The Kenya National Bureau of Statistics (KNBS) released the Foreign Investments Survey 2016. The survey monitors and evaluates progress of foreign investments in Kenya, which helps in policy making especially in foreign trade and investment, with the aim increasing inflow of foreign investment. The following were key changes in 2015 from 2014:

1. The stock of foreign liabilities increased by 5.4% to Kshs 1.1 tn from Kshs 1.0 tn,
2. The stock of foreign assets increased by 23.3% to Kshs 182.5 bn from Kshs 148.0 bn,
3. Net international trade of goods and services by companies that reported foreign assets and liabilities (FAL) narrowed by 37.2% to a negative balance of Kshs 365.3 bn from a negative Kshs 582.0 bn owing to total exports increasing by 26.2% and total imports declining by 26.0%, and
4. The number of employees employed by companies that reported FAL increased by 11.7% to 242,600 from 217,285, with their total compensation increasing by 16.6%, faster than average inflation in 2015 of 6.6%.

Foreign Liabilities

Foreign liabilities are investments into the country by non-residents. The table below outlines major changes in foreign liabilities reported in Kenya from 2014 to 2015:

Foreign Direct Investment (FDI) was the biggest contributor to total foreign liabilities in both years, increasing by 10.1% to Kshs 589.0 bn in 2015 from Kshs 534.8 bn in 2014. The increase in FDI was mainly driven by (i) a 7.2% increase in investments from Europe which contributes 48.5% of FDI as at 2015, and (ii) a 10.5% increase in investments in the financial & insurance sector which contributes 34.5% to FDI as at 2015. Other sectors that garnered FDI interest from non-resident investors in 2015 include manufacturing, information & technology and wholesale & retail trade, contributing 20.7%, 20.0% and 12.2% to total FDI, respectively. Europe contributes the largest percentage to foreign liabilities at 34.6% in 2015, up from 33.7% in 2014, due to an 8.3% increase to Kshs 374.7 bn from Kshs 346.1 bn in the same periods.

Foreign Assets

Foreign assets are investments by locals abroad. The table below outlines major changes in foreign assets reported in Kenya from 2014 to 2015:

FDI from Kenya into other countries was the largest contributor to total foreign assets recorded in 2015, at 76.3% up from 72.7% in 2014, due to the 29.5% increase to Kshs 139.3 bn from Kshs 107.6 bn. The increase in FDI was attributed to (i) a 266.0% increase in direct investments into the UK which is the 2^nd largest contributor at 10.6% to the total FDI investments from Kenya, and (ii) a 148.2% increase in investments into South Africa, which is the 3^rd largest contributor at 10.5%. Tanzania was the largest contributor to total foreign assets in 2015, at 12.5%, down from 14.0% recorded in 2014 despite the 9.8% increase to Kshs 22.7 bn from Kshs 20.7 bn in 2014. This was due to large gains in shares of contribution to total foreign assets by countries such as the UK and South Africa whose contributions rose to 12.3% and 10.6% in 2015 from 5.7% and 5.3% in 2014, respectively.

International Trade and Employment

The table below outlines major changes in international trade and employment reported in Kenya from 2014 to 2015:

Net international trade of goods improved by 40.3% to a negative position of Kshs 329.9 bn from a negative position of Kshs 552.3 bn, mainly driven by a 28.4% increase in export of goods while imports declined by 28.6%. Export of goods from the manufacturing sector was the main growth driver of total goods exports in 2015, increasing by 14.6%. However, net international trade of services worsened, increasing by 19.4% to a negative position of Kshs 35.5 bn from a negative position of Kshs 29.7 bn in 2014 owing to a faster increase in imports at 15.6%, than exports which increased by 6.9%. The increase in importation of services was mainly driven by a 111.2% increase in importation of computer services, which contributes 6.1% to the total. Overall, the net international trade position improved by 37.2% in 2015 to a negative position of Kshs 365.3 bn from a negative position of Kshs 582.0 bn in 2014 due to total exports increasing by 26.2% while total imports declined by 26.0%.

The number of employees employed by companies that reported FAL increased by 11.7% to 242,600 from 217,285, with (i) 53.5% being skilled labour, 37.0% being unskilled and 9.5% being employed in managerial positions, and (ii) 98.1% being local citizens and 1.9% being foreigners. The manufacturing sector was the largest employer, taking up 40.4% and 37.1% of all employees of firms that reported FAL in 2014 and 2015, respectively. Total compensation increased by 16.6%, faster than average inflation in 2015 of 6.6%, with the construction sector creating the most jobs at 18,332 jobs in a span of 1 year mainly attributed to infrastructure projects by the government.

Conclusion

Foreign investments in Kenya continued to increase in 2015 mainly through FDI from Europe, with most investors keen on the financial & insurance sector whose growth is driven by fundamentals such as:

1. the rising middle class in need of more superior banking, insurance and investment products, and
2. technological advancements in the sector, taking advantage of the widespread adoption of online and mobile banking.

Locals as well, continued to invest in foreign countries as they diversified their portfolios with increasing interest in South Africa and the UK in 2015. International trade in both goods and services therefore benefited the economy through increased employment of locals and in turn improvement of their living standards and spending power. This has been an indicator that foreign investor sentiments improved from 2014 to 2015, in line with an improvement in Kenya’s ease of doing business ranking to 108 in the 2016 report (which covers the business environment in 2014/15) from 136 in the 2015 report (which covers the business environment in 2013/14).