Mutai Kelvin – Industry and Retail

Mutai Kelvin – Industry and Retail

The industrial sector is expected to perform well in the coming years, as several government initiatives and programmes focus on boosting the manufacturing sector and its contribution to Kenya’s economy. Although official efforts are already under way, implementation of policies concerned with raising local output and lowering production costs could help Kenya on its path to becoming the industrial hub of East Africa. As for the retail sector, with the economy strengthening, foreign investors entering the local retail market and the middle class continuing to grow, prospects remain positive. Conversely, companies that weathered difficulties are in good shape.

Retailing in Kenya continued to grow in 2018, driven by increased mobile phone penetration as well as rising disposable incomes and consumer confidence. Notably, the sprouting up of shopping malls in the country has led to the opening of stores which mainly target mid- to high-income consumers, who are demanding more premium and sophisticated products.

Kenya has been ranked as having the second most developed retail sector in Africa as increased urbanisation fuels investment of billions of shillings worth of modern shopping malls. According to London-based consultancy Oxford Business Group, Kenya is second to South Africa and doubles Nigeria, Africa’s largest economy, in the level of development of its formal retail shopping system. “2015 saw a near tripling of Nairobi’s modern retail space, with close to 170,000 square metres of new leasable area coming on-line,” reads the report in part. “In comparison to other African markets, Kenya’s formal retail penetration rate, which ranges from 30 per cent to 40 per cent, is the second highest in Sub-Saharan Africa and this places the country at roughly half the level of South Africa, where formal retail is estimated to stand at 60 per cent of overall activity, but twice that of Nigeria.”

The OBG reports that the growth in retail malls has been fuelled by demand as the expenditure level for the average Kenyan consumer has risen by as much as 67 per cent in recent years, making Kenya Africa’s fastest-growing retail market. The increased demand has also fuelled interest from external players, with players like South Africa’s Game and France’s Carrefour that have taken prominent tenancy in Kenya.

Retailing in Kenya is expected to record moderate value growth over the forecast period, with sales driven by modern retailing. This performance will be supported by an increase in shopping malls in the country, as well as stronger interest from international investors looking to set up operations in Kenya.

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