Foreign investments can help in creating jobs and fighting poverty across the continent. FILE PHOTO | NMG Kenya has been tipped among the next investment hotspot in Africa for profitable investments by British firms.
New research by the Overseas Development Institute (ODI) funded by the UK Department for International Development released last week said UK firms should see Kenya and four other African countries including Nigeria, Ghana and South Africa as a place where they can make a profit, not just do charitable work.
“Africa presents a business opportunity for the UK and other foreign investors targeting a place with a growing market base and higher returns,” said Max Mendez-Parra, joint author of the report and a senior research fellow at the Overseas Development Institute.
“These investments are a win-win for the UK and Africa — creating jobs, growing economies and helping fight poverty across the continent, alongside traditional aid.”
The London-based think tank has produced figures that show the rate of profit on investment for firms investing in Africa is higher than many parts of the world.
The paper said last year the rate of return on all inward foreign direct investment in developing African countries was 6.5 percent, which is higher than the rate in developing Latin America and the Caribbean, 6.2 percent, and ‘so-called’ developed economies, six percent.
The report was published ahead of Monday’s UK Africa investment summit that hopes to be a model for British trade policy after the country leaves the European Union.
The summit comes at a time British corporate giants such as Barclaysm , British luxury carmaker Land Rover, Standard Chartered Bank , British American Tobacco and Unilever — which once straddled the Kenyan consumer goods market like a colossus — are struggling to fend off a stiff challenge from the more aggressive and flexible rivals.
Kenya’s preference for countries in the Far East for business and development financing under retired President Mwai Kibaki’s reign and later President Uhuru Kenyatta has dislodged European power-houses including the UK from long-held positions as the leading sources of foreign direct investment (FDI).
This change in FDI pecking order has deepened in the past couple of years as the majority of developed countries — under the shock waves of debt crises — cut back on foreign investment while emerging economies search for opportunities in frontier markets.