There is no place like home they say. A local’s perspective of home is different from that of an outsider and in the case of risk profiling, a local investor is not as alarmed when GenZs take to the streets as a foreign investor would.
Remember late last year and earlier this year when the country had a dollar shortage? The way business became troublesome so much so that the government went on to bargain deals in Kenya shillings. The dollar shortage had the world re-thinking trade.
Back here, Independent Power Producers (IPPs) payments were delayed, while some businesses started charging in dollar just so they could secure more for themselves.
The country continues to experience changes in core spheres that are redefining how we run our operations; government as well as business. Kenya has for years been a good ground for foreign investment; it is not without challenges of course. As of 2023, over $700 million was reported to have been invested in Kenya by foreign investors. The energy sector bringing in $300 million worth of Foreign Direct Investments (FDI).
Private sector investment is guided under the Private-Public Partnerships (PPPs) framework. This framework allows the government to utilise the efficiency of the private sector. The government has been keen to onboard more private sector players in essential government services to help speed up development as well as drive efficiency. This is a step in the right direction and is crucial to developing any country. No government is self-sufficient enough to handle all the needs of a country alone.
Back to locals investing in the energy space: recent PPP deals sparked a lot of controversy, awakening Kenyans to scrutinise and weigh in on the government’s engagements with the private sector. These deals are a call to us as a country to reflect and re-think our investment preferences and portfolios. It is also a chance for the government to evaluate what it’s doing to enable local investors to invest and secure returns.
While we dispute certain outsiders investing here, while we may decry foreign exchange impacts on the cost of things here locally, where are we investing our monies? Why are we less likely to invest in long-term projects? Is it a knowledge gap? Or just sheer lack of interest? We would rather invest in fast return projects. But what does that mean then? Such investments will be a reserve of foreigners.
As we clamour for streamlining of the process of onboarding PPP investments in Kenya, we must in the same vein push for conditions that would allow local investors to participate. Our banks, pension schemes, entrepreneurs need to broaden the asset classes that they are investing in. We shoot ourselves in the foot when we clamour for better processes and transparency in onboarding investors in the sector and yet our local investors remain unwilling or unable to invest in the sector. Local investors’ understanding and perception of risk is different from that of foreign investors. Where is the gap?
In the electricity sector for example, only one pension scheme has invested in a power plant. We still have very few Kenyan investors in the power projects. The MPs and Senate in their push for PPPs in Kenya shillings need now then to consider policies that will encourage the same. Their push for the same must be followed by policies that encourage and ensure local investors’ participation and returns. Local investors should not be hounded and demonised but rather encouraged to take a stake in the electricity sector.
Draw up incentives, ease the project development process for power projects, empower respective offices to do their job to facilitate the processes without interference. Build confidence in our local investors. This will not only build local content but also attract more local investors.