Kenya tax regime on focus as global firms exit

The pertinent questions are these: What are the true motives and strategic calculations behind these trends? Is political risk the real driver? And how do we explain the fact that even after what looks like an “exit”, European multinationals—Diageo and Vodafone are good examples—deliberately retain brand ownership, licensing arrangements and royalty streams?

Clearly, this is not retreat in the conventional sense. It is repositioning.

The real driver here is not Kenya-specific political risk, but global capital discipline. To understand what is happening, one must step back and look at the bigger picture.

In my view, the more important issue is not Diageo’s exit; it is Asahi’s entry. One of Japan’s largest brewing conglomerates has taken a major bet on Kenya. Indeed, Asahi’s acquisition of EABL marks the first time a major Japanese brewing group has taken a controlling position in an African alcohol business of this scale.

This transaction fits a nascent but clearly emerging pattern: Japanese investors are moving decisively into consumer goods, healthcare and manufacturing across Africa. If this sounds exaggerated, one only needs to look at the pace at which Japanese-backed pharmaceutical retail chains such as Goodlife are expanding.

What is likely to change? Obviously, strategic direction will now be set in Tokyo, not London. But what I found more insightful were comments I received from an analyst who closely follows Japanese multinational strategy.

He framed it this way: “Japanese capital is patient and prefers moderate, stable returns. Where Anglo-American capital increasingly favours asset-light licensing models, Japanese firms are still willing to own factories, distribution networks and people. They price African risk differently—and, crucially, over much longer time horizons.”

We should brace ourselves for the usual criticisms of the Diageo sale from that small but loud elite within our capital markets—the oligarchs who often lead in framing narratives in this space.

The familiar refrains will follow: Why was this a block sale? Why not a book-build on the NSE? Why not sell to the local market? Was the valuation fair?

Yes, Kenya’s capital markets are deep in terms of portfolio flows. But do they have the institutional depth to absorb a 65 percent control transaction of this magnitude?

We do have large institutions such as the National Social Security Fund and a sizeable private pensions industry. But do these institutions have the capacity to participate in transactions of this scale without breaching concentration risk thresholds?

The Diageo and Vodafone transactions carry important lessons for the ongoing public debate around President William Ruto’s ambitious plans for both an Infrastructure Fund and a Sovereign Wealth Fund.

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The relevant question is this: is the vision behind the funds President Ruto is touting about building institutions capable of anchoring such large transactions?

Until we get there, block sales to foreign strategic investors will remain the default outcome—not because Kenya lacks savings, but because it lacks institutions capable of aggregating and deploying those savings at scale.

Multinationals operate in an environment characterised by unpredictable interpretation of tax laws, a dysfunctional tax appeals system, and an increasing normalisation of retroactive fiscal claims.

There is also a more subtle but damaging problem: European multinationals, in particular, are increasingly frustrated by the collapse of traditional policy engagement mechanisms. Lobbying through associations and formal channels no longer delivers predictable outcomes.

The emerging preference is not persuasion, but litigation—seeking conservatory orders in court. It is expensive.

These are risks that operators can manage. But European boardrooms, accountable to yield-hungry public shareholders in New York and London, increasingly prefer not to carry them. The solution, from their perspective, is simple: move to asset-light models in Africa.

The writer is a former Managing Editor for The EastAfrican.