Investing In Africa Can Be Quite A Challenge: But Good Deals Are On The Horizon ~ by James Joroge
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Investing In Africa Can Be Quite A Challenge
But Good Deals Are On The Horizon ~ by James Joroge
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June 2005

Geography

Kenya lies in the Eastern part of the African continent with an area of 582,646 square kilometers (slightly smaller than the size of Texas). The country is nearly shield-shaped, its northern part is broader while the southern part tapers out to a tip. The equator runs midway, almost dividing the country in two equal halves. Its neighbors in the region are:

i) Ethiopia to the north 
ii) Sudan to the Northwest 
iii) Uganda to the West 
iv) Tanzania to the south
v) Somalia to the East.

The Indian Ocean borders the country in the Southeast. 

Topography

Kenya can be divided into several regions of lowlands and highlands. These are:


 
Nairobi
 
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a) The coastal plain - a region of high temperatures bordering the Indian Ocean

b) Nyika Plateau - This the safari country that occupies most of Kenya. The region is dry with little and sometimes unreliable rainfall.

c) The Highlands - situated in the central part of Kenya and divided into two parts by the Great Rift Valley, the Eastern highlands and Western highlands. This region receives heavy and reliable rainfall throughout the year.This is the breadbasket of the country with a lot of farming activities.

d) The Rift Valley straddles the country north to south dividing the highlands into two and has scattered volcanic hills and lakes. The region is dry to the north and south with the central rift receiving adequate rainfall due to its hilly nature. In the south rift are to be found the Maasai and there is grassland vegetation.

e) The lake region where the western highlands fall gently towards the shores of Lake Victoria (second largest fresh water lake in the world). This is a region of high temperatures and high rainfall.

Climate

Kenya lies across the equator and receives two rainy seasons in a year because of the sun’s movement across the equator twice in a year, one from about March to May and the other from September to November. Kenya has a highly diversified topography that influences local climatic conditions with the highlands having heavier rainfall than the lowlands. The lowlands have high temperatures while the highlands have a much cooler climate than most expect from a tropical climate. The north and eastern parts of the country have a semi-desert climate with cloudless skies, high temperatures and very low rainfall. The coastal region and lake Victoria region have high temperature and high humidity throughout the year and high rainfall.

Brief History

Kenya has old archeological sites which is why archaeologists call it the ‘Cradle of Mankind’. The Kenyan coast through its links with the Indian ocean trading system has had contacts with the outside world for the last 2000 years and this is apparent from the distinct architectural design with some towns like Lamu preserved as world heritage sites.

The history of modern Kenya can be traced back to 1895 when the country was declared a British Protectorate and later in 1920 as a British Colony. Colonial rule saw land divided into racial and tribal areas which created tension and was a great catalyst in the struggle against colonial rule. Land reform in the dying years of colonial rule saw the emergence of a strong middle-class in Kenya, which combined with a strong indigenous entrepreneurial spirit, ensured that Kenya enjoyed peace and strong political stability compared to its neighbors in the region in its 41 years of independence. Kenya remained a British Colony until 1963 when it attained independence under the leadership of Mzee Jomo Kenyatta; the first president after Kenya became a republic in 1964. Mzee Jomo Kenyatta served as President until his death on August 22nd 1978 and his Vice President Daniel Toroitich Arap Moi succeeded him. Daniel Moi served as president until his retirement in 2002 under the constitution, which after amendment in 1992 allowed a sitting president to serve a maximum of two five-year terms. The exit of Daniel Moi after 24 years as president of the country also saw the exit of KANU, the political party that governed the country from 1963 to 2002. KANU was replaced by the NARC party, which is a coalition of 16 different parties that coalesced to oppose KANU.

