Kenya's FDI down 18% due to COVID-19: UNCTAD

Kenya's foreign direct investment (FDI) has taken a hit in 2020, with a decline of 18% compared to the previous year, according to the latest report by the United Nations Conference on Trade and Development (UNCTAD). The data reveals that foreign investments in Kenya remain relatively weak, especially considering the country's size and level of development. The report highlights the challenges faced by Kenya in attracting FDI and sheds light on the impact of the COVID-19 pandemic on the country's investment landscape. Eva Otieno, Principal Africa Strategy at Standard Chartered Bank, provided insights into the situation during a live interview on CNBC Africa from Nairobi. Otieno acknowledged the historical weakness of FDI flows into Kenya. She mentioned that Kenya's lack of commodity wealth, unlike some neighboring countries with oil and gas reserves, could be a contributing factor. In comparison to Uganda's oil and Tanzania's gas reserves, Kenya's investment focus has leaned towards financial and insurance services. The COVID-19 pandemic further exacerbated the situation, leading to a significant decline in FDI in Kenya. While waiting for updated numbers for 2020, Otieno anticipates a noticeable drop in FDI flows into Africa as a whole due to the impact of the pandemic and the global decline in commodity prices. However, she remains cautiously optimistic about a potential rebound in 2021, considering the suppressed numbers from 2020. Otieno highlighted the sectors that attract the most foreign investment interest in Kenya. The financial and insurance sector tops the list, accounting for approximately 34% of FDI inflows into the country. Nairobi's potential to become a regional financial hub, supported by initiatives like the Nairobi International Financial Center, has cemented its appeal to foreign investors in the financial services sector. The information and communication technology (ICT) sector follows closely, benefiting from Kenya's technological advancements in Africa. Lastly, the manufacturing sector also garners foreign interest, reflecting the sector's significant contribution to the country's GDP. The alignment of FDI interest with key sectoral contributors highlights the potential for growth and investment in Kenya's economy, despite the challenges posed by the ongoing pandemic and global economic uncertainties.