Punitive measures from the Kenyan Government suggest it is time for foreign investment to look elsewhere.

“Due to the attractive opportunities, appealing location and low-risk investment environment, Kenya is open for business to attract companies with the strategic objective of tapping in to the growing potential of East and Central Africa”, that is according to the Kenyan Government’s investment promotion website www.invest.go.ke.

 The country has prided itself for years as an easy place for international investors to come and operate. Based on its success at marketing itself to international investors, the government has championed its widely acclaimed economic development programme ‘Vision 2030’ aimed at “transforming Kenya into a newly industrialised middle-income country providing a high quality of life to all its citizens by 2030 in a clean and secure environment.”  

Whilst these statements may appear sanguine and provide the soundbites that the international investment community like to hear, the problem arises when sentiment is not followed by necessary action. Or in this case, government regulation.

In recent months Kenya has been hit by a string of high-profile examples of businesses coming under-fire by government regulation which a generous critic might describe as incompetence; the more astute analyst would say it has been a wholesale operation of corporate theft by corrupt government officials targeting international investors. 

Nowhere has this been more clearly demonstrated than in the recent changes to regulations on the online betting industry in Kenya, where the government have brought in a tax regime on a whim that is so extreme and lacking in consideration it can only be assumed it was designed to terminally cripple the industry. Overnight, one of the fastest growing industries in the country has been taken down. Last year that industry contributed KES 10billion to public revenues, providing much needed social services where nearly 40% of the country still live on less than $1-a-day. Furthermore, the betting and gaming industry is one of the largest employers of young people in the country as well as the main sponsors of the national football league.

Betting is, and always has been, an industry that divides opinion down moral lines. Whatever individual feelings people harbour towards the sector, betting has been around since the beginning of time and will no doubt continue as long as humans exist. Governments have a choice - either to legislate the industry properly; which generates much needed tax revenue, jobs and provides security to the users, or attempt to ban it, which history tells us only forces the industry to the black market leaving no one better off apart from the criminals who operate there.

But the recent clampdown on the online betting market in Kenya has not opened a debate on the morality of betting, it has instead raised a large red flag to the international investment community, and called into question the attractiveness of investing in any industry in Kenya when you have a regulatory environment so vulnerable to the whims of self-interested Ministers and a legal environment so toothless.

The KRA has, once again, been weaponised by public officials pursuing personal agendas, leading to over 17 international directors, who had followed all legal channels to obtain their residency documents, being either deported or denied entry on arrival, from the country without any warning or explanation of what they were alleged to have done. These are directors who had relocated their families and committed their futures to Kenya, not the investors hidden in glass towers in Wall Street and Canary Wharf that you read about extracting their profits immediately from the country. The directors deported were exactly the individuals that Vision 2030 relied upon to give it a chance of reality. Yet, the actions of a few officials have significantly jeopardised the opportunity of making this a reality.

The actions of the Kenyan government have also raised the attention of neighbouring countries who have been quick to capitalise upon Kenya’s falling attractiveness. Ethiopia are set to launch their first online betting company, AbyssiniaBet, in coming weeks and continue to promote themselves as an investment destination safe from political interference.

Sammy Zeleke, an Ethiopean investment analyst based in Addis, commented ‘The Ethiopian government recognise clearly the problems being faced in Kenya now with public officials abusing the legal system to steal from investors and destroy businesses through self-interest. International investors tell us regularly how hard they are finding it to operate in Kenya now and the uncertainty of the environment. Ethiopia is now offering an alternative, where there is an independent legal system free from any government interference and an investment climate that welcomes international investors, rather than deporting them for no reason.”

The long term impact on Kenya’s economy from the closure of the betting industry will be seen more clearly in the coming months, but with street protests against the collapse of the National Football League to the foreign investors spooked into finding alternative destinations, it is already looking like one of the costliest miscalculations of government under President Kenyatta’s premiership.