Courtesy Photo:A view of the shopping centre of the newly constructed civil servants’ houses at Ngara.The immense activity in the sector in the recent past has only met a quarter of the market demand.
How do I invest in Kenya from the diaspora?
By Jatin Ghaghda
I am assuming that you are from Kenya or have relatives in Kenya and hence want an answer to this question.
The question ‘How to invest in Kenya’ can be solved by first understanding the risk taking capacity and time to maturity of the investor. Thereafter the avenues / investments that match these conditions need to be short listed. Then we can decipher how the investments can be made.
The following are a few of the popular options for investing in Kenya currently:
Real Estate: in the past 8 years Kenya has seen a drastic increase in the Real estate sector, primarily driven by the banking sector’s relaxed rules on giving home based loans. The middle class has driven this increase by buying land in the prime locations in Nairobi & Mombasa. The sector does provide very good returns provided the investment is from cheap capital or from savings (borrowing money from local banks is very expensive). The market can yield a return of 20% to 30%. However the market is currently in a slump, due to a very supply of real estate units and low demand. Investors here are holding onto the prices in anticipation of a future increase in demand. Investment avenues are:
Direct investment – any investor can invest in the sector directly from the diaspora. They only need to ensure that they hire the best lawyers, bankers and accountants to look out for their interests.
As a Group of investors – same rules as above for getting best people in the team, investors can come together to form a company.
Equities / Stock Exchange: Nairobi Stock exchange (NSE) is the most regulated stock exchange in East Africa. There are over 50 companies that are listed on the NSE which provide a healthy return on investment provided the investor hold these investments for a longer time period. As we head into an election year the market is not so favorable. Avenues for entry are via an investment broker, who will assist an investor to open a CDSC account.
Money Market / Government securities: This is the most safest investment vehicle, that provides a stable and consistent return. Government Bills and bonds yield a return between 8% – 12% p.a. Avenues for investing:
Investment broker: who have an account with central bank of Kenya (CBK) and can pool investors.
Local Banks: who can pool investors to buy the government securities. They charge a fees of around 0.25%.
Investing in Business: This is advisable provided the investor knows the business owner well, or the transaction is for an equal partnership. Depending on the industry being focused, returns can be as high as 30%. Very favorable!!