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Foreign investors are snapping up opportunities across neighbouring markets and dumping anything Kenyan in response to rising inflation and a volatile political climate.

They cite the increasing costs of trading and interest rate hikes, as well as lack of access to concessional financing to fund continued growth, as motives behind exiting the market once considered the to-go-to place in sub-Saharan Africa.

Neighbouring countries like Rwanda, DR Congo and Libya are gradually overtaking Kenya to become among the top six countries where billionaires are betting big, according to the International Monetary Fund (IMF) report on the World’s top 10 fastest-growing economies in 2023.

The Bretton Woods institution projects economies of countries like Senegal to grow by 8.1 per cent, Niger by 7.3 per cent and Cote d’Ivoire to grow by 6.5 per cent this year. DR Congo and Rwanda are projected to grow by 6.7 per cent with Libya at 17.1 per cent.

Cost of power

Bureaucratic hurdles and the rising cost of power also add to the list of issues experts say are making it difficult for investors to do business in the country and instead opt for other markets.

Peter Macharia, a financial expert who also runs a digital lending firm Jijenge Credit Ltd said there are probably many specifics for the recent decline, but it usually comes down to supply versus demand.

“As the currency weakens, any person or business wants to get rid of the shilling as fast as possible in favour of the best-performing ones like the US dollar,” he added.

The sharp currency slide has upset the authorities who are now putting measures in place to punish the perceived perpetrators – those believed to be hoarding dollars and speculating on making a killing on “rainy” days.

Speaking when he officiated the listing of LaptrustREIT at the Nairobi Securities Exchange (NSE) recently, President William Ruto stated that the government had taken measures to ensure dollar availability in the near future. “For the people who work numbers, I am giving you free advice that those of you who are hoarding dollars, you shortly might go into losses,” he warned in his address.

But those warning shots have not yielded the desired results, at least not yet as the value of shilling continues to wane – trading at Sh133.20 against the US dollar last Wednesday. Inflation rate on the other hand, held steady at 9.2 per cent last month.

According to Rufas Kamau, markets analyst with the Fx-Pesa run by EGM Securities, Kenya is still experiencing a strong dollar shortage as investors continue to liquidate their investments in NSE due to external and local factors such as the depreciating shilling, “which is hurting their portfolios in dollar terms.”

Kamau said rising interest rates and high inflation isn’t the optimum environment for investing in technology stocks and investors are worried that the bear market will continue.

Access to credit

“The Kenyan consumer is still experiencing low access to credit and unemployment is still high,” he said in his projections for the next two months to June. The US looking to continue hiking interest rates to address the high inflation which stood at 6.0 per cent in February 2023.

 The hike, which is likely to be implemented will strengthen the US dollar further against the Kenya shilling and as a result increase import prices, according to Kamau. A range of analytical approaches suggests that business investment has been subdued partly due to the effects of Russia’s invasion of Ukraine and other factors like political fights in the form of protests.