Congolese investors exited Kenya market after EAC entry
Thursday July 18 2024
An aerial view of DRC capital Kinshasa. Investment by Congolese investors in Kenya registered a sharp drop in 2022. Shutterstock
The admission of the Democratic Republic of Congo (DRC) into the East African Community (EAC), which was expected to open up business between the country and other member States, seems to have done the opposite for Congolese investors holding assets in Kenya.
Kenya registered a sharp drop in assets held by Congolese citizens and companies in 2022, just after Kinshasa was admitted into the regional economic community in April of that year, a move that effectively allowed free movement of people, and goods and services into the Central African country.
Latest statistics show that Kenya’s foreign liabilities stock owed to DRC fell by 30 percent in 2022, from Ksh182 billion ($1.4 billion) a year before, to Ksh127 billion ($969 million), even as other EAC citizens increased their investments in Kenya.
Foreign liabilities are the money or assets a country owes to foreign entities, such as loans from foreign banks, investments by foreign companies, or bonds held by foreign investors. These obligations reflect how much the country is financially dependent on others.
DR Congo has traditionally been the highest holder of Kenya’s foreign liabilities, second to South Africa on the continent, but has now been relegated to third place by Mauritius, whose assets in Kenya rose four percent to Ksh170 billion ($1.3 billion) in the same period.
The drop means that Congolese firms and individual investors sold their assets in Kenya, which could include equity and shares in companies, government securities, physical property, or reclaimed loans owed to them by Kenyan companies.
Ordinarily, the entry into the EAC, which immediately made it possible for free movement between Kenya and DRC, should have advanced their investment relations, but Congolese investors appear to have defied the norm.
In contrast, Kenyans increased their portfolio in the DRC after its admission into the regional bloc, with the country’s assets there nearly tripling to Ksh53 billion ($404 million), from Ksh18 billion ($137 million) in 2021.
Read: DRC now Kenya’s fastest-growing EAC export market
This means that Kenya is still a net debtor to DRC, since it has fewer assets compared with the liabilities it owes Kinshasa, but the tides could be turning, given this is the first time such a drop is recorded.
According to the Central Bank of Kenya, the Kenya National Bureau of Statistics and Kenya Investment Corporation, which publish biennial statistics, the jump in Kenya’s assets in DRC was “due to investments in the banking sector.”
Notably, the year following DRC’s entry into EAC saw two Kenyan banks invest heavily in Kinshasa, with KCB paying close to Ksh15 ($115 million) for 85 percent stake in Trust Merchant Bank and Equity Bank injecting an additional Ksh11 billion ($84 million) in Banque Commerciale du Congo (BCDC), the Congolese unit it acquired in 2021.
Generally, Kenya’s investment position with its neighbours improved in its favour, maintaining a net creditor status with the other six member countries of the bloc then, save for DRC.
This means Kenyans increased their assets in neighbouring countries more than the other nations’ citizens raised their investments in Kenya.
Tanzania has remained the top host of Kenyan assets in the region, holding around Ksh61 billion ($466 million) worth of investments, second to Ethiopia, which currently hosts about Ksh74 billion ($565 billion).
Read: Tanzania bars foreigners from microfinance outfits
Uganda hosts Ksh53 billion ($405 million) worth of Kenyan assets, a five percent rise from 2021, while Rwanda hosts Ksh20 billion ($153 million) of investments, a nine percent rise from the previous year.
Somalia, which got admitted into the bloc last year, although hosting the smallest amount of Kenyans’ investments, witnessed a surge in 2022, with the country’s foreign liabilities to Nairobi rising 19 percent to Ksh116 million ($885,496).
Investments held by other EAC citizens in Kenya also increased, totalling Ksh163 billion ($1.2 billion), from Ksh33 billion ($252 million), largely driven by DRC’s entry into the bloc. This constituted 7.9 percent of Kenya’s total foreign liabilities.
The largest rise was in foreign liabilities owed to Tanzanians, which rose 43 percent to Ksh8.1 billion ($61.8 million), from Ksh5.7 billion ($43.5 million) in 2021. This was largely driven by the investments by tycoon Rostam Aziz’s Taifa Gas in Kenya in the period.
