Economic trends in East Africa draw international investors
Low oil prices and Kenya’s increasing economic activity and st rong global market performance is drawing the i nterest of i nternational i nvestors towards East Africa.
Gyongi King, chief i nvestment off icer at Caveo Fund Solutions, has visited the region over f ive years and has made obser vations across t he banking, telecoms and power sectors. Being “on the ground” gives investors i nsight to make better i nvestment decisions, says King. “There’s lots of opportunity.”
Despite the positive performance of Kenya’s equity markets, there are risks. This i ncludes securit y (Al-Shabab attacks have heightened tensions), cheap i mports (particularly i n t he cement, cabling and materials sector due to the lack of price competition) and drought impacting the agriculture sector (half of the Kenyan population works in agriculture; the poor rainfall will impact food prices and security).
Count r i e s i n t he r e g i on a r e integrated thanks to trade agreements, with the resulting tax benefits making it easier for capital to f low across borders. There are opportunities in the banking sector, and cement companies are also well positioned for distribution. Rural areas are being urbanised as a result of technology. There is consumer growth and increasing eff iciency in markets.
KING NOTES FOUR MAJOR TRENDS IN THE REGION:
FORMALISE BANKING) Banks are using technology to draw people into the formal banking sector, which has scope for expansion. Mobile phone network operators like Safaricom have developed mobile money.
Economies are still cash driven. “M-Pesa is three times the volume of [customers with] credit and debit cards in Kenya. It is much better known and used than traditional banking methods,” says King. “People are not necessarily keen on traditional banking. They want things that are more easy, convenient, and easily accessible.”
Sa fa r icom conducts va r ious transactions and collects data on people’s mobile money histories. In this way, mobile money service providers can keep track of customers that the traditional banking sector does not have access to. However, t here are securit y issues when it comes to mobile banking. A small f i l m can be placed on top of a Safaricom SIM card, creating a double SIM for a phone. This allows consumers to use the airtime rates of a cheaper competitor. Such dual SIMs compromise the security measures put in place by Safaricom and information of transactions can be copied onto the f ilm or second SIM. Safaricom is raising the matter in court.
POWER: PROBLEMS DIFFER ACROSS THE REGION Power is an issue for developing markets, but countries have developed unique solutions.
In Kenya, different independent Buoyed by falling oil prices, Kenya’s growth is projected to rise from 5.4% in 2014 to 6%-7% over the next three years (2015-2017), making it one of the fastest-growing economies in Sub-Saharan Africa, according to the latest (KEU) published by the World Bank.