Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
The Kenyan business environment continues to recover, but challenges remain. Some key challenges include:
- Corruption and weak governance
- Weakened consumer spending (leading to rising unemployment and poverty)
- Lower public investment and fiscal austerity
- Uncertainty relating to the political environment.
According to Transparency International’s Global Corruption Perception Index 2021, Kenya ranked 128 out of 180 countries (with 180 being the most corrupt). Claims of corrupt dealings, particularly in land purchases and large government contracts persist. Other governance issues also include government inefficiency, weak regulatory and judicial systems. Obtaining a title to land is potentially fraught with legal complications. This reduces the borrowing capacity of families and businesses and constrains Kenya’s ability to broaden its capital base. Land reform is a divisive and emotional issue, complicated by tribal traditions, land sale scams, and perceived historical injustices, which Kenya has so far been unable to resolve.
Inadequate enforcement of intellectual property rights (IPR) on videos, music, and computer software makes some U.S. firms reluctant to export these goods and services to Kenya. According to the EIU, competition from low-cost Chinese imports and the prevalence of counterfeit and substandard goods are further barriers, especially in manufacturing.
According to the African Development Bank’s Kenya Outlook, growth will slow in 2022 and 2023 driven by a decline in domestic and external demand caused by lower income and by an increase in food and fuel import costs and on the supply side by tepid economic activity across sectors due to cost-push factors.
Kenya’s public sector spending has been adversely affected by ballooning public debt. According to Deloitte, Kenya’s debt-to-GDP ratio rose to 68.2% in 2021 from 65.8% in 2020. This is likely to cause further shrinking of public sector procurement opportunities. According to the Economist Intelligence Unit (EIU) Country Risk Report, Kenya’s sovereign risk assessment remains at CCC, a wide budget deficit and the rising cost of servicing external debt poses manageable risks. The Kenya government has shifted its fiscal policy from stimulus towards consolidation, backed by a 2.34 billion IMF extended credit facility.
According to the EIU Kenya political risk assessment, as of July 2022, Kenya’s political risk rating remains at CC, with a score of 75 (high risk). The rating mainly reflects political and security risks stemming from social inequality and corruption.