Kenyan Counties Emerge as Frontiers for Investment

With many Ugandan entrepreneurs struggling to access capital to finance and grow their businesses, website a new company has opened its doors into the country to help solve the problem.

Addressing journalists in Kampala on Thursday, Ascent Rift Valley Fund’s Lucas Kranck explained that the big gap in the finance sector in the country compelled the new private equity player to come on board.

“There is a big gap in the finance sector and one of the ways to solve it is through private equity so that businesses grow quickly and move to another level,” said Kranck.

According to Kranck, the new company which has already set foot in Kenya and Ethiopia will invest more than US10m in the country in the next 12 months as part of its efforts to boost entrepreneurship.

“We want to invest in services like banking, insurance and producers of consumer goods such as beverages and foods as we look at companies with 2-5 years of operation. In fact we want to partner with companies whose growth directly affects the incomes of the local population,” he added.

Ascent will not invest in agriculture and real estate, saying it takes long for an entrepreneur to reap from such sectors as the gestation period is always long.

According to Ascent Uganda boss, Richard Mugera, the initiative is intended to bring capital closer to Ugandan entrepreneurs which he said has always hindered growth of many businesses.

“Ugandans are natural entrepreneurs. However, the growth of promising Ugandan enterprises is sometimes hampered by lack of access to growth capital and external support,” said Mugera.

“We believe that with this office, our close engagement with the Ugandan entrepreneurs, we will be able to navigate the unique investment environment with the focus of providing the right fit of growth capital and significantly contributing to Uganda’s investment landscape,”

Officials say the firm has a broad range of investors including Norfund (Government of Norway), OeEB (Government of Austria), European private investors and African Institutional Investors such as Kenya Power Pension Fund.

It’s the first East Africa fund to have successfully tapped into local institutional capital, including pension funds, in its first fundraising.

Ascent, which manages the Ascent Rift Valley Fund (ARVF), announced in July 2014 its first close. ARVF has thus far raised $50million to be invested in growth enterprises in Uganda, Ethiopia and Kenya.

The Kampala office allows Ascent to be close to the Ugandan entrepreneurs with a view to identify potential investment partners and, once an investment has been made, to support the investee companies in their rapid growth first in Uganda and then in the region.

ARVF has already developed a pipeline of opportunities cutting across diverse sectors of the economy. The investment size is between $2million and $10 million per company.
Impressive returns on investments has become the magnet attracting local and international investors to Kenyan counties with manufacturing, viagra sale value addition and technology emerging among the most preferred areas of investment due to growing demand for products in these areas.

The counties, viagra aware of the crucial role investment plays in growing their local economies, have invested in incentives like tax breaks, free land, and relaxing certain company registration processes to bait prospective investors.

Such investments, for example, have been identified as key in transfer of knowledge especially to the locals from the investing companies, raising the living standards while setting the pace for businesses due to demand for better services and products through schools, housing, and entertainment.

Investors are responding with high appetite for the counties’ resources buoyed by the fact that the counties offer nascent unexploited markets that provide quicker and higher returns on investments.

“We are talking about treasure troves that have not received the right attention they deserve by the national government. The scramble for these goldmines especially because of aggressive marketing has caught the eye of many investors who are keen on the highest form of return from the investment. Finding resources concentrated in one area in large quantities and accessing the right infrastructure to exploit them has become the counties’ selling point,” said Dr. Julius Kipng’etich, the Chief Operating Officer at Equity Bank.

He was one of the speakers at the inaugural Kenya International Investment Conference 2014 in Nairobi that has brought local and international investors together to learn about investment opportunities and business climate in Kenya.

Kwale County has benefited from investors, among them Base Titanium for the exploration and mining of titanium and rare earths and Pacific Wildcat Resources Corps (PAW), whose operating budgets are injected into the county In the last one year, Sh760 million has been invested in community projects in the area, such as schools, hospitals and boreholes.

In Murang’a County, even as the county government invests in creating modern value addition factories to tap into the robust agricultural activities in the area favoured by good climates, multinationals have already set up shop and are directly benefiting the locals.

Makers of soft drinks, chocking under prohibitive import duty for fruit pulp, a key ingredient in the soft drinks, have decided to buy the fruits directly from the farmers.

Coca-Cola has introduced higher farm gate prices to passion fruit farmers while New Zealand based Olivado Company, which is in the business of manufacturing edible oils, has incentivised Murang’a County farmers with free trainings, high quality seeds and higher prices for their produce.

“It becomes easier to deal with the counties because for us we are very particular about meeting the actual people we are doing business with and engaging directly with them. Working with the people of Isiolo County where we buy most of the hides and animal skin has assisted us identify more opportunities and understand the dynamics of sourcing hides from Kenya. For example, how the health of livestock and cleanliness of abattoirs which was missing before matters. We are now addressing such concerns to iron out our business engagements,” said Mr. Bert Sieberg an investor leading a delegation from Germany and who owns a leather and apparel business in Berlin.

But the counties are grappling with policy and legislation teething problems that investors have raised concerns about. Eager for more revenue, the counties are imposing new taxes on everyone and everything creating an environment that investors say is increasingly unpredictable.

The proposed tax by Mombasa County to be charging $2 per tonne or $10 per consignment for cargo shipped from East Africa’s biggest port has sparked complaints by the Shippers Council of Eastern Africa that it would raise the cost of trade. A major concern at the investment conference, the ad hoc taxes are sounding the death knell for the fledgling economies.

But so are the counties misplaced spending priorities at the expense of development and infrastructure which the investors count on for ease of doing business.

A report by the Office of the Controller of Budget released earlier this year indicates that certain counties are spending unto 80 per cent of their budgets on recurrent expenditure like payment of wages and a paltry 20 per cent on development.

“The counties need to put their acts together.  Investors need to be baited by seeing mature and efficient governments that prioritises development,” said Dr. Kipng’etich.


Header advertisement
To Top