The key to doing good business in Africa is to have good professionals to back you up.  In most cases, you will find bureaucracy in government painfully slow, multiple approvals await you, the process itself of getting approvals from the Government and Local Authorities may sometimes not be very clear.  However, if you have an appetite for risk and the necessary patience the rewards are numerous. Essentially, you must have a good lawyer - to walk you through the myriad procedures in getting approvals, incorporating companies, drawing up agreements and most of all ensuring you stay on the legal side of things. There are a number of things which cannot be done without the aid of a lawyer e.g. acquiring land legally, incorporating companies and basically mortgaging your property.  All the documents must be drawn by a competent lawyer so it’s important to get good referrals and ensure all the papers are in order.  Lawyers entitled to practice are required to obtain practicing certificates every year.  Courts in this country have on occasion set aside entire real estate/land transactions done by lawyers without practicing certificates. It is also important to get a good accountant.  The tax system in the country is complex and a lot of minor changes with big impact are never publicized.  Taxes are collected by the Kenya Revenue Authority and Municipal authorities mostly in the area of land rates and business permits.  Basically getting a good accountant means getting an honest person.  Too often a bad accountant may end up fleecing you of all your working capital.  The revenue authority has also been extremely stringent in ensuring taxes are paid and they have introduced the electronic tax registers for the retail sector and personal identification numbers which are now required when doing a number of transactions e.g. getting utilities, paying rates, getting local business permits etc.  It’s important to note that the revenue authority is the only body in this country authorized by law to sell property without going through the court system.  Therefore it’s important to ensure that all taxes are paid or provided for in the budget. Having a good accountant to keep your books will help avoid tax audits and unilateral imposition of taxes and penalties by the revenue authority. Thirdly, you should have a good banker. Banks in this country can either lift you to the heavens or sink you to the depths of hell.  Although a majority of banks will generally provide you with a good service by ensuring your cheques are paid on time and providing you with bank statements etc.  The most important thing to note about banks is their lending rates.  Before taking up bank loans you have to go through the loan agreements carefully.  In most cases, you will end up with numerous charges and penalties lumped on the principal amount.

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The premier mortgage finance institution in Kenya is the Housing Finance which is a public listed company on the Nairobi Stock Exchange.  They have a fully fledged property mart where properties of various values in numerous locations around the country are advertised.  This will give you a real insight into the Kenyan real estate.  You can find the mart posted on their website www.housing.co.ke

If on the other hand, you prefer to purchase land and develop a house to cater for your individual tastes, the legality of any land to put a building cannot be gainsaid. Land is an emotive issue in Kenya and for various historical reasons land in the country has ended up being governed by almost five different legal regimes.  Land regulations are found scattered in various statues.  It is therefore important, before you put your money into any land, to confirm that the land has a clear and a marketable title.  In Kenya, most properties have been surveyed and demarcated and its fairly easy to do an official search at the Land Registration Offices to determine  the legality of land title and ascertain ownership.  The lands offices are not automated and almost everything is done manually including entries on the land register.  Therefore in some unusual cases it does happen that one piece of land may sometimes have more than one title deed though for this the government offers indemnity to innocent buyers.  Through an official search you will confirm who the registered owners are, whether the land has been sold to third parties and whether the land has been mortgaged and any other fact left undisclosed or suppressed by a prospective vendor of land.

Two important things to check when buying land, first check the tenure of the land.  Land in this country is held under leasehold or under government grant for which annual rents or rates is payable or freehold where no rent is payable.  Any land on leasehold with less than fifty years remaining is not worth purchasing.  Property taxes  due to the government or local authorities are a first  charge on the property and enquiries must be made in the government and municipal authorities offices to ascertain whether all taxes and rates have been settled.

The other important thing to check is the permitted use of the land in question.  Land is typically divided into commercial, industrial, agricultural and residential land.  Conversion of land from one type of user is possible by applying to the relevant government department.  This should be done by lawyers or land valuers conversant with the process.  Planning permission is sought from municipal authorities which legally empowered to control developments in their jurisdiction.  Local authorities are empowered to demolish any structures not in conformity with the city plans and the costs of this recoverable from the investor.  Recently it has also become increasingly important to get clearance from the National Environmental Management Authority (NEMA) which may require environmental audit and environmental impact assessments reports before building permission is granted.

All the above may sound complicated but it’s important to take care of the above issues in order to avoid legal tussles later on after investing substantial amounts of money.  For example, a big shopping mall constructed on top of a sewer line and without clearance from the environmental agency is now threatened with demolition.  One later addition to the above is a 10% Capital Gains Tax introduced in last years budget and which was due to take effect from January 2007.  This tax proposal was recently defeated in parliament and the capital gains tax will not effect as envisaged.

