual growth rate...

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Freight Transport

Kenya Freight Transport

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Although Kenya's real GDP grew 5.8% year-on-year (y-o-y) in Q2 2014, according to data released by the Kenya National Bureau of Statistics and reported by Reuters, the country's freight industry will nevertheless face headwinds in the form of the poor performance of Kenya's key export sectors over the coming years.

Kenya's key export sectors will continue to post relatively weak growth over the medium term, exerting a drag on the country's trade balance, as well as the freight industry. We predict that the deficit - and the wider current account deficit - will gradually narrow towards the end of our 2014 to 2018 forecast period due to slower import growth.

Figures from the Central Bank of Kenya (CBK) indicate that export revenues were, in local currency terms, 3.3% lower in the first six months of 2014 than in the same period in 2013. The falling value of the Kenyan shilling means that shipments fell by 5.0% in US...

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Information Technology

Kenya Information Technology

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BMI View: The oil-producing African nations draw a large portion of government revenues from petroleum exports, exposing them to the sharp decline in crude oil price in late 2014 and early 2015. This will weigh on public spending and private investment in the short-term, including investments in new IT products and solutions.

Headline Expenditure Projections

Ghana

Computer Hardware Sales: GHS866mn in 2014 to GHS1.027bn in 2015, +18.5% in local currency terms. The government's ambitious Basic Schools Computerisation project and e-governance initiative will be the main growth driver.

Software Sales: GHS176mn in 2014 to GHS220mn in 2014,...

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Infrastructure

Kenya Infrastructure

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BMI View: Kenya's construction and infrastructure sector is set to maintain positive growth this year but damage to investor confidence is likely to remain a dampner on upside potential. Growing insecurity in the country has limited forecasts for growth at 7.9% year-on-year. The successful issuance of Kenya's eurobond shows that long-term interest in the market is strong however and bodes well for the government's ability to fund infrastructure investment in the coming years.

Key Developments

  • The governments of Kenya, Zambia, and Tanzania have signed a memorandum of understanding (MoU) for a USD1.2bn project to link the electricity systems of the three countries. Work will involve establishing...

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Insurance

Kenya Insurance

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BMI View : We see a bright future for Kenya's insurance industry, with domestic economic growth driving expansion of both the life and non-life sectors. The market place is competitive and highly fragmented, and as such there opportunities for larger regional and global firms to expand their reach via local acquisitions. Meanwhile local firms continue to expand via the use of innovative distribution channels and the introduction of new, market targeted, products.

BMI is forecasting robust GDP growth of 6.3% in Kenya in 2015, as the tourism industry regains ground and the country's key agricultural sector sees more positive growth. This economic growth will drive a leap in private financial consumption, providing opportunities for insurance firms in related sectors such as motor vehicle insurance (with auto sales on the up) and mobile phone...

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Medical Devices

Kenya Medical Devices

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BMI Industry View: The Kenyan medical device market is expected to grow by a CAGR of 14.4% over the 2013-2018 period, alongside impressive GDP growth and strengthening imports. Almost all medical devices are imported, as domestic production is limited to basic consumable items, a situation that is expected to remain unchanged for the foreseeable future. Demand for medical devices remains high as many health facilities require modernisation.

Headline Industry Forecasts

  • In 2013, the Kenyan medical device market was estimated at US$122.7mn, or US$2.8 per capita. This market size is comparable to Oman; in per capita terms, the market is similar to the Philippines. The market is expected to expand at a CAGR of 14.4% over the 2013-2018 period,...

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Pharmaceuticals & Healthcare

Kenya Pharmaceuticals & Healthcare

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BMI View: The impending dual epidemic of communicable and non-communicable diseases in Kenya will create business opportunities for multinational drugmakers. Investment into physician and patient education and therefore addressing one of the barriers to high-quality care in an emerging economy such as Kenya - will work to indirectly create a sales channel for their medicines, in both the public and private sector. Furthermore, efforts to raise awareness of therapeutics and disease management will work to create patient and prescriber loyalty and build trust for therapeutics for the treatment of 'new' diseases.

