The Panel was made up of Belvas Otieno (Investment Officer, International Finance Corporation), Joseph Murabula (Chief Executive Officer, Kenya Climate Innovation Center), Chibuzo Ene (Chief Executive Officer, Nathan Claire) and was moderated by Lisa Botha (Partner, Pinsent Mason).
Kenya remains an attractive investment destination, albeit more can be done.
Kenya is deemed to have many investment opportunities in comparison to other jurisdictions including in sectors such as climate, water, energy, consumables, infrastructure, energy and many more, due to various factors including being a regional gateway. It was suggested that incentivizing entrepreneurs by lowering tax rates as well as enhancing the ease of complying with tax procedures would be beneficial to the country’s entrepreneurial ecosystem.
Data driven decision making is crucial in enhancing governance in the region.
The panel recognized that the quality of governance has significantly improved in the course of the years in Kenya which has contributed to its success as a financial center compared to other African destinations. Kenya and other countries in the region should however be more deliberate in harnessing quality data and utilizing such data to guide decision making by government agencies and authorities.
Development impact is clear, but commercial return remains elusive.
Investment in Kenya (and Africa generally) generates clear developmental impact results. However, there is a scarcity of deals that offer promising commercial viability and consequently, there is an apparent need for entrepreneurs to enhance return to their investors in order to deepen investment by attracting commercial investors, whose investment participation is crucial for later stage investment rounds as opposed to development finance institutions (DFIs) whose participation should be more prevalent at the earlier stages.
Lisa, summarized the discussion by noting that there’s need to maximize returns and narrow the loss gap; entrepreneurs need more clarity on legislation; SMEs need more access to innovative finance suitable to grow business; there is need to incentivize the growth of talent as well as harness it so that top talent with entrepreneurial skills does not remain working independently thereby limiting their ability to grow; and there is need to enhance the involvement of stakeholders, including at grassroot level, in decision-making by government.
The Roundtable ended with a fireside chat by Dr. James Mworia, CFA (Group CEO and Managing Director, Centum Investment Company PLC) who was interviewed by Terryann Chebet (Strategic and Business Development Lead, CNBC Africa) on how investors can harness Kenya’s potential and deepen private investment.
Diverse and Lucrative Sectors
James started off by outlining the most profitable sectors which most savvy investors ought to invest in: Housing, Education, Financial Services, Energy Agriculture and Technology. These three sectors are the most lucrative and most profitable. These sectors were chosen based on an analysis of the economy and identifying which sectors will prove critical to the economy moving forward.
A suitable investment climate is crucial to harness Kenya’s potential
He added that to deepen private sector investment, the government must create a suitable investment climate. This can be done through operating frameworks such as the Two Rivers International Finance and Innovation Centre (TRIFIC) Special Economic Zones (SEZ). The TRIFIC SEZ aims to solve the problem of fiscal inefficiencies faced by investors bringing capital into the country.
He added that SEZs established under the Special Economic Zones Act enjoy incentives such as exemptions from Capital Gains Tax (CGT), exemptions on taxes on interest, royalties and management fees. These incentives make it easier for FDI to come into the country through the SEZ regime.
Operating frameworks such as SEZs provide entities with a fiscally attractive environment that allows them to scale their operations and compete on a global stage.
The role of leadership is critical in harnessing Kenya’s potential
James highlighted that as a business owner seeking private investment, your company’s leadership is key to the success of your company. Many investors and business owners typically make their investment decisions based purely on the company’s value creation plan while ignoring “the how” which is the company’s implementation and execution of its value creation plan.
A business owner must set out a clear implementation plan which includes the selection of a good leader and competent management team and the establishment of processes to make sure that the leader can support their team during the implementation process.
With regard to execution, he stated that rather than focusing solely on results, the business’ emphasis should be on what should be done to achieve these results. It’s important to manage the inputs into the results and working with the team to review the actions that should be taken to achieve the end goal. Intense focus should be placed on the “how” and the execution.
Another critical role played by an effective business owner is “clearing the path”. This entails dealing with any potential challenges that are beyond the control of the business e.g. regulatory challenges, financing structures etc. As an effective owner, you must clear the path for the business and allow the leadership of the business to focus on the operation of the entity and achieving the goals that have been set out.
Finally, he added that savvy investors and business owners must always work with the end in mind. It’s important to establish clear structures that will be able to monitor the operations of the company. A business owner should focus on the drivers of the value creation plan but also on the risk management. A business that can strike the balance between value creation and risk management is extremely lucrative to potential investors.
Investment strategies should be market driven.
Kenya is an extremely lucrative market for investors and global trade. In terms of doing business, Kenya is on par with most countries in the world. This gives us a great advantage in maximizing global trade & the PE/VC asset class. Investment strategies should be market driven. Private investors need to invest and scale behind a hypothesis. Investments should be data driven.
“Accept the data, pivot and scale your investment until the numbers & data make sense.” This is how investors in Kenya will harness the investment potential available in Kenya.