Kenya Country Analysis

Topics: Kenya, Investment, Economics Pages: 5 (1723 words) Published: October 20, 2013
1. Executive Summary
Kenya is a country that has a history of political instability and violence amongst its citizens. Kenya has a large agricultural sector and is a very low-resource country that has very high levels of population growth. These high levels of population growth lead to a large labour force of unskilled workers. Public and Private Investment is crucial for upgrading a firm’s technology and ensuring technological progress. In recent years, Kenya has had very low investment levels, which leads to very poor economic infrastructure. The Kenya government has recently made it its goal to improve the skill of its labour force and the economic infrastructure. With an increase in visitors into the country, it looks like Kenya is on its way to more public and private investment. This does not diminish some of the risks of doing business in Kenya, such as violence, poverty, and political unrest. 2.1 Country Description and Macro Environment

Kenya is an Eastern African country, which has neighboring countries that include Ethopia, Uganda, Somalia and South Sudan. Agriculture is the main industry that contributes to Kenya’s GDP and other main industries are food and beverage processing, and manufacturing of petroleum products. Top exports are tea, coffee, hides, skins and beer. It has a well-developed air transport system, with over 150 airstrips throughout the country (6). Kenya’s main airport, which is the biggest one in Eastern Africa, is being expanded to a capacity of 4 million passengers (4). Kenya has one major seaport in Mombasa, which connects all of the other major seaports around the world. The Mombasa seaport has been known to be inefficient, especially with regards to custom clearance (1). Also, in Mombasa is Kenya’s single-track railway system that branches out to other Kenyan cities. Paved roads connect most of the country but have been mostly unmaintained in recent years and have started to deteriorate. Various Internet system providers have recently started up and Kenya has a good communication system with Kenya Posts and Telecommunications Corporation providing international direct dialing and mobile telephones. Three of Africa’s top multinational corporations are located in Kenya, and barriers that have limited more are political and economical instability, crime and insecurity, corruption and delayed licenses and work permits. Kenya has multiple trade-agreements and economic ties with numerous countries and are a part of trade agreements such as COMESA, Africa Free Trade zone, East Africa Community and African Growth and Opportunity Act (8). 2.2 Political Situation and Stability

The country’s political stability is crucial to the business climate. Foreign funds invested in Kenya are likely going to be affected by any political revolution. Elections in 2007 resulted in more then 1200 people killed in ethnic violence (9). A recent Harvard study suggested Kenya should be growing at 7% rather than 4% and this decline in growth is due to Kenya’s messy politics. The government is trying to improve the country’s weak infrastructure, but political instability puts off investors and corruption still remains high (12). 2.3 Legislation affecting Foreign Investment

Kenya is a member of East African Community (EAC) and so it follows the EAC Custom unions common external tariffs 16% VAT and 2.25% import declaration is also charged on all goods. The government in times of famine or impending disaster can temporarily or indefinitely suspend these import duties and taxes. Since the 1990’s Kenya has attempted to improve trade policy and attract foreign investors. These efforts have resulted in many barriers to trade being lifted due to efforts of government officials to investigate reports of corruption, passing new laws and joining trade unions. Non- Tariff Barriers include standardizations, subsidies, and corruption and Bureaucracy (3). 2.4 Economic Conditions

The Kenyan economy has shown growth in recent...
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