This archive report was first published on 23 October 2019.
Kenya has maintained its third position in the continent's investment attractiveness ranking, according to the ABSA Africa Financial Markets Index, 2019, published on October 23, 2019.
The country's net score of 65 out of 100 points is attributed to the issuance of government debt instruments to investors, including new sovereign bond listings, which have seen the country's value of listed sovereign bonds rise sharply.
Kenya listed a third dual-tranche Eurobond issue amounting to Ksh.210 billion ($2.1 billion) earlier this year, resulting in a 20 percent increase in bond turnover of the government securities second market.
Additionally, Kenyan pension funds have moved to scale up their investments in alternative assets, allocating an estimated Ksh.155.7 billion ($1.5 billion) in differentiated portfolios through the Kenya Pension Fund Consortium.
However, the consistency in Kenya's attractiveness to investors has been achieved at the expense of constrained private sector growth, characterized by the crowding out of private sector participation in the formerly open debt market.
“By issuing a lot of domestic debt, interest rates on the issues have been more attractive to investors, and as a consequence, the margins have made it difficult for Corporate Kenya to go forward,” noted ABSA Group Head of Research Jeff Gable.
Mr. Gable holds out for the anticipated lifting of roadblocks to private sector lending, which he believes would lead to more buoyant growth. However, he insists that banks would still set the pace for the recovery of credit to local business enterprises.
More to Kenya's shaky investments outlook, the International Monetary Fund (IMF) reclassification of both the local currency and the country's debt distress profile has seen a partly deterioration of investor attractiveness.
Early last year, the IMF pushed down the shilling classification into a predetermined range, setting off alarms on the country's effective Forex exchange regime. Subsequently, the IMF reclassified Kenya's debt distress from low to medium in October, pinning the downshift on missed tax targets in recent years.
Kenya can, however, count on some buoyancy in attraction from the improved insolvency regime ahead of markets leader South Africa, which instills investor confidence through the prompt re-capture of investor value from the dissolution of firms.
