Ethiopia beats Tanzania to become Kenya’s top investment destination

Ethiopia surpasses Tanzania and Uganda as the primary foreign investment destination for Kenya, with direct investment reaching Ksh60.2 billion in 2021.
Kenyan businesses, including Safaricom and KCB Bank, have made significant inroads into the Ethiopian market, capitalizing 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.

Due to the growth of local businesses in the enormous neighboring market, Ethiopia has surpassed Tanzania and Uganda as the main foreign investment destination for Kenya.

According to recently released data, Kenya's direct investment in Ethiopia reached Ksh60.2 billion ($440.7 million) in 2021, beating Tanzania's and Uganda's respective Ksh51.5 billion ($377 million) and Ksh56.3 billion ($412 million).

A resident of one economy having control over or a sizable amount of influence over the administration of a business that is resident in another economy is referred to as direct investment abroad, also known as outward direct investment.

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 favor 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.

Several Kenyan businesses have entered the Ethiopian market, notably the world's largest telecommunications provider, Safaricom, which runs under the name Safaricom Telecommunications Ethiopia Private Limited provider (STE). The staggered rollout of Safaricom Ethiopia began in August 2022 in Dire Dawa and will eventually reach 24 other cities, including Addis Ababa.

Additionally, lenders from Kenya, including KCB Bank, have shown interest in penetrating the Ethiopian sector. In October of last year, a group of senior executives from KCB Bank traveled to Addis Ababa to meet with representatives of the Ethiopian Investment Commission (EIC).

A month after Ethiopia's Council of Ministers made history by approving the opening of the nation's banking sector to international investment, the KCB team visited the country.

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 ($1.18 billion), Kenya's overall foreign direct investments generally showed an upward trend over the review period, reaching Ksh239.6 billion ($1.75 billion) at the end of 2021 compared to Ksh93.5 billion ($684 million) at the end of 2015.