U.S firms optimistic on Kenya

Posted on October 10, 2015 12:00 am

United States of America companies still have high hopes of the Kenyan economy and think that an increase in customer base and market demand will help them gain profits, according to a survey on Business Confidence 2015 conducted by an American think tank in my possession reveals.Nevertheless, the main reason for possible negative business performance according to the latest ease of doing business report thank ranks Kenya among the bottom half is because of negative government plans and regulations. These have led to lower investment expansion in the Kenyan market, the survey revealed.The feedback on the generalised system of preferences from respondents showed a concern on the competitiveness of the Kenyan economy affecting United States of America business in Kenya. However, the potential renegotiation of the U.S -East African Community doesn’t seem to be a complete solution that helps improving business performance. Regulatory reforms are also an important complementary element for upgrading Kenya’s strength.The survey also showed that security is the biggest worry for the American business community while maintaining profitability, enhancing customer base, and sales activities are top priorities. The respondents consider cooperation between the private sector and government as a tool to drive and maintain business in Kenya.

Nairobi Skyline.Photo: Duncan Edwards - Australian adventurer)
Nairobi Skyline.Photo: Duncan Edwards – Australian adventurer)

The survey was conducted from January to April this year and sought opinion and feedback from chief executive officers and those in high managerial positions in U.S companies in Kenya. They were asked about confidence in the Kenya economy and their views on current trade and investment issues, especially issues for the U.S – Kenya free-trade agreement. They were optimistic and confident about the Kenyan economy. Even after the recent deadly terror attacks in Kenya, they said it did not have much of an impact on trading between Kenya and the U.S.It is believed that the Kenyan economy would improve in the next two years while businessmen also trusted that their business performance would improve along with the economic trend, with the main driver being a widening of customer base and market demand. However, there are concerns about government plans or regulators hampering ease of doing business in the country, thus affecting the decision for foreign investment expansion. A significant concern, the survey revealed, was the impact of capital gain tax particularly in the investment sector.Despite the concern, only a few companies have drafted a business plan to adapt to this change.

To deal with the situation, the American business community agreed that support from the chambers of commerce and other trade organisations in terms of business facilitation is crucial, particular in the area of policy dialogue and advocacy. The four key determinants relative to the Kenyan economy concerns over exports, potential decline in consumption, infrastructure and mega-project investment like the expansion on Jomo Kenyatta International Airport and Standard Gauge Railway line and strong tourism growth were discussed.The most efficient business strategy is to find a new investment theme that suits the Kenya’s capacity best such as innovative, services industries like ICT, healthcare and pharmaceuticals, financial services for the US businesses, and consumer discretionary sector for Kenya business. Kenya must adopt a strategy to maintain its competitiveness. Moreover, it is very important to take advantage of various investment promotion schemes that the Kenyan government is now offering to the private sector, which include interesting sectors for the foreign business community such as medical services, digital, automotive, and petrochemicals. No doubt the role of services liberalisation in strengthening Kenya towards a more competitive economy in the global market is crucial.

Contador Harrison