Magazine article African Business

South African Investors Cry Foul. (Countryfile: Kenya)

Magazine article African Business

South African Investors Cry Foul. (Countryfile: Kenya)

Article excerpt

South Africa has unleashed a trade war with Kenya over investment barriers against its nationals. South Africa believes that deliberate efforts are being made to frustrate potential investors in Kenya.

Whereas Kenyan authorities are upbeat to woo foreign investors, South Africans, who have invested billions of dollars in other countries on the continent since the fall of apartheid in 1994, have not found it easy to put their money into the Kenya economy. South Africa is now the third largest foreign investor nation in Kenya, after the United Kingdom and the United States, but it is experiencing covert hostility from Kenyan authorities, and is convinced that there are intentional efforts to lock its investors out.

The concern in South Africa follows the closure of the Castle Brewing Plant at Thika. Outwardly, it would appear that the South African Breweries-owned Castle Brewing Kenya Ltd plant was shut after a gentlemen's agreement following falling sales. But there is more than meets the eye. The firm had been subjected to high cost raw material imports which pushed its production costs higher than those of the Kenya Breweries. It was subsequently engaged in a cut throat rivalry with East African Breweries, before a pact was reached to end their rivalry and form an alliance.

Business and diplomatic circles tell a story that would not encourage any foreign investor to set foot on Kenya. They say Castle's decision to leave the Kenyan market was the most visible indication of the frustrations foreign investors suffer in Kenya as they struggle to compete with businesses in which top political and government officials have interest. East African Breweries is one such firm in which Ministers, permanent secretaries and a retinue of well-connected politicians double as directors, shareholders and suppliers and distributors.

A top South African embassy official complained of intrusive Cabinet Minister for demanding bribes of up to 25% to allow new business. He moaned that there were no clear rules of what a foreign investor should or should not do and that the authorities intentionally concealed trade regulations.

Former Castle managers and diplomats reveal that foreign investors find Kenya's market confusing. South Africa investors particularly feel they are not wanted. Like other foreign investors, they find the long list of taxes, bureaucracy, and corruption that comes with it, unbearable.

Former Castle marketing director Joe Wanjui, who is a Kenyan, had no clue that the firm was to change hands. He heard about the takeover from news bulletins like several hundred employees. He admitted the company had been pitched against odds that were far from a level playing ground. He observed that despite the mounting competition fostered by globalisation, Kenya government officials still behave like there is no competition and the borders are still closed.

"Government Ministers still call foreign directors of various companies and demand that relatives and friends be employed in certain positions or such directors will have their work permits cancelled," said Wanjui.

Manga Mugwe, the vicechairman of the Kenya Association of Manufacturers, said Castle's fate and the complaints by foreign investors indicate that the government needs to get to the roots of the problems foreign investors face in Kenya.

"There is no law barring government officials from owning businesses. …

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