Kenya retains 3rd place in continental investor attraction ranking

Kenya has retained third place in its attraction to investments on the continent, according to the recently published ABSA Africa Financial Markets Index, 2019.

The hold in position for a second year running at a net score of 65 out of a possible 100 points is attributed in great part to the substantive issuance of government debt instruments to investors in the past year including new sovereign bond listings.

Earlier this year, Kenya listed a third dual-tranche Eurobond issue amounting to Ksh.210 billion ($2.1 billion) to see the country’s value of listed sovereign bonds rise sharply in addition to a 20 percent increase in bond turnover of the government securities second market.

Additionally, Kenyan pension funds moved to scale up their investments in alternative assets to allocate an estimated Ksh.155.7 billion ($1.5) billion in differentiated portfolios through the created Kenya Pension Fund Consortium.

Nevertheless, the consistency in Kenya’s attractiveness to investors was achieved at the shadows of constrained private sector growth characterized in 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 road blocks to private sector lending even as he insists banks would still set the pace for the recovery of credit to local business enterprises.

“Looking top down, if there is a replacement of caps, we would expect to see more buoyant growth. The real answer however sits on the practical lending decisions made by banks.

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 Bretton Wood’s institution pushed down the shilling classification into a predetermined range to set 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 down shift 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.