The brick and mortar fallacy: Why Kenya’s top assets struggle globally

We are obsessed with concrete in Kenya. We celebrate the ribbon-cutting of a new commercial complex, a sprawling agro-processing facility or a massive residential development. We view the physical asset as the ultimate proof of success.

Yet, a recurring scenario plays out in boardrooms across Nairobi: a local developer takes their physically world-class asset to an international private equity firm or a development finance institution seeking expansion capital or a buyout. The investor is initially impressed. Then they look under the hood and then walk away.

Why? Because despite the multibillion-shilling concrete, the entity is run like a corner kiosk. They suffer from the “Brick-and-Mortar Fallacy” – the belief that the physical asset alone is enough to attract institutional money. It isn’t. Global capital doesn’t just buy assets; it buys the structures and systems that manage those assets.

In my years managing institutional risk in the City of London, the mandate was clear: we don’t just assess the internal rate of return; we assess the framework of control. When international investment committees look at Kenyan projects, they apply a ruthless fiduciary lens.

When they find opaque decision-making, mingled personal and corporate accounts or an absence of independent oversight, they don’t necessarily just say ‘no’. They apply a massive “value discount” to the valuation to compensate for the operational risk. The founder leaves millions of dollars on the table simply because their house wasn’t in order.

Conversely, assets with robust, transparent structures command a “value premium.” They attract cheaper capital, better partners and higher valuations because the risk is mitigated.

In Kenya, discussing corporate governance without discussing family governance is a futile exercise. The vast majority of our significant local assets are family-owned.

This is the ultimate “unmodellable risk” for international capital. A foreign fund will look at a highly profitable, family-run logistics company or real estate portfolio and ask: What happens if the patriarch or matriarch steps down, or worse, passes away suddenly?

We have all seen the headlines. Empires built over decades paralysed in probate court for years, drained by sibling rivalries and succession disputes. This isn’t just a family tragedy; it is a catastrophic governance failure.

To an international investor, a brilliant business model means nothing if the underlying ownership structure is a ticking time bomb of family litigation. If the succession plan isn’t legally watertight and actively managed, the asset is virtually un-investable for institutional money.

If local originators want to command the value premium and partner with serious global capital, they must apply the same rigour to their organisational foundation as they do to their engineering blueprints. This requires a deliberate focus on high-performance structuring:

Use robust special purpose vehicles and holding company structures to legally ring-fence liabilities and clarify ownership.

Build a fiduciary board: Transition from a ‘friends and family’ advisory group to a truly functional board.

You need independent directors who possess the gravitas and expertise to genuinely challenge the founder and ensure international compliance standards are met.

Succession planning is not a will hidden in a safe; it is a dynamic, legally binding corporate governance framework. It must dictate continuity of leadership and ownership transfer long before a crisis hits.

The physical asset is merely the collateral. The investable asset is the robust structure you build around it.

It is time for Kenyan developers and business owners to ask themselves a difficult question: Are you building a family fiefdom, or are you designing an institution ready for global capital? If it is the latter, the blueprints must change.

The writer is an investment strategist