Government

Kenya has a hybrid of the Westminster parliamentary system and a strong presidential system with the President serving as both head of state and head of government.
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Rift Valley
Maasai working in the Rift Valley
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Executive

The President serves a maximum of two five-year terms under the constitution and appoints his cabinet from the members of Parliament. The president also appoints his Vice-President who is the Leader of Government business in Parliament. The current president is Mr. Mwai Kibaki elected in 2002 as a compromise candidate of the various opposition parties and the Vice-President is Mr. Moody Awori. The President heads a government of national unity consisting of 30 ministers picked from the various parties in Parliament including the former ruling party KANU. This was a move to quell the persistent wrangling in the coalition of parties under the National Rainbow Coalition (NARC) though this has been challenged in the constitutional court. 

Legislature

The unicameral National Assembly sits in the capital Nairobi and consists of 222 members of which 210 are elected to a term of 5 years from single member constituencies and the remaining 12 are nominated according to Party strength. Kenya has a vibrant multi-party democracy with the elections hotly contested every five years. The last general elections held in 2002 saw power transferred peacefully from KANU the single party that had ruled the country since independence to a new coalition of parties NARC which won 59% of the Parliamentary seats (130 out of 222), KANU retained 68 seats and other smaller parties shared the remaining 12 seats.

Judiciary

The judiciary is consists of the Court of Appeal as the highest court with nine judges, the High Court with 45 judges and various subordinate courts with 230 magistrates spread out across the country including special Kadhis’ (Islamic).

Arising from its colonization by the United Kingdom, the courts in Kenya have followed the English common law system and in many respects English jurisprudence, statutes and case law are applicable in contracts, commercial and company law, and family law.

People

Kenya has a very diverse population estimated at 32 million people that includes the major language groups of Africa and a small non-African populations of Asian, Europeans and Arabs to be found in the urban centers and cities which contributes to the cosmopolitan culture. The country has 43 ethnic groups with more than 40 local ethnic languages and dialects and different local cultures. However, English is the official language used in the government offices and the court and is spoken quite widely with literacy in English at around 65%. The national language and lingua franca is Swahili which is spoken throughout East Africa.

Religion

Christianity is the dominant religion in Kenya. Kenyans are very spiritual and there are many churches and Christian communities throughout the country. Roman Catholics are around 30% of the population and around 40% of the population is Protestant. The Muslim faith has 20% of the population and is centered in the coastal region and northeastern region among the Somali people. Other communities such as the Maasai continue to practice indigenous beliefs. Even with the growth of Christianity traditional/ indigenous beliefs still have strong influence and various traditional practices continue to be upheld alongside Christianity 

In major urban centers are to be found Hindu temples catering to the Asian community; Nairobi also hosts a Buddhist temple and various meditation centers.

Economy

Even though less than 10% of the land is arable, agriculture continues to be the mainstay of the economy with about 75% of the work force engaged in agriculture, mainly as subsistence farmers. The main agricultural exports are tea, coffee, horticulture and pyrethrum while products such as sugarcane, wheat, maize, rice, dairy products and meat products are produced for the domestic market. The horticultural sector has been a key area of growth in the 1990s with Kenya emerging as the biggest flower producer in the world. In the highlands are to be found vast estates of tea and coffee with horticulture grown under irrigation in such areas as Naivasha in the Rift Valley.

The major cities of Nairobi, Mombasa and Kisumu host the industrial sector which is concentrated in grain and sugar milling, motor vehicle assembly and production of motor vehicle spare parts, production of cement, beer, soft drinks, cosmetics and pharmaceuticals, petroleum products, paper and packaging products. The textile industry is located in Export Processing Zones exporting to the United States under the Agoa program.

In the 1990s the Kenyan economy was subjected to ‘shock therapy’ through the implementation of Structural Adjustment Program prescribed by the World Bank and International Monetary Fund (IMF) which saw the country move to a free market economy with the abolition of foreign exchange controls, price controls and interest rates controls. The effects of this transition are still felt today in the form of high interest rates and subsequent loan default. 

