Europe-based development finance institutions (DFIs) cut new investments in Kenya to nearly a third last year in what analysts link to their rising preference to put more money in poorer countries like Ethiopia and Tanzania.
Germany’s DEG, the European Investment Bank (EIB) and the Belgian Investment Company for Developing Countries (BIO) invested Sh9.4 billion last year, down from Sh30 billion in 2011.
Last year, DFIs such as Germany’s DEG, French PROPARCO, Dutch development bank FMO and Norway’s Norfund did not make new direct investments in the country, with the latter two exiting Family Bank in December.
Analysts say the drop in the investments is linked to a smaller pool of investment funds earmarked for Kenya by the DFIs that have instead allocated more funds to other markets such as Ethiopia and South Sudan.
“DFIs are focusing more on other less developed countries where they want to make a bigger social impact compared to Kenya, which is more developed,” said Ms Eline Blaauboer, a partner at TBL MirrorFund.
DEG, for instance, recently announced it will invest $10 million (Sh850 million) in an Ethiopia-focused private equity fund to support small and medium-sized enterprises in the neighbouring country.
Last year, fruit juice maker Kevian and Reltex Tarpaulins were some of the SMEs that benefited from the DFIs’ investments that mainly seek to fund enterprise expansion.
Kevian received a $7.5 million (Sh637 million) seven-year loan from DEG while Reltex Tarpaulins sold a stake to BIO for $1.3 million (Sh110.5 million). Tens of SMEs also benefited from loans worth Sh8.6 billion advanced by European Investment Bank.
In 2010, Kenya Women Finance Trust, Rift Valley Railways, Base Titanium, Equity Bank and Lake Turkana Wind Power were some of the beneficiaries of these investments.
The DFIs seek to make good returns on their investments that are also designed to roll back poverty in the host country, with the firms focusing largely on creating jobs and improving lifestyles by investing in infrastructure, energy, agriculture, and financial services sectors.
Kenya has traditionally attracted the lion’s share of the regional investments by DFIs.
Analysts add that the tough economic environment in Kenya last year also hurt investor sentiment in the short term besides the March 4 General Election that has induced a wait-and-see stance among investors.
“The high inflation and high interest rates damped investor appetite last year,” said Paul Kavuma, the CEO of private equity firm Catalyst Principal Partners.
Source :businessdailyafrica.com
