Kenya yanks its welcome mat for outside investors

By , Special to The Christian Science Monitor

Kenya, once a black African bastion of unfettered enterprise for all comers, is embarking on a radical change of image. Foreign businessmen have been angered and unnerved by government signals that their commercial activity is to be limited. In the latest reaffirmation of his commitment to place the economy in the hands of African citizens, President Daniel arap Moi decreed June 8 that foreigners entering into joint ventures must give a controlling interest of 51 percent or more to indigenous Kenyans.

The equity ruling, the most specific restriction to date, is part of a groundswell of economic xenophobia aimed at the influential European and Asian communities. Earlier in the month Mr. Moi arbitrarily introduced a five-day workweek and pledged to speed up the process of Kenyanization among the sizable foreign work force.

The changes found favor with the increasingly vocal Central Organization of Trade Unions, which has called on shop stewards to identify foreigners whose posts should be relinquished to ``indigenous'' Kenyans.

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Over the past decade the number of foreigners working in the country has been cut in half, to 9,000. The great majority are in managerial positions.

``We as employers find this untenable,'' fumed the managing director of a United States multinational, who asked to remain anonymous for fear of further damaging the foreign sector's government relations. ``This has undone an enormous amount of goodwill and will significantly reduce any outside interest in Kenya.'' He called the trade unions' call for Africanization a ``witch hunt.''

The policy shift seems to undermine Kenya's reputation as a capitalist showcase and cast into doubt government attitudes toward foreign investment. Moi's ruling is at odds with the country's foreign-investment law, considered one of the most liberal in the world.

Foreigners have a considerable stake in the economy, a fact that is beginning to worry government planners. They feel Kenyans should have a greater say in their economic destiny after 23 years of independence from Britain. More than 180 multinationals, mainly from the United States, Britain, and West Germany, have sunk some $1 billion into the country.

US investment accounts for just over a third of this. But in the past three years some two dozen US companies have divested, according to a US Embassy spokesman in Nairobi. Several of these are commercial banks, which considered the regional market too insignificant to justify having headquarters in Nairobi. First National Bank of Chicago's Kenyan division plans to follow the Bank of America's example and retreat to a minority equity position with a management contract, according to reliable reports. Citibank is the only US bank left which is actively seeking out business.

Expatriate businessmen concur that it would be difficult to find many African entrepreneurs with both the expertise and the capital required to assume a majority shareholding in a joint venture with a foreign partner. As no firm guidelines have been issued, it is unclear how or when the 51 percent ruling will be applied.

Asked for clarification on the new regulation, Adam Ali, managing director of the Investment Advisory and Promotion Center, said, ``I don't know anything about it.'' He heads a state-run organization charged with advising potential foreign investors.

Foreign businessmen have expressed concern that the decree will usurp their control over dividend declarations and board room decisions. It will also discourage expansions and new investment, they said.

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