The transition is yet to be completed with the new government under the leadership of President Mwai Kibaki resuming cooperation with World Bank and IMF to begin and ambitious economic reform program. The new government has embarked on reform initiatives bridging the budget deficits and deregulating and the privatization of state run enterprises, rehabilitating and building infrastructure which is creating greater business opportunities for any well-informed investor who is a keen watcher of the African market. Wages remain low, inflation has been contained below 10%, and interest rates now hover around 13-20%. The renewal of donor involvement has provided renewed hope for reversal of the slow economic growth.

A lot of potential exists for new ventures in ICT, computer stationery, infrastructure and real estate, energy and power utilities, mobile telephony. Good business ideas and capable management are what’s in short supply.

In March 1996, the presidents of Kenya, Uganda and Tanzania re-established the East African Cooperation (EAC). The EAC’s objectives include harmonizing tariffs and customs regimes, free movement of people, and improving infrastructure in the East African region. In March 2004, the three East African countries signed a Customs Union Agreement that came in to force in January 2005. The Customs Union will soon incorporate Rwanda and Burundi bringing together a market of over 80 million people.
 
Tusker Beer
Tusks of Mombasa

Money

The liberalization of the economy in the 1990s resulted in a healthy foreign exchange market. The market exchange rate has stabilized with the Kenyan shilling becoming freely convertible against major currencies.
The Kenyan currency the Shilling has denominations of 1-shilling coin, 5-shilling coin, 10-shilling coin, 20-shilling coin, 40-shilling coin, 50-shilling note, 100-shilling note, 500-shilling note and 1000-shilling note.
The current exchange rates for the major world currencies are:

I US Dollar 74.7 Kenya shillings
1 Euro 96.4 Kenya shillings
1 Sterling Pound 140.5 Kenya shillings
1 South African Rand 12 Kenya shillings
100 Japanese yen 69.8  Kenyan shillings
1 Canadian Dollar 61.3   Kenyan shillings
1 Singapore Dollar 44.5  Kenyan Shillings
1 Australian dollar 57.5  Kenyan Shillings

Corruption

Corruption has been quite endemic in the past with major scandals resulting in the suspension of donor funding by the World Bank and IMF. However the new National Rainbow Coalition (NARC) government has embarked on sustained program to eradicate the vice. It has enacted the Anti-corruption and Economic Crimes Act and Public Officer Ethics Act in May 2003 aimed at fighting graft in public offices. Other reforms in the judiciary saw 18 senior judges and over 50 magistrates sacked on allegations of corruption. The new government continues to be dogged with allegations of high corruption especially in public procurement in the sensitive and often secretive defence and security departments. Reforms are under way in the public procurement that will see these departments opened up to public scrutiny and open audit. 

Overall there is a remarkable effort to fight and eradicate graft in public offices and this has seen a steep decline in petty corruption with almost all government offices maintaining anti-corruption desks to deal with complaints of corruption.

Culture

Understanding The Kenyan Way Of Life

Kenya is a country of diverse ethnic and cultural diversity. In the urban areas you will find a completely western culture; the same urban fashion you would find in any big city in the world. In the rural areas and remote parts of the country, people are living in their traditional way of life, looking after cattle, farming their plots of land, doing laundry in a stream. As urbanization spreads, attracting people to the urban and western lifestyle, fewer and fewer Kenyans are living in the traditional setting. 

On the whole, Kenyans are an incredibly warm and friendly people and as you socialize with them you will delight at the friendliness of the people, their warm smiles and their easygoing nature. This is best exemplified by the ‘hakuna matata’, which simply means ‘no worries’ and that’s how most Kenyans lead their lives. One of the most noticeable things as one travels around the country is the large number of people on the roads. Everywhere even on long lonely stretches of highway you find people walking or riding on their bicycles, women carrying loads of firewood tied to their backs, people seated together in urban centers. The people go on about with their daily lives in an easygoing nature. 

Kenyans love music and in every village you find people listening to small pocket radios. Music and dance are a cherished part of Kenyan culture and play an integral role in social and religious life. People love to dance to the rhythm of music and in most urban centers you’ll find young people clubbing to latest contemporary dance music known as ‘kapuka’. In the western parts of Kenya, the popular style is benga dance music supplemented by traditional wind and stringed instruments. You’ll find music even on the ‘matatus’ the multi-colored and individually decorated and named public transportation mini-buses ever present along the roads. 

