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Unique opportunities that can unlock Kenya’s FDI potential in 2025
To provide confidence to global financiers and investors, Kenya must strengthen its capital markets ecosystem, which plays a crucial role in offering essential financing and exit opportunities.
As we look ahead to 2025 with ambition, a review of the global Foreign Direct Investment (FDI) landscape in 2024 reveals a complex interplay of challenges and opportunities.
In 2024, global FDI flows experienced a modest rebound, reaching approximately $1.3 trillion, a two percent increase from the previous year, with Asia taking the dominant share.
Africa, home to approximately 1.4 billion people and immense mineral wealth, remains the world’s most untapped continent, brimming with potential yet struggling to translate its promise into tangible economic opportunities.
Africa attracted only $53 billion in FDI inflows, representing a mere four percent of global inflows and marking a three percent decline from the previous year—the continent continues to face challenges in unlocking inclusive and broad-based investment.
Regionally, a three percent decrease in FDI was noted in East Africa with inflows totalling $10.6 billion, representing a 20 percent share of the total haul into Africa.
As one of East Africa’s most dynamic economies, Kenya holds immense potential to attract FDI by leveraging its unique geographical position and focusing on high-impact sectors.
To realise this potential, Kenya must adopt a targeted strategy that emphasises mass job creation, value addition, and infrastructure development. This requires implementing bold and investor-friendly policies that create a stable, transparent, and enabling environment to attract and sustain global FDI inflows.
Kenya’s agriculture sector, a cornerstone of its economy, employs a significant portion of the population but remains underutilised in terms of value addition. With global food trade exceeding $1 trillion, the country has a unique opportunity to unlock its potential by breaking cartel-like monopolies and inviting global players to leverage its vibrant ecosystem.
Developing holistic value chains is essential—transforming cotton into fabric and apparel, oilseed crops into oil extracts, and livestock farming into end-consumer products. These investments would enhance export earnings, unlock significant rural and urban employment opportunities, and strengthen Kenya's position as a global leader in agri-processing.
Kenya offers a compelling value proposition for foreign investors, positioning itself as an ideal destination for global manufacturing giants aiming to expand their operations in partnership with local entrepreneurs and farmers. With right policies, Kenya can and must headhunt the right global players with the desired technical knowhow, ready markets and the desired equity capital.
Mining and natural resources
Kenya, endowed with untapped mineral resources such as titanium, copper, manganese, gold, rare earth minerals, and limestone, has immense potential in the mining sector, which remains largely underdeveloped, but has significant potential to transform its mining sector into a driver of economic growth.
To realise this potential, Kenya must adopt a clear plan of strategic alignment with like minded democracies to ensure sustainable development and avoid exploitative practices.
While coal is a fossil fuel, it remains an essential resource for industrialisation, particularly for developing nations. Kenya must consider responsibly developing its coal deposits to gain the low-cost energy advantages that many Asian nations have leveraged while simultaneously advancing their renewable energy goals. Kenya is uniquely positioned to balance this strategy, given that over 90 percent of its energy already comes from renewable sources.
Focusing on downstream mineral processing and sustainable mining practices will ensure value addition and minimise environmental impact. Strategic partnerships with global players can further enhance technological and operational efficiencies.
By offering incentives such as tax breaks for processing and transparent regulatory processes, Kenya can position itself as a competitive and attractive destination for FDI in mining, unlocking substantial economic growth and industrialisation.
Investments in this sector can significantly boost rural employment, creating mass jobs across mining and processing activities. Local processing will significantly boost government revenue through value-added taxes, consumer spending and pay-as-you-earn (PAYE) collections, moving beyond minimal royalties.
Core infrastructure development through PPPs
Kenya’s economic growth relies heavily on robust infrastructure, yet critical gaps remain in roads, airports, power supply, and water systems. Public-Private Partnerships (PPPs) offer a practical solution, provided lessons from previous setbacks are effectively addressed.
Reviving the PPP initiative to modernise Jomo Kenyatta International Airport (JKIA) is vital for positioning Kenya as Africa’s leading logistics hub. Similarly, prioritising the Usahihi Nairobi-Mombasa Expressway will reduce transportation costs, strengthen regional connectivity, and boost domestic tourism. Leveraging its strategic location and strong ties with an economically pragmatic incoming US administration, Kenya has a unique opportunity to drive these two transformative projects forward.
Additionally, Kenya must refine its Special Economic Zone (SEZ) strategy; while SEZs are essential hygiene factors for FDI, they require a focused and strategic approach to attract enterprises aligned with the country’s economic priorities.
Integrating select public SEZs into transparent PPP frameworks could expedite their operationalisation. Supported by predictable fiscal policies and streamlined regulatory processes, such reforms will enhance the effectiveness of SEZs and unlock Kenya’s full infrastructure potential.
Critical role of capital markets
To provide confidence to global financiers and investors, Kenya must strengthen its capital markets ecosystem, which plays a crucial role in offering essential financing and exit opportunities.
Banks and debt financing: Kenyan banks need to enhance their project financing capabilities by developing internal expertise to evaluate projects based on their viability and merits, rather than relying solely on collateral-based lending.
Alternative investment funds: Kenya requires clear policies and robust strategies to attract Alternative Investment Funds (AIFs), positioning itself as a hub for venture capital (VC) and private equity (PE) investments. Well-structured incentives are crucial to encouraging large funds to set up and invest in Kenya.
While this will be challenging without competitive policies, addressing these gaps can unlock significant capital essential for driving economic growth.
IPO market revival: Reviving the IPO market, which has stagnated in recent years, is crucial for Kenya's investment ecosystem. A vibrant IPO market builds confidence among local and international investors while providing essential exit avenues for foreign equity capital, thereby enhancing Kenya's appeal as a competitive and attractive investment destination.
Transparent privatisation of select state-owned enterprises, combined with streamlined and accessible listing processes, will play a pivotal role in revitalising the Nairobi Securities Exchange and fostering a robust capital market.
A robust capital market is a cornerstone for attracting global investors, as it provides the liquidity and exit options necessary to instill confidence in their long-term commitments.
By demonstrating a well-functioning ecosystem for IPOs, secondary trading, and debt financing, Kenya can position itself as a credible and competitive destination for global funds and multinationals seeking reliable returns and scalability.
The writer is a geo-economist and head of advisory, Andersen Kenya
