Investors are showing renewed interest in the Kenyan market as the country’s economic growth is projected to rise to 5.5 percent this year. This growth is bolstered by a robust tourism sector and a rebound in agriculture. Additionally, easing inflation and strong remittance flows to households are expected to enhance consumer spending, a crucial factor for growth in the coming years.
Finnfund’s economist, Tangeni Shatiwa, notes, “Overall, we believe that Kenya’s improved external position will foster investor confidence and enhance its ability to secure international financing. This is already reflected in the significant investor interest demonstrated during the recent USD 1.5 billion Eurobond issuance in February, which marks Kenya’s second issuance since early last year.”
Before 2024, Kenya’s external position was noticeably weak, hampering its access to external financing. However, the country has made notable strides over the past year, with its external deficit shrinking to 3.6 percent of GDP in 2024, down from 4.4 percent in 2023. Increased funding from bilateral and multilateral partners has also strengthened foreign exchange reserves.
Shatiwa highlights the opportunities stemming from recent changes in U.S. trade policy. While some African nations may view these changes as potential risks, he asserts, “Kenya is in a favourable position to negotiate a trade deal with the USA, given its status as a key ally in the region. Furthermore, Kenya’s low export dependency on the U.S. and the modest reciprocal tariff of 10 percent on textile exports could enhance their competitiveness over Chinese products.”
In terms of investment opportunities, Shatiwa identifies several promising sectors within Kenya. The ICT sector, in particular, has driven significant innovation and dynamism in the country. Finnfund has made strategic investments in this area, such as Twiga Foods, a mobile platform that links small farmers with retailers, and Kasha Technologies, which utilizes technology to streamline the provision of healthcare and related products. Furthermore, Finnfund’s investment in Kentegra Biotechnology Holdings supports smallholder pyrethrum farmers, providing them with a stable income source in drought conditions.
“Despite facing several challenges in recent years, Kenya continues to be an attractive hub for businesses and investors in the region. While the country’s economic growth slowed to 4.7 percent last year, it still outperformed the average growth in Sub-Saharan Africa, underscoring the strength of its dynamic, services-led private sector compared to its peers,” concludes Shatiwa.