As we celebrate Jamhuri Day and Wangari Maathai’s Nobel Prize, the investment climate is not good in Kenya, as reports this weekend indicate.
1. Listing on NSE is difficult
Celtel (formerly Kencell) plans a listing on the London Stock Exchange and has no plans for a local listing in Nairobi. The Nairobi Stock Exchange is lagging in Africa – it has 49 listed companies compared to 450 in South Africa and 75 in Zimbabwe. Despite high appetite for Kenyan investors, problem is that listing costs are high and regulations too stringent according to the Sunday nation (12/12).Some of the criteria that many prominent businesses cite for not listing on the NSE include (i) single investor cannot own more than 25% of a corporation (ii) 6% annual transaction costs. Only 21 companies have been added since 1990.
2. Effects of crime in Nairobi
Crime affects business in a very expensive way – According to the East African (13/12) Kenyans spend 32 billion shillings annually ($400m) on private security companies – in addition to the 4.6 billion annual police. Properties like Lonrho house (270K per month) and Village Market (1.3 million p.m.) have seen their security costs double in the last few years.
This is also having a negative impact on housing with many apartments now having monthly service charges of about 10% of rents – that mostly go to security. Meanwhile, high-cost apartments that are very close to slums that are growing have seen their prices dip. Monthly rents in Loresho are down to 25,000 from 50,000 10 years ago (and estate agents take buyers though Kyuna and avoid Waiyaki Way which passes though Kangemi and which may change a buyer’s mind). In Langata rents are down from 20-22k to 16-18k per month for 3 bedroom maisonettes that overlook Kibera
3. South Africa poaches Kenyan tourists
Those $400 and $500 (Nairobi – Johannesburg) airfares you see in the Daily papers are not meant for you! They are targeted at luring tourists visiting Kenya to take a cheap side-trip to South Africa (fares are inclusive of three days, bed & breakfast, game drives and airport transfers)