Kenyans also love beer almost as much as they love dancing and the most thriving venture during the hard economic times was the local brewing industry and pub business. The pubs in Nairobi and major urban centers, until a recent crackdown, used to be open 24 hours day. The national beer is excellent and is called Tusker beer. Various local brews exist including traditional liquor such as mnazi brewed from the coconuts found on the coast, busaa brewed in western Kenya from sugarcane and muratina, in central Kenya the beer is brewed from fruits and honey. Kenyans love to meet together and celebrate any event over their beer and nyama choma (barbecued meat). 

The national motto of Kenya ‘harambee’ meaning, “pull together” also captures another key aspect of Kenyan culture that calls for a spirit of working together as a community in order to improve the well being of the villages. In that spirit hundreds of volunteers in the villages come together to build clinics, schools, gabions to prevent soil erosion, and collect funds to offset medical bills and even send students for further studies abroad.

Kenya And Foreigner Relations

In the colonial times white settlers led an elite lifestyle enjoying close economic ties with the government and offering employment to people in the farms and light industry. On one hand missionaries and other charitable institutions offered medical services and schooling to indigenous people. Arising out of the colonial experience, many Kenyans have come to expect financial support from foreigners. When traveling across the country in the rural areas as a foreigner you may be annoyed by the constant begging and selling of souvenirs whenever you stop, or you may just be delighted by the friendliness and warm reception accorded to foreigners. It’s important to bear in mind that the local populace in rural areas tends to view most foreigners as missionaries, aid workers or tourists. If you do not hold yourself to either or all of the three then it is pretty easy to make your way around. In Nairobi, you will find the normal hustle and bustle of a modern city with everyone pursuing their own affairs.

Social Mannerisms And Niceties

In greeting people always try and give out a firm handshake, most local people find it insulting to be given casual greetings like ‘Hi?’ Even on the streets of Nairobi people tend to stop and catch up and happily chat right on the pavements. In trying to make people open up it’s advisable to carry out conversation even a quick chat or joke; it eases tension and makes you as a foreigner more acceptable. Intimate greetings are frowned upon though it’s okay to hug in public, but greetings should not be extended to kissing perhaps only a gentle peck on the cheek for women. In Nairobi and other urban centers just take normal precautions that one would normally take when visiting major cities: beware of tricksters and fraudsters and do not take things at face value. 

Something important to note, in African culture people do not maintain continuous eye contact. As you converse with people you will find them avoiding a direct glare into your eyes, which should not be taken as sign of dishonesty or lack of confidence. Maintaining continuous eye contact makes people feel intimidated, like you are sizing them up and in most cases local people will not open up to conversation if you hols eye contact. It’s part of the local culture for conversations to be carried out among people of the same age group. Conversations across the age groups is carried out with great modesty and respect especially for older people. It’s normally considered rude and disrespectful to talk back to older people or interrupt their speech or stare into their eyes, so typically people in same age group will open up to conversation with one another and hold back when talking to people younger or older than themselves. Just to illustrate this generational gap: when in Kenya you’ll hear a language spoken almost exclusively by the younger members of society known as Sheng, a mixture of Swahili and English along with a fair sprinkling of other languages.

Overall, you just need some time and patience to understand the culture and the different types of people in the country. For example, in the Northeastern province which is dominated by Somali ethnic groups, you find a very strict dress code. In the coastal regions, people are accustomed to talking with visitors from other cultures and they are very welcoming; this is called Mombasa raha - meaning it’s one joyous place. In Nairobi and its environs you have to be street smart; when a deal is too good think twice. In some areas - the north and south of the country and especially among the Maasai, Turkana, Samburu groups - people still lead their lives in the traditional way: simple and full of content. Kenya is magnificently diverse and you have to see in order to experience its ever-changing face.

To contact James Click Here
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