Kenya: Development in action

Our grassroots investors recently traveled to Kenya to learn firsthand about the country’s policies and consumer markets. While the investable universe is still small, a focus on economic development and a young, hardworking population could be a formula for sustainable growth.

Views expressed are those of the author and are subject to change. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional or institutional investors only.

High-level observations

  • A young, hardworking, entrepreneurial population has embraced technology, earning Kenya the distinction of being one of the most digitally progressive countries in the world.
  • Government initiatives to increase food security, affordable housing, manufacturing, and access to health care should be positive for long-term growth.
  • A government-imposed interest-rate cap has stifled lending and contributed to multiple years of creditless growth. The politically popular cap has proven difficult for policymakers to remove.
  • Corruption, political instability, and unemployment are overarching concerns, especially among young consumers.

Kenya has historically struggled with a host of development challenges, including corruption, government ineffectiveness, large fiscal deficits, and a low-value-added, agriculture-driven economy. In recent years, however, policies aimed at inclusiveness and prosperity have begun to catalyze major shifts in Kenya, potentially setting sub-Saharan Africa’s fifth-largest economy on a path to sustainable growth.

Kenya’s GDP has compounded nearly 6% annually since the start of the decade,1 making it one of the world’s fastest-growing frontier markets. The investable equity market is still small, with a market capitalization of US$23 billion as of this writing.2 And while rapid growth typically creates near-term opportunities, we wanted to gain a deeper appreciation for Kenya’s long-term investment potential. On a recent grassroots research trip to Nairobi, we met with small business owners and consumers to learn firsthand about their concerns, preferences, and aspirations. This paper notes our primary takeaways.

Young, digitally savvy populace

Like much of Africa, Kenya is a young country, with 50% of the population under 19 years of age.3 Nairobi, the capital and largest city, has a population of four million (8% of the population) and produces roughly 60% of Kenya’s GDP. Kenya is urbanizing at a brisk pace, albeit from a low level. Approximately one million people enter Kenya’s workforce each year, and a major challenge — and a key ingredient for continued growth — is ensuring that Kenya’s jobs supply can meet rising labor demand. In an online survey we conducted of Kenyan consumers, 51% of respondents said their top concern was “lack of job opportunities.”

Aspirational and frustrated with the government’s ability to create jobs, young Kenyans are determined to make their own way. They see themselves as innovators, embracing technology and adapting innovations from…

To read more, please click the download link below.

1The World Bank. | 2CEIC. | 3PopulationPyramid.net.

RECOMMENDED FOR YOU

Climate change and emerging markets: Assessing opportunities and challenges
September 2020
Climate change and emerging markets: Assessing opportunities and challenges
,
Interested in structural opportunities in emerging markets? Be prepared to think differently
A new investing paradigm for emerging markets? We look at the evidence for economic development over economic progress as a key determinant in these markets.
August 2020
Interested in structural opportunities in emerging markets? Be prepared to think differently
,
Emerging markets: Navigating opportunities and risks in today’s crisis
We explore today's key emerging markets themes including the impact of COVID-19, China's evolving global relationships and an increased focus on sustainability.
August 2020
Emerging markets: Navigating opportunities and risks in today’s crisis
,
EM small caps: Hidden gems in plain sight?
Our team makes the case for strategically investing in EM small caps and for employing an actively managed approach to this underutilized asset class.
December 2019
EM small caps: Hidden gems in plain sight?
,
Brazil: Off the fiscal crutches, but can it walk?
Brazil is implementing an ambitious plan to pivot 180 degrees from a state-led to a neoliberal, market-driven economy. Two of our Latin America investors share takeaways from a recent research trip about Brazil's near-term growth prospects and potential to generate investment returns.
December 2019
Brazil: Off the fiscal crutches, but can it walk?
,
Kenya: Development in action
Our grassroots investors recently traveled to Kenya to learn firsthand about the country's policies and consumer markets. While the investable universe is still small, a focus on economic development and a young, hardworking population could be a formula for sustainable growth.
December 2019
Kenya: Development in action
,
South Africa: Making the best of a challenging </br>environment
Despite myriad socioeconomic challenges, consumers and business owners in South Africa are resilient and optimistic about the country’s future. Two of our emerging markets portfolio managers share insights gained on a recent grassroots research trip to Cape Town and Johannesburg.
November 2019
South Africa: Making the best of a challenging
environment
,
Top of Mind: Existential questions about value, international diversification, and China
Should investors be patient with value stocks and international equity diversification? And where do China A-shares fit in an emerging markets portfolio? Multi-Asset Strategist Adam Berger collects his thoughts along with research from colleagues across the firm.
August 2019
Top of Mind: Existential questions about value, international diversification, and China
,

We use cookies to improve your experience on our website. To accept cookies click Accept & Close, or continue browsing as normal. For more information, visit Cookies & Tracking NoticE.