Doing business in Kenya – Our Financial Director, Luise Rice and Africa Desk Manager, Ansie Elliott have just returned from visiting our offices in Kenya, Nairobi.
Kenya has become a popular destination for foreign companies entering the African Market as an alternative to South Africa. The country boasts with substantial private sector, including a significant number of foreign investors.
As the leading economy in East Africa, Kenya’s’ strategic location and its well-developed business infrastructure make it a natural choice for investors and many international firms have made it their regional hub.
Business in Kenya – business environment & ease of doing business
Kenya is largely regarded as the financial and logistics hub of East Africa. The country is well positioned to maintain and expand its status as an African business hub as government reforms continue to improve the business climate. The most commonly spoken business language is English.
The considerable size of the local market, with over 55 million people in Kenya and over 300 million in the entire East African Community (EAC), offers good opportunities for companies wishing to enter the market to sell their products in Kenya and neighbouring countries.
Kenya’s young, growing and well-educated population, which is very familiar with technology, is also a major advantage. Companies should take this explosive growth into account when planning their business venture into Africa.
According to a report released by the Kenya National Bureau of Statistics in October 2021, Kenya’s real GDP grew by a robust 10.1% in the second quarter of 2021, compared to a 4.7% contraction in the same quarter of 2020. East Africa, with Kenya as their anchor economy, was the only African region that avoided a recession in 2020, when the region’s economy was growing by 0,7% (average in Africa = -1,8%).
Kenya is one of the top intra-African exporters, mostly exporting to countries within the EAC. The fact that the EAC is viewed as the most integrated block of Africa’s regional economic communities shows the regions’ good basis for taking advantage of the African Continental Free Trade Area (AfCFTA), which came into effect on January 1st, 2021, and aims to create a single market for goods and services and a continental customs union. Kenya-based companies are well positioned to take advantage of the opportunities associated with the AfCFTA as cross-border trading is very common within the EAC.
Top performing industry sectors in Kenya
Currently, Kenya is the third-largest economy in Sub-Sahara-Africa, ranking only behind Nigeria and South Africa. The top performing industries in Kenya include agriculture (including forestry and fishing), mining, manufacturing, energy, and services (including financial services and tourism).
The largest contributor to Kenya’s GDP by far is the service industry, which stands at around 63% of the GDP. A large part of this is the tourism sector, as Kenya is a top destination for tourists from around the world, due to its national parks, safaris, beaches, and sunny weather. The government has implemented tourist-friendly regulations like visa on arrival for tourists from certain countries.
Agriculture is the second largest contributor to the economy, with half of local produce being exported. The biggest contribution to the sector comes from tea, coffee, and horticultural crops (including flowers, potatoes, vegetables, and fruits).
Another large part of Kenya’s economy is the manufacturing sector, which amounts to around 15% of the GDP. Most of the country’s manufactories are in the major cities of Nairobi, Kisumu and Mombasa. Most are centred on the food sector, including beer production, grain milling and sugar. Other portions of the sector include automotive (mostly car assemblies), oil refineries, cement industry and the informal sector (manufacturing mostly household goods). The government has enacted favourable tax conditions to boost the manufacturing sector. Some industrial equipment and raw products are tax-free.
Kenya has a long-term focus on digitalisation. The Information and Communications Technology sector is growing fast and offering opportunities for companies to tap into the countries emerging potential.
The growth of the economy is also assisted by the government’s commitment to infrastructure development. It continues to invest in the development of public infrastructure, including the upgrading of roads, railways, energy, ports, and airports, and prioritises investor-friendly reforms, such as a review of public-private partnership policies and legislation, to deliver more infrastructure projects.
The Kenya National Bureau of Statistics’ report said economic activity and growth in the last years were driven by policy easing and supported by sectors such as information, communication, and technology (ICT, which recorded 25.2% in the second quarter of last year), transport and storage (16.9%), finance and insurance activities (9.9%) and manufacturing (9.6%).
Interested in doing business in Kenya / East Africa?
InterGest South Africa has a local presence in Kenya, Nairobi and have assisted many foreign companies with setting up their business activities in East Africa. We offer you unparalleled support every step of the way – from company registration to monthly administrative services.
As a part of our company policy, we offer our first consultation to you free of charge. Our team of professionals are ready to be of service to you. So, if you are considering expanding your business into East Africa. Contact us today!
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