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Recent Topicals

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Privatization of State Enterprises

Mar 26, 2023

Privatization generally refers to transfer of ownership of an entity or a corporation from public to private sector. Privatization typically aims at enhancing economic efficiency by improving a company’s performance, cease or reduce the need for government economic intervention. Further, privatizations have been used to induce competition in monopolized sectors. Globally, one of the notable privatization of State Owned Enterprises (SOEs) was British Airways in 1987 when it was listed on the London Stock Exchange. Closer home in developing nations such as Kenya, State Owned Enterprises have been touted as major contributors to the nations expenditure and public debt, given that whenever these companies borrow, the state guarantees the debt. As at the end of FY’2021/22, publicly guaranteed debt by SOEs stood at Kshs 145.4 bn, a 7.5% decline from Kshs 157.2 bn in FY’2020/21. To put this in perspective, the current regime targets to redu...

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Nairobi Metropolitan Area Commercial Office Report 2023

Mar 19, 2023

In 2022, we published the Nairobi Metropolitan Area Commercial Office Report 2022 themed ‘Changing Working Patterns Driving the Market’, in which we highlighted the performance of the sector in 2021, as well as giving insights on the outlook and areas best fit for investment opportunities. According to the report, the sector witnessed improved performance, with the average rental yields coming in at 7.3% in 2021, 0.3% points higher than the 7.0% recorded in 2020, attributed to continued COVID-19 pandemic recovery, an improved business environment and expansion in activities by various firms. The average occupancy rates slightly reclined by 0.1% points to 77.6% in 2021, from 77.7% recorded in 2020, this is as some firms still embraced a work from home policy. Asking rents and prices stabilized to an average of Kshs 94 and Kshs 12,108 per SQFT respectively in 2021, from Kshs 93 and Kshs 12,280 p...

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Kenya Economic Update: 2023

Mar 12, 2023

On 24th February 2023, S&P Global downgraded Kenya’s credit outlook to negative from stable and followed a downgrade of the Long Term Foreign Currency issuer default ratings by Fitch Ratings on 14th December 2022. This comes at a time when the country is struggling with its liquidity position as a result of high debt service obligations and as a result, being at high risk of debt distress. Kenya is also facing elevated inflationary pressures with inflation having increased to 9.2% in February 2023 from 9.0% in January 2023 mainly driven by high food and fuel prices. Kenya’s inflation has remained above the Central Bank of Kenya’s target range of 2.5%-7.5% with the 2022 average coming in at 7.6% reflecting the increased cos...

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Real Estate Developers Regulatory Framework

Feb 26, 2023

The performance of Kenya’s Real Estate sector has been on a positive trajectory, with the sector’s contribution to the country’s GDP recording a 5-year Compounded Annual Growth Rate (CAGR) of 6.0% to Kshs 749.7 mn in Q3’2022 from Kshs 560.8 mn in Q3’2017. Additionally, the sector contributed 10.5% to the total GDP in Q3’2022, coming in as the second largest contributor to Kenya’s GDP, only behind the Agricultural sector that contributed 14.8%. This impressive performance of the Kenyan Real Estate sector in Q3’2022, surpassing perennial major contributors to GDP such as transport at 10.3%, both financial and insurance and product taxes at 8.9% each, while both manufacturing and trade contributed 8.5% each, points to the increased significance of Real Estate to the economy and paints a positive outlook. However, the lack of proper regulation and oversight over developers and other stakeholders poses significant challenges that could claw...

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Currency and Interest Rates Outlook

Feb 19, 2023

The Kenyan shilling has recorded a Year to date depreciation of 1.8% against the US Dollar to close at Kshs 125.6 as at 17th February 2022, from Kshs 123.4 on 3rd January 2023, adding to a 9.0% depreciation in 2022 and further depreciation of 3.6% and 7.7% in 2021 and 2020 respectively. Key to note, this is the lowest the Kenyan shilling has gone against the dollar. The continued depreciation has been mainly driven by an ever present current account with of Kenya being a net importer and the import bill being in US Dollars. Being a net importer has also left Kenya susceptible to external shocks that have inflated the import bill and negatively affected the shilling such as the high global crude oil prices occasioned by persistent supply chain constraints worsened by the ongoing Russia-Ukraine conflict. The inflated import bill has led to increased dollar demand from importers against a lower supply of hard currency. Additionally, the aggressive public debt accu...

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