Nairobi City skyline. FILE PHOTO | NMG Kenya and Britain have officially signed a deal about turning Nairobi into Africa’s financial hub, which presents a big opportunity for the former. Britain is the primary investment management centre in Europe and second largest in the world after the US.
So such co-operation has a big potential to funnel big international investments into the country.
But in analysing what this agreement means, Kenyans seem to be getting ahead of themselves on what exactly needs to be done by the country to deliver this vision and mission.
First, we need abandon looking at establishing the Nairobi International Financial Centre on the brick-and-mortar model — feauturing first class real estate development projects to host the financial district.
Just because London has a street lined up with these global banks, investment firms and financial institutions doesn’t mean that is what we need to replicate in order to make Nairobi a successful financial district.
In fact, if we have learned anything from Konza Technocity, it is that when creating any economic hub, brick and mortar is not the catalyst for convergence of investment.
Why London has a cluster of these financial institutions within its CBD is that it developed organically more than a century ago. London as the capital of the British empire has been a financial services provider as far back as the slave trade times.
So, it’s misguided to propose that Kenya has to establish a financial district. For emerging markets like Hong Kong and Singapore, it has not been first class real estate or a financial district that worked for them but high-quality tech infrastructure to run efficient financial services.
Second is the argument that the Nairobi International Financial Centre means re-modelling Nairobi into a low tax haven destination. This is not an advisable because we will be entering the race to the bottom which we cannot afford against established jurisdictions like Mauritius.
It is this race to the bottom that has actually precipitated the proposal for the 15 percent global minimum corporate tax to deter profit-shifting because its unsustainable in the long run for everyone.
The best way the government should design Nairobi International Financial Centre is to prioritise linking the London and Nairobi stock exchanges for fast growing companies in Africa to cross list.This will attract liquidity into the Nairobi Securities Exchange and investment around securities (NSE) trading like investment banks, financial consultants and private equities, which specialise in provision […]