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German Companies In Kenya Less Optimistic About Their Business

German companies are still confident about their business in Kenya but optimism has decreased in the last six months, as indicated in the Autumn 2019 World Business Outlook Survey, released by the Delegation of German Industry and Commerce for Eastern Africa (AHK Eastern Africa) in cooperation with the German Business Association in Kenya (GBA). According to the survey results, the business expectations of companies in the next twelve months now stands at 62% expecting higher/better. This is down from 71% in the Spring 2019 survey results. In addition, interest in expansion of existing employee base has fallen to 38%, down from 45%, while 48% remained constant in their desire to maintain their current employee numbers.

However, the German business community in Kenya still sees many opportunities for bilateral trade relations and economic growth, including employment opportunities. 57% of responding companies, up from 42%, indicated their current situation is likely to remain constant. In addition, 33%, up from 19%, still maintain constant positive business expectation for the next 12 months. The highest increase is 33% expecting better/higher economic growth for their organization, up from 29%, while 52%, up from 42%, expect their economic growth to remain constant.

AHK Eastern Africa has been at the forefront of implementing initiatives to boost the attractiveness of the Kenyan market through various activities, including the launch of the German Dual Vocational Training System in the Kenyan Private Sector, sector specific business delegations to Kenya on renewable energy and energy efficiency, Start-Up and ICT projects between Germany and Kenya and business delegations to Kenya from the German Federal states of Hessen and Lower Saxony just to name a few. These initiatives have seen both German and Kenyan companies build useful ties which are likely to lead to increased bilateral trade, shared expertise and opportunities in 2020.

However, the risks noted by German companies to doing business in Kenya have also evolved. The survey results indicate that 52% of respondents view the Kenyan economic framework conditions as a risk to economic growth, this is down from 71% in Spring. Other risks include declining demand for products and services (47% up from 41%), shortage of skilled labor (38.1% up from 25%) and lack of access to financing (38.1% up from 16%). These rank highest among others as major hurdles to their business activities in the country.

Thomas Wimmer, Deputy Ambassador and Head of Economic Affairs at the German Embassy in Nairobi, mentions that the results are an indicator of the strong desire of German companies to remain active and even scale up their operations in Kenya. “The Kenyan market has demonstrated a great propensity for trade relations. We continue to witness an eagerness to find and establish strong links locally and abroad from this market.”

“Despite the challenges, Kenya continues to be a very attractive partner for German companies looking to form business relations abroad. In the past year, we as AHK Eastern Africa have seen increased frequency in business delegations and fact finding missions seeking to explore the country,” says Maren Diale-Schellschmidt, Delegate of German Industry for Eastern Africa. “With the recent introduction of a Competence Center for German Export Finance in our AHK office, we are actively addressing the challenge of financing to allow for smoother market entry and operations.”

The AHK World Business Outlook is based on a regular survey of the member companies of the German Chambers of Commerce Abroad and Delegate Offices (AHKs) coordinated by the Association of German Chambers of Industry and Commerce (DIHK). In autumn 2019, the survey collected feedback from around 3,700 German companies, branches and subsidiaries abroad. Of these, 338 were responses from German companies operating in Africa. Furthermore, 58 of the respondent companies are operational in Eastern Africa, with 21 respondents in Kenya. It is important to note that this is not an indication of the number of existing German companies in Kenya, rather those who responded to the survey.