The entry of the Democratic Republic of Congo (DRC) into the East African Community (EAC), which was anticipated to enhance business relations between the DRC and other member states, seems to have had the opposite effect for Congolese investors in Kenya.
Following DRC’s admission in April 2022, Kenya saw a significant decrease in assets owned by Congolese individuals and companies. Statistics from that year reveal a 30 percent drop in Kenya’s foreign liabilities to DRC, decreasing from Ksh182 billion ($1.4 billion) in the previous year to Ksh127 billion ($969 million). This occurred even as investments from other EAC countries in Kenya grew.
Foreign liabilities refer to the money or assets a country owes to external entities, such as loans from foreign banks, investments by foreign companies, or bonds held by international investors. These obligations indicate the extent of a country’s financial dependence on others.
Historically, DR Congo was the largest holder of Kenya’s foreign liabilities after South Africa on the continent. However, it has now been surpassed by Mauritius, whose assets in Kenya increased by four percent to Ksh170 billion ($1.3 billion) during the same period.
This decline suggests that Congolese firms and individual investors have sold their assets in Kenya, which could include equity, shares in companies, government securities, physical property, or loans receivable from Kenyan firms.
Usually, the DRC’s entry into the EAC, which allowed for unrestricted movement between Kenya and the DRC, should have strengthened their investment ties. However, it seems Congolese investors have taken a different path.
On the other hand, Kenyan investments in the DRC surged following its EAC membership, with Kenya’s assets in the DRC nearly tripling from Ksh18 billion ($137 million) in 2021 to Ksh53 billion ($404 million).
Despite this increase, Kenya still owes more to the DRC than it holds in assets there, but this is the first instance of a recorded decrease in liabilities. The Central Bank of Kenya, the Kenya National Bureau of Statistics, and Kenya Investment Corporation attribute the rise in Kenya’s assets in the DRC to investments in the banking sector.
Following the DRC’s admission into the EAC, two major Kenyan banks made substantial investments in Kinshasa. KCB purchased an 85 percent stake in Trust Merchant Bank for around Ksh15 billion ($115 million), and Equity Bank invested an additional Ksh11 billion ($84 million) in Banque Commerciale du Congo (BCDC), which it had acquired in 2021.
Overall, Kenya’s investment situation with its EAC neighbors improved, with Kenya maintaining a net creditor position with all member countries except the DRC. This suggests that Kenyans increased their investments in neighboring countries more than those countries increased their investments in Kenya.
Tanzania remains the top destination for Kenyan investments, holding approximately Ksh61 billion ($466 million), followed by Ethiopia with about Ksh74 billion ($565 million). Uganda holds Ksh53 billion ($405 million) in Kenyan assets, marking a five percent increase from 2021, and Rwanda holds Ksh20 billion ($153 million), a nine percent increase from the previous year.
Somalia, which joined the bloc last year, saw a notable 19 percent rise in foreign liabilities to Nairobi, reaching Ksh116 million ($885,496) in 2022, despite hosting the smallest amount of Kenyan investments.
Overall, investments by EAC citizens in Kenya increased to Ksh163 billion ($1.2 billion), up from Ksh33 billion ($252 million), primarily due to the DRC’s membership. This represented 7.9 percent of Kenya’s total foreign liabilities.
The largest increase was in foreign liabilities owed to Tanzanians, which surged 43 percent to Ksh8.1 billion ($61.8 million) from Ksh5.7 billion ($43.5 million) in 2021, driven largely by investments from tycoon Rostam Aziz’s Taifa Gas.
