Last month, Africa Matters Limited (AML) co-Managing Director Piers Dawson and Associate Joy Kibaki were in Nairobi, Kenya, meeting senior-governments officials and private sector investors. Their engagements came three months after President William Ruto was declared the winner of Kenya’s presidential election by the electoral commission, with his 13 September inauguration marking the end of Uhuru Kenyatta’s ten-year term.
Kenya, like other African countries, faces various economic headwinds including rising energy prices and soaring inflation. Despite these challenges, Kenya remains the commercial powerhouse of East Africa, and the third largest economy in sub-Saharan Africa. With strong agricultural and service sectors, developed banking and legal systems, and relatively strong macro-economic policies, Kenya will continue to be one of the most important African economies during Ruto’s five-year term.
Mudavadi appointed Prime Cabinet Secretary
On 27 September, Ruto announced his new cabinet. His 22 appointees marked a decisive break from the cabinet of his predecessor, Kenyatta. Ruto’s first announcement as president was the creation of the Prime Cabinet Secretary role. Musalia Mudavadi, a veteran opposition figure, and close Ruto ally, was awarded the position. A member of Kenya’s political elite, Mudavadi has led the Amani National Congress party since 2017, and finished third in the 2013 presidential election behind Kenyatta and Raila Odinga. Mudavadi served as deputy president (2002-2003) and deputy prime minister (2008-2012) under presidents Daniel arap Moi and Mwai Kibaki respectively. He has also held numerous ministerial positions. As Prime Cabinet Secretary – a position similar to prime minister – Mudavadi is officially the third most senior person in government, behind the president and deputy president. Many observers, however, view Mudavadi as Ruto’s de factor number two, given his political experience and gravitas. He will be a driving force in shaping government policy and pushing implementation. For foreign investors and diplomats alike, Mudavadi will be a key figure to engage with in Ruto’s government.
Kenya’s priorities for foreign investment
To discuss Kenya’s commercial landscape and economy, Piers and Joy met Prime Cabinet Secretary Mudavadi in November 2022. Their conversation centred on the new Kenyan government’s priorities for, and desired engagement with, foreign investors. They put the following questions to Prime Cabinet Secretary Mudavadi.
1. What are your government’s short-term priorities for foreign investment?
Kenya currently has high levels of national debt, which means we have to be prudent in our fiscal management. Therefore, we want to find investors who will partner with the government through public-private partnerships. This will be our preferred arrangement to engage foreign investors. The private sector has a key role to play in Kenya over the next five years, particularly in the energy, water, health, agriculture, financial and aviation sectors. To give a specific example, Kenya Airways is facing challenges, and our government would certainly consider partnering with a foreign airline. Such an arrangement would provide benefits from an operational and financial perspective.
2. Over the next five years, which sectors are your government prioritising to attract foreign investment in?
The core sectors that we are prioritising are healthcare, housing, agriculture, energy, and water. Within the water sector, the government will seek to prepare the regulatory and legal framework to facilitate water purchase agreements. In healthcare, we are looking into the development and manufacturing of vaccines against infectious diseases – even in the absence of a new public health threat – because this will enable Kenya to reduce healthcare costs in the long-term. Our government is also focused on reducing the cost of living for Kenyans. In line with this goal, we will be looking to venture into affordable housing with private investors. As I mentioned previously, Kenya’s current levels of public debt are high; it would, therefore, not be sustainable for us to fund this development ourselves.
3. What are your plans for transport infrastructure development, as this is important to foreign investors?
The Kenyan government is committed to developing transport infrastructure, but as with other areas of development, we will look to do this in partnership with the private sector. An example of this approach that is ongoing is the Nairobi Railway City, which forms part of our efforts to revamp local railway systems, particularly commuter links to the capital. The government is developing this project with the help of private investors, alongside support from the UK government. We are also committed to the LAPSSET project, which will open up Kenya to South Sudan and Ethiopia, enhancing regional integration.
4. Chinese investment in Kenya has grown over the past five years. What is your message to investors, or potential investors, from the UK, Europe, and the USA?
We welcome all investors as there are significant opportunities in Kenya. Currently, given the history of Kenya, the UK remains our largest foreign investor. Chinese investment is largely in infrastructure and housing, as this is their key strength. Moving forward, the government must think about making Kenya’s debt position more sustainable, and with China being the country’s largest creditor, the government will have to make decisions based on a cost-benefit analysis. We cannot continue borrowing at the same rate for infrastructure development if we want to reduce the country’s debt burden, and we certainly welcome investors from the West.
5. Are there new incentives that your government is planning to offer foreign investors?
We are always looking into this as we want to encourage more investment into Kenya. We already offer a range of incentives such as special economic zones, however, depending on the sector and specific project, the government may consider negotiating other bespoke terms for investors. We are innovative and open to new ideas, so would encourage investors to reach out to us with their specific enquiries.