Why investors are fleeing Kenya, AfDB report
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Investors fleeing Kenya to search for safe assets according to African Development Bank (AfDB) report
Investors fleeing Kenya to search for safe assets according to African Development Bank (AfDB) report.
The African Development Bank (AfDB) released a report on May 25 that outlined the reasons why some investors have recently stopped doing business in Kenya.
The 2023 African Economic Outlook (AEO) study claims that businessmen left Kenya in search of secure assets.
Their choice slowed Kenya’s economic expansion as investors withdrew their funds from the Nairobi Securities Exchange (NSE), exacerbating the current decline in Treasury Bills, bonds, and stocks.
African Economic Outlook claims that investors’ concerns over the depreciating Kenyan shilling led some to look into other markets.
The same downsizing effect on investors fleeing was felt in Nigeria and South Africa, ranked as major economies in Africa.
” Currency weaknesses in some of Africa’s more globally integrated economies (Kenya, Nigeria, and South Africa) are expected to persist in 2023, largely due to potential capital outflows as investors search for safe assets in advanced economies,” the report read in part.
The report further showed that investors sought other investment options due to decreased external demand for the Kenyan shilling.
The uncertainty pushed them to find alternative safe investment assets.
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“Currency weaknesses in some of Africa’s major economies—Kenya, Nigeria, and South Africa—are expected to persist in 2023, due largely to tighter global financial conditions and weak external demand,” it added.
Besides stocks hitting a nosedive, the country lost two major investors in the Lake Turkana oil exploration project. Africa Oil Corp exited the Kenyan market to focus on its operations in Namibia, withdrawing its investment which stood at Ksh8 billion as of December 31, 2022. Total Energies also withdrew its bid to invest in the oil project.
AfDB, however, noted that depreciation rates could ease later in 2023, reducing the pressure on President William Ruto’s administration.
According to economists and experts who pieced together the report, Kenya’s recovery would be reinforced by expected improvements in global economic conditions, fueled by China’s reopening and a downward adjustment of interest rates as the effects of monetary policy tightening on inflation.
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