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Kenyan firms' spending up as business confidence rises

16. November 2016

Growth operation bills for last year hit Sh6trn, the ninth largest in Africa, says study

Kenyan firms have let loose their purse strings in an apparent  show of business confidence as operation bills of rlast year hit  Sh6 trillion, the ninth largest in Africa. A new McKinsey Global Institute report shows that local companies funnelled $60 billion (Sh6 trillion) in acquiring capital goods, input materials, financial services, transportation and ICT for expansion. The spending is mainly driven by mulltinationals and large home grown firms as SMEs accounted for just 16% of the budget. the report stated that Africa's household consumption and business spending are both growing strongly, offering campanies $5.6 trillion opportunity by 2025, amidst recent shocks and challenges. The companies' rapid expansion has beeen supported by a strong consumer base which promises future stable market, so the report.Kenya, Ethiopia, Sudan and Tanzania have two segments that will together account for 14 per cent of Africa's overall consumption growth to 2025 according to the report which further says, that food and beverages will be by far the largest spending category in East Africa. Nevertheless, there will be great opportunities in housing , consumer good, and hospitality and recreation. Companies in South Africa rated as top spenders (Sh61.5 trillion) on the continent, followed by nigerian companies at $490 billion (Sh49.4 trillion) last year, accordig to the report. Third was Egypt at $286 billion (Sh28.8 trillion), Algeria (Sh16.7 trillion9, Morocco (Sh13.3 trillion) whereas firms in Angola sunk $107 billion(Sh10.8 trillion) in their businesses last year. All in companies in Africa splurged Sh262.6 trillion ($2.6 trillion) on their businesses last year with  Nigeria and South Africa contributing to 40 percent of this expenditure. The McKinsey report says that half was spent on input materials, 16 percent on capital goods and the rest on a wide range of services including business and financial services,transportation, information technology and telecommunictaion services. The report further forecast an increament of 1$ trillion in expenditure by African businesses over the next 10 years to  $3.5 trillion by 2025.  The companies are justified to grow their spending amid growing demand. Africa's private consumption is expected to grow at an impressive rate of 3.8 percent  to nearly $ 2.1 trillion in 2025 in real 2015 prices, says the report. According to this report, half of the additional consumption is forecast to emanate from East Africa, Egypt and Nigeria.  A recent study in July this year by financial consulting firm Ernst & Young, indicated that Kenya overtook South Africa and ermerged the biggest investor in other African countries  in terms of the number of projects last year.

Business Daily: Neville Otuki

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