Wealthy Tanzanian citizens and firms have invested more than Ksh5 billion ($50 million) in Kenya over the past two years, reversing the predominant one-way flow of capital between Nairobi and Dar es Salaam.
The cross-border investors have made their bets in Kenya’s stock market, consumer goods, petroleum and financial services sectors.
The latest entrant is Village Supermarket, a Tanzanian-owned retail chain that this month set up at Nairobi’s upmarket shopping complex, the Village Market.
Village Supermarket, a family business based in Tanzania’s largest city Dar es Salaam, runs boutique-style stores stocking food, wine, baked goods, kitchenware and home accessories sourced from around the world.
Recent big-ticket acquisitions by Tanzanians include the M Bank takeover of Oriental Commercial Bank, Lake Oil buyout of Hashi Energy and huge stakes in blue chip Kenyan firms snapped up by billionaire investors Aunali and Sajjad Rajabali.
Analysts say the foreign investors are attracted by Kenya’s favourable medium-term economic growth prospects buttressed by reduced political tension.
The World Bank projects the country’s GDP will expand steadily to highs of 6.1 per cent by 2020.
“Notwithstanding fiscal consolidation, economic activity is poised to rebound over the medium term.
“GDP growth is projected to recover to 5.5 per cent in 2018, and steadily rise to 6.1 per cent by 2020 when output gaps in the economy would have closed,” the World Bank said in a recent report on Kenya’s economic outlook.
Rising oil prices and a sharp reduction in lending to the private sector are, however, seen as the major risks to the upbeat growth forecast.A Treasury plan to repeal the interest rate caps is expected to reverse the sharp drop in private sector lending in the past one year, the World Bank added.Tanzania’s Lake Oil, founded by Ally Edha Awadh, last year acquired the petroleum retail division of Kenya’s Hashi Energy for an undisclosed sum.The deal saw Lake Oil enter a familiar regulatory and competitive market where the control of fuel prices and margins is similar to that in Tanzania. Petroleum prices Petroleum prices in Kenya are set by the Energy Regulatory Commission (ERC) while those in the neighbouring country are set by the Energy and Water Utilities Regulatory Authority.This leaves firms operating in both countries relying on higher volumes to grow profits, with some like Vivo Energy further benefiting from sale of premium fuels like Shell.