Are you considering to invest in the fast growing Kenyan or East African market? That’s smart, we’ll tell you why and how to position yourself for growth in this robust region.
What EA’s Emerging Economy Mean to Businesses
The average cost of running a business in an emerging economy is usually relatively lower compared to developed economies. Let’s explain why.
The Global economy is made of developed and emerging economies from different countries. First World countries have developed economies while 3rd World countries’economies are considered emerging or at infancy stage.
Economies at infancy want to develop fast so most of them set streamlined policies. This together with low input cost, drives investments fast. (Most African countries however have high level corruption and mismanagement chasing away investors).
What does this mean to you as an investor/entrepreneur?
Investment in Developed Vs Emerging Country
Before diving into the pool of business and investment, you have to do a comprehensive background check on:
- Business policies
- Political stability
- Infrastructure
- Cost of production
- Availability of skilled labour
Each of this factor is as important as the next. Let’s expound on them.
5 Factors to Consider Before Investing in a Country
- Business Policies: Government/tax policies on businesses is the number one factor investors should look out for before registering any kind of business in a state. Policies should be fixed long-term and predictable. A tax policy that is fixed for the next 30 years is more appealing compared to that which changes after every 5 years or annually.
- Political Stability: Most African countries, Kenya included are know for high political tensions when elections approach. This is normal for any democratic state but the tensions should not interfere with normal running of businesses.
- Infrastructure: Good infrastructure allows any business to easily connect to the market. Telecommunications connectivity, electricity, roads and even ICT are all essential depending on the type of business you want to major in.
- Cost of Production: apart from tax policies, there might be other factors affecting the cost of Production in an economy. For instance fuel prices, cost of raw materials or cost of labour. To ensure a good profit margin, your cost of production should be low.
- Availability of Skilled Labour: When starting a business that requires a certain skill set to operate, make sure the personnel will be found within the country of operation. There is an investor who started a safari agency in Maasai Mara. They even had hot air balloons that were never used simply because there were no licensed hot air balloon pilots available to be hired. They later discovered that there were only 5 licensed balloon pilots in Kenya at that time
Consider Economic Outlook
There are many indicators that will tell you how an economy is doing and what to anticipate in future.
We encourage investors to really analyse the stock market of the country in question. When the economy is great, companies meet expectations and some outperform there peers.
it takes time to analyse the companies one by one, instead you should look at the indices. Index contain a combination of companies. For instance S&P 100 contains top 100 companies in the USA, East Africa companies too have indices.
Take a deep dive in the Nairobi Security Exchange.
Advantage of Investing in East Africa
Picture an index graph in a developed country vs one from a developing country. Stocks in developed countries are valued highly, some even being overvalued.
On the other hand stocks in East Africa are low priced. We have companies like Safaricom and Equity which are to some degree undervalued.
The stock market in East African countries has a large room for improvement since most companies are far from their peak. Furthermore the governments have not yet pumped incentives in the business sector to push growth. So you will be sure of a bull market when everything aligns.
In 2010s Kenya was the undisputed economic powerhouse of the East African region.Well that hasn’t changed yet but the neighbourhoods I.e Rwanda, Ethiopia, Uganda and Tanzania are catching up fast.
You are spoilt for choice coming to this region.
To connect to the E.A market or gain insights on the market, you can always reach us @ +254110403666