To help you in all this there a resource center that assists home builders in making more informed decisions when building.  The centre is known as the Building Information Center and it has a detailed database of quality material, product suppliers and professional service providers i.e. civil engineers, quantity surveyors, architects, interior designers etc.  I did not manage to get their web address but here are their contacts:
  Building information centre
  P.O. Box 30669 GPO 00100
  Tel (254) (020) 824478, 350578/9

Capital markets-Nairobi Stock Exchange
The equities and bonds market in Kenya is administered through the Nairobi Stock Exchange, which is one of the most active capital markets in Africa.  The market is open to both local and foreign investors and hosts around 60 listed companies.  Access to the NSE can be gained through two main options.

First, through a registered stock broker or investment bank.  This only requires you to open a Central Depository savings account with the registered stockbroker who can then place your deals or orders under instructions that you can give online.  Though most stockbrokers will give you information on stocks you may require dedicating time research on the various stocks.  You could as will give a discretionary mandate allowing your brokers to execute trades without obtaining instructions.  To achieve this you would have to open a nominee account of a discretionary nature and hence avoid the need to have a CDS account in your own name.  You would have to specify to the broker your investment objectives and stipulate no-go investments.  The brokers then report quarterly on trades executed and on portfolios held and their valuations.

Over the past three years the economy has been on the growth path and the Nairobi Stock Exchange has been one of the top beneficiaries.  The market has been on a bull run with its index moving from 1500 to 5500 points currently.  Quite recently a lot of ordinary Kenyans turned to the market to invest with CDS accounts moving from a low 70,000 to more than 350,000.  The result has been that most initial public offerings this year have been overwhelmingly subscribed up to 6 times.  The most hyped IPO this year was the country’s biggest energy company KENGEN which listed at an initial price of KShs. 11.90 (around 1 Us cent) and saw its price at the market jump 4 times.  The share price movements are normally posted on the NSE website and in print media between Tuesday and Saturday.  The stock exchange has also seen a sharp increase in the number of participants in the market with four IPOs this year.
 

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The other option available is investment through unit trusts. There are only three unit trusts i.e. Old Mutual trust, African Alliance and the British American Asset managers trust.  Despite all the hype at the market there are not many collective investment vehicles and virtually no mutual funds.  A lot of collective investment in the market is done through investment clubs and cooperative societies.  Investment through unit trusts is generally more convenient and offers diversification.  Unit trusts managers also publish their prices daily in the newspaper and provide statements and regular commentary.  Overall they do offer some comfort against market shocks but I do find their returns sometimes to be low, lower than the market performance.  A search on the names will lead to their websites.

Finally it is advisable to check on agents of companies, to conduct background checks on the expertise and professionalism of agents and stock brokers and finally ensure they are licensed by the market regulator, the Capital Markets Authority.

Retail trade
Retail trade in Kenya is perhaps the most challenging area to invest.  The market is extremely price-sensitive and you require time to study and understand the consumer habits in the country.  Generally consumer spending is mostly concentrated at the end of the month when most workers get their salaries.  The peak consumer season begins in August to mid-January.

Generally clothing and textiles, shoes, household goods and electronic goods do well in Kenya’s retail market and you can never go wrong in these categories though competition is tough.  Another key thing in retail trade is the location of the premises.  The most successful ventures around Nairobi have good locations near bus termini where consumers can easily get transport.  Transportation in the city is pretty hectic.

A lot of South African firms have fallen by the wayside after failing to adequately research and understand the consumer pattern.  A lot of firms which were in the retail trade started off with a bang only to fold up in two or three years of operation.  The premier brewer Castle Breweries also had to fold up after failing to capture the Kenyan beer market.  On the other hand, Chinese firms have shown a lot of resilience and seem to be doing quite well even in the most insecure parts of downtown Nairobi.  A lot of it has to do with low priced consumer goods of wide variety they offer.  Most of the retail trade is concentrated in clothing, shoes and electronic goods.

Overall it depends on the market that you want to target.  The high income earners shop in shopping malls that have sprung up in the cities.  In Nairobi you will find Sarit Centre,Westlands; Village Market, Gigiri; Nakumatt junction, Karen, Panari Sky Centre.  The middle class exhibits a lot of brand loyalty and will mostly shop in the retail supermarkets i.e. Uchumi Supermarkets, Nakumatt or Tuskermatt which are the major retail chains and competition among them is stiff.  Retail trade among the middle class is also done at what are known as “exhibition malls”.  These are shops which have been portioned into tiny cubicles where small retailers sell merchandise sourced mainly from Dubai and China.  Although small, these stalls mainly dealing with clothing, shoes and electronic goods in particular cell phones are highly lucrative.  The good returns from small investments have made these stalls extremely attractive for many people starting on entrepreneurship.  The result is the proliferation of similar businesses and therefore getting a good location really matters.

Another area in the retail trade that is doing well is restaurants and fast food premises.  Again, this requires an insight of the eating habits among the working class.  All the same with a modest investment, good interior décor, good location it usually does well, more so if there’s a pub incorporated.  Kenyans have a drinking culture especially on the weekends and indeed in the recent past many pubs and coffee shops have opened up in the Nairobi Central Business District.  Retail trade requires local authority business permits, health and medical tests for restaurant workers and for pubs a liquor license.