Kenyan businesses are increasingly investing in Ethiopia as the country surpasses Tanzania and Uganda as the primary foreign investment destination for Kenya, with direct investment reaching Ksh60.2 billion in 2021. Safaricom, the world’s largest telecommunications provider, and KCB Bank are among the Kenyan businesses that have made significant inroads into the Ethiopian market, capitalising on its growing economy and business opportunities.
Kenya’s overall foreign direct investments have shown a positive trend, reaching Ksh239.6 billion by the end of 2021, indicating increased international engagement and investment activity. Although Tanzania was the top foreign investment destination for Kenya at the beginning of 2015, the recently released Economic Survey 2023 reveals that the balance has now shifted in favour of Addis Ababa.
“Tanzania was the leading destination for the country’s investment abroad at the start of 2015 the review period, with investments declining in 2018, but later recovering to reach Ksh51.5 billion in 2021,” an extract from the survey reads. “Kenya’s direct investment in Uganda reached its peak at Ksh56.3 billion in 2019, while investments in Ethiopia reached Ksh60.2 billion in 2021,” it added.
Safaricom has already started rolling out in Ethiopia, with the staggered launch of Safaricom Ethiopia beginning in August 2022 in Dire Dawa and set to reach 24 other cities, including Addis Ababa. Lenders from Kenya, including KCB Bank, have also shown interest in penetrating the Ethiopian sector, with a group of senior executives from KCB Bank travelling to Addis Ababa in October last year to meet with representatives of the Ethiopian Investment Commission.
The Economic Survey also reveals that, with the exception of 2020, when the Covid-19 pandemic caused an 8.4% decline in outward direct investment to Ksh161.1 billion, Kenya’s overall foreign direct investments generally showed an upward trend over the review period, reaching Ksh239.6 billion at the end of 2021 compared to Ksh93.5 billion at the end of 2015.
Kenya’s increasing engagement with the Ethiopian market is seen as a positive sign of the country’s growing international investment activity, especially in light of the challenges posed by the pandemic. The trend is expected to continue as businesses explore new opportunities and leverage the region’s growing economies.
