Chinese dominance fuels US firms’ scramble for Kenya

President William Ruto

President William Ruto and US Ambassador Meg Whiteman witness as Investment and Trade CS Moses Kuria and Investment Promotion PS Abubakar Hassan Abubakar sign a bilateral agreement with US firm Moderna to build a Sh65 billion mRNA facility, in Nairobi on March 30.  

Photo credit: Pool

A raging battle for resources between China and the US is behind the scramble for Kenya by American investors, who, in the past two weeks, have pledged to channel billions of shillings into the country.

China remained the largest source of Kenya’s imports, accounting for 20.5 per cent of total imports valued at Sh441.4 billion in 2021, as per the Kenya National Bureau of Statistics economic survey. The war in Ukraine and the Covid pandemic might have acted as catalysts, pushing more UK and US firms to invest in Africa, and Kenya in particular, in the past one year, to counter China.

US Ambassador Meg Whitman acknowledged during the recent American chamber of commerce regional business summit in Nairobi that Kenya’s unique historical and geographical position as the gateway to East Africa makes it a favourite destination for investors outside Africa.

“But let’s zoom in on why Kenya should be your target destination. Here are some reasons: Kenya’s largest export market is the United States; Kenya is the most stable democracy in East Africa; the gateway to the East African market of almost 500 million consumers; regional logistics and finance hub,” said Whitman.

Nairobi’s vibrant technology community is already known as the Silicon Savannah, and the government is committed to establishing the capital as the premier destination for tech investment and innovation in Africa.

Kenya is one of the top trading partners for the US in Africa, and has been a great beneficiary of the Africa Growth and Opportunity Act, a preferential trade programme that expires in 2025. The trade volumes between Kenya and the US have lately been on an upward trajectory. “We are negotiating the Strategic Trade and Investment Partnership – commonly known as STIP. Kenya expects to finish talks for a trade and investment deal with the US at the end of the year and to sign the agreement by April 2024,” said Moses Kuria, Trade and Investment Cabinet Secretary.

The US became Kenya’s largest export market last year, edging ahead of neighbouring Uganda.  Kenya exported about Sh117.7 billion ($890 million) worth of goods to the US, compared to $600 million imports.

“$1.5 billion in total US-Kenya trade is fairly balanced and is expected to increase as the United States and Kenya negotiate a first-of-its-kind bilateral trade agreement between the United States and a sub-Saharan African country,” said Whitman.

Kenya’s huge investment in infrastructure, including the expansion of the Jomo Kenyatta International Airport, Kisumu port, roads and the SGR railway, play a major role in attracting investors. During the recently held American chamber of commerce regional business summit in Nairobi, President Joe Biden’s administration awarded grants totalling $5.1 million under the Prosper Africa and Feed the Future USAID-funded grants in the agriculture sector. The US government also announced a $10 million US International Development Finance Corporation loan to Kentegra to expand its pyrethrum operations in Nakuru County.

“Prosper Africa and Feed the Future funded grants and investments have been awarded to seven private sector companies in the agriculture sector to support access to agricultural inputs and production technologies while expanding Kenyan value-added processing and the export of products like macadamia nuts and dried fruits,” said Scott Cameroon, acting Chief Operating Officer at Prosper Africa.

“Prosper Africa also clearly has large priorities in the digital sector. We also facilitate investments across Africa. So we will certainly be supporting our digital transformation for Africa work that just launched in December.”

Among the seven companies that Cameroon mentioned his agency supports are iProcure Limited, Afrimac Nut, Sunculture, Sanergy/Regen, Exotic-EPZ Kenya Limited, Goshen Farm Exporters Ltd, and Victory Farms.

USAID awarded a $1.2 million co-investment grant and helped Sanergy/Regen access a $2.65 million loan. This will help the organisation to scale up production and distribution of fertiliser made from human waste and in turn create 277 jobs, support thousands of farmers and establish a $7 million processing plant.

Targeted sectors

USTDA is another US Trade agency whose current portfolio in Kenya consists of 11 infrastructure activities with the potential to unlock more than $971 million in financing and create more than $487 million in US export opportunities to support infrastructure in emerging economies. The agency will focus on four sectors, namely clean energy, transportation, digital and healthcare infrastructure.

The USTDA is funding a feasibility study to help Kenya-based bandwidth and Cloud Services Group Limited to expand its operations to provide new, affordable broadband network access in Kenya and East Africa at $1.13 million and as well as a $1.05 million grant to Nairobi hospital.

“We are engaged in an early stage to help fund the projects with either feasibility studies or technical assistance for those projects that will help to attract the investment; if you have a bankable study, you can help the investment,” said Ms Enoh T. Ebong, director of the US Trade and Development Agency (USTDA).

The USTDA is also working to upgrade information communication technology across the hospitals so that they can run efficiently and connect better to their patients.

According to the US, Kenya is among Africa’s leading destinations for foreign direct investment and venture capital, with smart engineers and an excellent workforce. The country generates over 90 per cent of its energy from renewable sources, making it a suitable destination for investors. Kipeto, the second-largest wind farm in Kenya, is supported by the US International Development Finance Corporation and PowerAfrica.

During her opening remarks on Wednesday, Whitman raised concerns over a disjointed tax regime not conducive to her country’s planned investments.

President William Ruto, in reply, announced a raft of tax relief measures. “Kenya is interested in and committed to promoting the best operating environment for business enterprises, and our policy and institutional framework is designed to make Kenya the most competitive investment destination,” he said. “My government is finalising new tax policy guidelines that have gone through stakeholder consultations, including inputs from AmCham. This policy that will enhance transparency in our tax regime will take effect by June 2023 and will now be in place for a minimum of three years.”

The president of the US-Africa Business centre, US Chamber of Commerce, Scott Eisner, said they want to see more US investments in Africa in almost all sectors.