Moody's: Kenya's strong growth and improving governance to help fuel corporate investment and expansion

Kenya's buoyant economic growth, stable business environment and growing consumer demand from its emerging middle class will be among the factors driving expansion and investment among non-financial companies in the East African country, Moody's Investors Service said in a report today.

Kenya's young population and growing middle class will also contribute to growth in a range of sectors, including agriculture, manufacturing, telecommunications, retail and transport.

The country's currently stable political and legal environment make Kenya an attractive East African hub for companies, which is credit positive for Kenyan corporates and also for those looking to expand into the country.

"Despite the backdrop of slowing growth in a number of Sub-Saharan Africa, especially commodity exporters, we expect Kenya to have robust economic growth in the next year to 18 months," said Douglas Rowlings, a Moody's Assistant Vice President and author of the report. "Companies will also benefit from expected further trade liberalization and policies which encourage corporate investment. The country will increasingly become the destination of choice for corporates wanting a presence in East Africa."

Moody's forecasts that Kenyan GDP growth will reach 5.7% in 2016 before rising to around 5.9% in 2017, with the trickledown effect of a growing economy increasing GDP per capita. The GDP forecasts supported by a diversified economy are significantly higher than those for less diversified commodity-exporting countries in Sub-Saharan Africa which previously had higher growth during the commodities super cycle.

Growing demand for consumer products and services will drive expansionary investment in many sectors, with relatively low levels of competition and a maturing market yielding high margins for some corporates. As a result, Kenyan operations will help to enhance revenues and margins for domestic and international companies.

Public and private property and infrastructure development in Kenya will benefit companies involved in construction, engineering services and building materials.

Kenya's relatively deep and mature domestic capital market also provides good funding access for companies seeking local currency financing for expansion in the region.

The potential for political instability around the 2017 general elections poses the main risk to corporate growth in Kenya.