The investor demand and business activity is set to increase as political stability returns to Kenya, analysts have observed.
Specialist global risk consultancy Control Risks said Kenya is emerging from a protracted presidential election process and seeing a return to political stability.
Nonetheless, challenges will persist in 2018 for organisations operating in the country and East Africa more widely, said the consultant citing high debt levels in Kenya and unpredictable policymaking in Tanzania are among the key risks for businesses operating in the region.
“2018 is set to be a promising year for Kenya and the East Africa region. We have started to see the recovery of investor confidence due to the return of political stability in Kenya, as well as renewed interest in major infrastructure projects both in Kenya and across the region,” said Daniel Heal Control Risks’ Senior Partner for East Africa.
Heal said Kenya’s pending repayment of the first portion of a Eurobond worth USD 774.8m in 2018 should be a trigger for the government to refocus attention on controlling public borrowing and spending before debt becomes unmanageable.
“Kenya has a strong appetite for external borrowing and has remained politically intransigent about its downsides.”
“While Kenya remains highly unlikely to default on its debt, growing interest payments and international banks’ shrinking appetite to provide further loans will result in lower public spending, which has been a key driver for economic growth in recent years,” Heal said.
Control Risks has identified the following as the key risks facing businesses in East Africa in 2018:
- Lingering debt crisis raises potential reputational risk
- Regional political cooperation increases vulnerabilities for investors
- Tensions between Kenya’s national and county governments may generate new political risks
- Regulatory risks in Tanzania
- Security and operational risks as a result of political pressures in Ethiopia and Uganda