BY VICTOR ADAR
Although 2014 was a stormy year, the outlook for 2015 is bright as the country is now teeming with investors, developers, lenders as well as brokers in different sectors. Virtually all economic sectors have promising opportunities, although returns will vary depending on industry pricing levels, competition and creativity.
To date many Kenyans still struggle to make ends meet as well as access banking, education and healthcare needs – all presenting customer needs waiting to be satisfied. It is better to get a heads-up on where to invest, which sectors and markets offer the best prospects, and trends. The five most important sectors that will drive growth and stimulate wealth creation are discussed below.
DAIRY INDUSTRY
Much of Eastern and Southern Africa is well suited to dairy production, but only Kenya has established a competitive dairy industry. Kenya’s industry is based partly on a formal sector for processed milk and other dairy products. Its dynamic informal sector based mostly on raw milk is even more important, supplying over 80% of the market. Growing population and nutrition consciousness will fuel demand for dairy products.
Kenya’s success is largely attributable to the small medium enterprises and entrepreneurs, who pay attention to animal health, choose high milk-yielding cross-bred cattle and bet on improved feeds. In addition, the country’s success points to the importance of improving linkages to the formal sector through cooperative milk collection and milk cooling centres.
Key challenges especially in the informal sector, however, remain. Think the unfriendly government policies especially when it comes to flexibility in setting quality and safety standards for the informal chain. Sometimes there are plenty of things that governments don’t do well – they fail in filling a vital gap as they concentrate on giving the much-needed incentives to the already established firms while overlooking those still practising on small scale.
While pointing to the need for significant investment in professional agriculture and agribusiness, Mr Richard Mbugua, a financial adviser at Britam, says improving both agriculture and agribusiness sectors will translate to higher incomes and thus more jobs.
“Population is growing,” Mr Mbugua says. “Farms are springing up everywhere but the commercial market where it’s less tiring is where the money is. Professionals and those who cannot be involved physically are able to work in a group where they can contribute towards management of the farms.” This, he adds, helps the professionals to keep going even when the going gets tough.
CASHLESS ECONOMY
Kenya is a role model in mobile payments, thanks to M-Pesa, and continues to set the trend globally. Mobile payments, especially on transaction side, is the new growth area. A number of products are already in the market – such as Lipa Na M-Pesa, SpotCash and other utility services – but the surface has barely been scratched. Techies are burning the midnight oil to come up with creative ideas. You can be one of them.
At a time when the government has already gazetted regulations that will outlaw the use of cash for bus fare payments, the country is set for bigger things. The move by the Matatu Owners Association and the Matatu Welfare Association to launch cards for travellers is in line with the government directive for matatu owners to implement cashless payment systems. The transformation is aimed at upgrading the security and regulation of the country’s over 22,000 public transport vehicles.
“Even though much of the world’s population has access to different options for making payments other than cash, cash still persists. Cash takes time to get at, is riskier to carry, and by most estimates, cash costs society as much as 1.5% of GDP,” KCB Group CEO Joshua Oigara said at the launch of its Pepea card, which allows holders not only to do other transactions like making online payments but also to pay for transport.
Equity Bank, which runs BebaPay, Barclays, Postal Corporation and PesaPrint Metro (through a partnership with Kenswitch) are some of the big players angling for the cashless party. At the same time, MCo-op Cash, an advanced wallet from Co-operative Bank, was launched in August 2014 to allow customers and non-customers across all mobile phone networks to open bank accounts, apply for loans, and make cash and utility payments from their mobile phones. Away from mobile money as a way of promoting cashless society, there is also widespread use of credit and debit cards.
Data from Central Bank of Kenya shows that transactions valued at Sh1.9 trillion were moved through mobile money in 2013. In December a lone, 25 million people used their mobile phones to transact. Analysts say the key driver of the growth of this cashless economy has been the upward uptake of smartphones and increased internet penetration.
Cashless pay card system will also take the country by storm. It comes at a time when Burbidge Capital puts the country’s private equity deals in the financial services at 35%, the largest in East Africa. Oil and gas stands at 18%, and agribusiness is at 15%. It is the growing middle class that has been making this pun out well as most industries are competing to serve this segment of the population.
A few months ago (October 2014) a review of national output figures indicated that Kenya’s economy expanded by 25%, now ranked 9th (previously ranked 13th in Africa) after overtaking Ethiopia, Tunisia and Ghana. This provides some evidence that economy is gradually improving.
PROPERTY
Real estate is poised to contribute more to economic growth and has been recognised in the computing of GDP. Increase in the investment opportunities in the sector has seen a rise in demand for apartments and commercial offices. The property market is so hot that it has even attracted several giants including Coca-Cola East Africa, Equity Bank, UAP Insurance and organisations like World Bank and World Health Organisations. Within Nairobi a lone, Kenyan developers mint millions from both rental and sale of houses with prices ranging from Sh20 million for maisonettes.
Financial services firm UAP Holdings is banking on growing its rental income to beyond Sh1 billion. The insurer is constructing office complexes in Juba and Nairobi while getting the much-needed income from Kampala’s commercial property. Their other huge project is the Sh1.7 billion Juba Equatorial Towers office block and the UAP Towers in Upperhill, Nairobi.
Although Eveready’s powerful light was dimmed in October by what was called “creative technology”, the company is looking to cash in on the lucrative real estate sector, which has been identified as one of the key drivers of the country to the mid-level economy as envisaged in the economic blueprint Vision 2030.
Many individuals are making fortunes from property, building and selling or renting out houses. The advent of county governments has put the icing on the cake with growing demand for accommodation and office space demand around county headquarters. Supply of building material will be a major source of business.
GOVERNMENT TENDERS
The Jubilee government has reformed public procurement through electronic tendering and swift payment once services or goods have been delivered. E-procurement means the field has been evened for most suppliers and contracts are likely to go to the best qualified suppliers, unlike the past when the process would be manipulated to give favoured companies most jobs. So get to know about the new procurement rules and procedures and try your luck. The government is the biggest spender and has the biggest procurement budget.
SECURITY
Last year, Mpeketoni massacre at the coast became a national focus after the killing of 60 people. The dust is yet to settle in Kapedo in Turkana and Mandera where more people were attacked and killed.
Security has become a basic necessity and big business opportunity for those who can come up with creative solutions.
Private security companies have been doing booming business and more creative solutions are needed in the industry for both individuals and organisations – against terrorism and armed robbery.
