Kenya tops EA bloc in impact investments

Kenya has become the top regional destination for investors putting money in impact investments that target both social and financial gains, a new study shows.

The report, which looked at regional impact investments made between 1998 and 2004, says Kenya accounted for nearly half of the $9.3 billion (Sh930 billion) invested.

The report, produced by the UK Department for International Development (DfID), the Global Impact Investing Network (GIIN) and Nairobi-based Open Capital Advisors found Kenya had impact investments worth $4.2 billion (Sh420 billion) which is 46 per cent of the amount that went to the region.

Data shows Development Finance Institutions (DFIs) such as the World Bank are the biggest investors in power plants, schools, banks, hospitals and other ventures having put $3.6 billion (Sh360 billion) in such ventures through 136 deals. Private equity and venture capital firms invested $650 million (Sh65 billion) in 221 deals over the same period. The study says that more funding would have gone to local ventures were it not for security concerns.

“Kenya is so dominant that some impact investors express concern that the landscape is already saturated. However, ongoing security concerns as well as challenges common to the region have kept impact investing activity in Kenya from reaching its potential,” says the report.

Human capital

“Kenya offers the advantage of more readily available human capital compared to other countries in the region,” the study says.

‘‘But like other countries in the region, the informal nature of many businesses poses challenges for investors, and there have been few examples of successful exits.”

Uganda and Tanzania accounted for 13 and 12 per cent of the funds invested which translates to $1.2 billion (Sh120 billion) and $1.1 billion (Sh110 billion) respectively.

Ethiopia received seven per cent or $651 million (Sh65 billion) while Rwanda got four per cent or $372 million (Sh37 billion) in funds. Most of the reported Kenyan direct foreign investment deals went into energy and financial services.

“These two sectors have received more than 70 per cent of the total capital disbursed directly by DFIs, driven by large energy projects such as dams and wind farms as well as significant investments in local commercial banks,” says the report.

The Sh70 billion Lake Turkana Wind Project and Centum Investment’s Sh30 billion Akiira One geothermal plant are some of the mega projects in the energy sector that have attracted foreign funding.