A crisis can dramatically reshape a country’s international reputation, as was evidenced by Kenya in 2013, when two unrelated yet damaging events dealt a considerable blow to the country’s carefully crafted image as a safe and foreigner-friendly investment destination.

In early August, dramatic images of Kenya’s international airport engulfed in flames surfaced across the world's media outlets. Then, in mid-September, the country suffered one of its worst ever terrorist attacks, and footage emerged from the Westgate shopping mall in the country's capital Nairobi, showing armed assailants and terrified, fleeing shoppers.


Steady development

Michael Kamau, Kenya’s cabinet secretary for transport and infrastructure, says that while such events did much to reveal some of the country's shortcomings, the government’s swift response to both crises illustrates that its investment in modernising its security services, as well as developing supportive institutional and infrastructural frameworks, means that Kenya has rebounded robustly from these challenges.

“Kenya is a beautiful country for investors, and as our infrastructure and security is improving, we are seeing renewed interest especially from US companies that are keen to set up their businesses here,” says Mr Kamau. “An IBM laboratory has just opened and Google has set up its [regional] headquarters in Nairobi. These things about Kenya have been understated.”

Alluding to the fire at Jomo Kenyatta International Airport (JKIA) in August, Mr Kamau says: “In the past we had fires in other airports and they were closed for three to four days. Although the fire at JKIA broke out in the morning, by six o’clock in the evening I was there to receive the first incoming international flight. Although the fire destroyed our arrivals terminal, we swiftly responded by [establishing] a temporary terminal, and we are currently completing the construction of terminal four, which will have an additional capacity of 2.5 million passengers when completed.”

Critical attraction

Kenya continues to remain the pre-eminent destination for FDI in east Africa. Historically seen as the region’s key trading post, Kenya has remained attractive to foreign investors thanks to its large population of 43 million people and the connectivity provided by its leading airline, Kenya Airways, which is one of the largest in Africa and has helped make the country a pan-African business hub.

Data from greenfield investment monitor fDi Markets shows that of the five countries in the East African Community (EAC) – Burundi, Kenya, Rwanda, Tanzania and Uganda – Kenya continues to attract the lion’s share of FDI. Between 2003 and 2013, Kenya attracted 319 greenfield investment projects, which represents 41% of all projects in the region. Tanzania ranked a distant second, attracting 180 projects, while Uganda followed in third place with 169 projects.

“Nairobi is a melting pot of people from all parts of the world,” says Mr Kamau. “As Kenya Airways has grown, people from all parts of Africa and other parts of the world have come to Kenya. For example, Kenya Airways now operates direct non-stop flights from Nairobi to Guangzhou in China.”

But while Kenya attracts the largest number of foreign investors in east Africa – between 2003 and 2013, 263 foreign companies invested in the country, compared with Tanzania, which ranked second attracting 142 firms – Kenya’s regional neighbours have outpaced it in attracting capital. Over the same period, Uganda received the most investment, attracting $19bn of FDI. Tanzania followed attracting $15bn in investment and Kenya ranked third with $13bn-worth of FDI.

Engineering a solution

Analysts have contended that although Kenya’s GDP remains robust – the African Development Bank says that the country’s economy grew by 4.5% in 2013 –  its infrastructure has not kept up with this growth. Indeed, infrastructural constraints such as insufficient road and port networks led Kenya to drop seven places in the World Bank’s 2014 ‘Doing Business’ rankings, moving from 122nd to 129th place.

“We have a huge infrastructure deficit in Kenya,” says Mr Kamau. Although this remains the most pressing challenge to doing business in the country, he maintains that the government has engaged in a slew of projects to improve Kenya’s infrastructural capacity and, far from losing its allure to foreign investors, Kenya is set to maintain its leading position as the EAC’s top FDI destination.

“The current government has invested heavily in improving the road infrastructure in Kenya,” says Mr Kamau. “We have started the Mombasa-Kigali-Kampala railway line, which connects Mombasa [on the east coast of Kenya] to Nairobi, Kigali, which is Rwanda’s capital city, and Kampala, which is Uganda’s capital city. Our studies found that this railway, which will ease road congestion, could increase Kenya’s GDP by 1.5%.

"We are constructing several regional roads, including a route that connects Mombasa to Arusha in Tanzania. We have also commenced the building of a major road connecting Mandera in the north of Kenya to Garissa in the east. We will also build a seven-kilometre railway line that connects JKIA Airport to Nairobi’s city centre, to make it easier for passengers to commute between the two locations. We are working hard to ensure that Kenya remains competitive and I believe that this is the time to put your money in Kenya.”