Headline Expenditure Projections

  • Pharmaceuticals: KES63.75bn (USD724mn) in 2014 to KES73.31bn (USD793mn) in 2015; 15.0% growth in local currency terms and 9.4% in US dollar terms.

  • ...

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Power

Kenya Power

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BMI View: Kenya's power sector is set to change dramatically over the forecast period to 2023, with hydropower to lose its dominant share of the power mix. The country is investing heavily in geothermal, wind and solar, and a number of coal-fired and gas-fired facilities are due to come online this decade.

As a result, power generation will more than double, to 19.1TWh in 2023. Just outside the forecast period, the country also plans to open a nuclear facility. However, projects regularly experience delays, creating a degree of uncertainty to the outlook. Meanwhile, consumption is set to rise dramatically as both the population and the economy grow, from 9.2TWh in 2015 to 17.7TWh by 2023. This implies a steady shift from the import to the export of electricity.

Key Trends And Developments

  • Kenya added 70MW of power to the...

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Renewables

Kenya Renewables

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BMI View: The Kenyan government's push to improve electrification rates, expand renewable energy, improve electricity trade links and reduce its reliance on hydropower and diesel are strategically sound moves that will benefit the country both economically and socially over the coming decade. We hold a particularly optimistic outlook towards the country's geothermal industry, as capacity comes online and the government continues to invite proposals for the construction of new geothermal power plants.

Kenya's energy policy and efforts to promote renewable technology reflect the need to diversify the country's electricity mix away from expensive imported oil and unreliable hydropower. Kenya has the potential to generate electricity from almost all types of renewable energy resources - including geothermal, wind and solar power. We are witnessing...

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Shipping

Kenya Shipping

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Good Prospects For Mombasa In 2015

For 2015, we continue to have a strong growth outlook for Kenya's ports and shipping sector based on three main factors: strong domestic growth in Kenya itself; a dynamic East African region (this is important because Mombasa acts as a trade gateway for many of Kenya's neighbouring countries); and finally, continuing signs that Mombasa port's ongoing congestion problems are easing.

BMI also remains bullish about prospects for the Kenyan economy. We are forecasting 6.6% GDP growth in 2015, with the economy rebounding strongly on an estimated growth of 5.1% in 2014. There are various reasons for the quickening pace. The key is rising consumer spending, supported by a better agricultural sector performance and rising tourism arrivals. Infrastructure developments are also playing a significant role. Investment has...

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Telecommunications

Kenya Telecommunications

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BMI View: Fibre-optic network infrastructure deployments will enable Kenyan telecoms service providers take advantage of the growing demand for enterprise data solutions and convergence services. These services have the potential to sustain fixed-line growth and offer hard-pressed operators the opportunity to diversify their revenue streams away traditional voice services.

Key Data

  • Kenya's mobile market grew by 1.3% quarter-on-quarter (q-o-q) in Q314, compared with a growth of 2.3% q-o-q during the same period in 2013.

  • Mobile ARPU appreciation continued in 2014, with Safaricom recording a 5.5% year-on-year (y-o-y) increase in mobile ARPU in the 12 months to...

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Tourism

Kenya Tourism

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BMI View:  For 2015, we are forecasting a slight turnaround in the beleaguered Kenyan tourism sector's fortunes, with arrival numbers set to rise by 2.5%. However, this remains dependent on a lasting improvement in the domestic security situation. We are also expecting slight rises in international tourism receipts and the number of overnight stays in 2015.

At the present time, Kenya's tourism sector is facing not only terror threats but also a public perception that travellers could be at risk of contracting the Ebola virus if they travel to Africa. In August 2014, the World Health Organisation (WHO) stated that Kenya was a 'high-risk' country for the spread of Ebola, given its role as a regional transport hub, although there had been no reported cases of the disease within...

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