The coronavirus pandemic has had major impacts on the Kenyan economy. The number of unemployed people has increased while many businesses have been forced to go out of business. At the same time, returns in the equities industry have fallen as some of the biggest companies in the country struggle. For example, as shown below, the NSE all share index has dropped by more than 10% in the past year. In the same period, the S&P 500 has jumped by 10% while the JSE 40-share index has gained 3%. In this article, we will look at some of the best investment ideas in Kenya.
Invest in Real Estate
Real estate has been among the worst-affected industries during the pandemic. With so many out of work, real estate firms have struggled to fill their properties. A quick walk into many shopping malls shows that many businesses are closing.
Similarly, a look in many residential apartments shows that many of them have no tenants. Also, a quick talk with many real estate agents reveals that many tenants are struggling to pay their rent.
Meanwhile, financing is also a major issue facing the real estate sector. Many banks are struggling with many nonperforming loans while the securities are not selling in auctions.
Another challenge facing the real estate sector in Kenya is distrust among buyers. Recently, we have seen scandals coming from companies like Mahiga Homes, Banda homes, and Urithi Sacco.
Therefore, amidst all chaos, there is a reason to believe that real estate is among the best investment ideas in Kenya. For example, if you have the resources, you can buy property that is being sold cheaply in auctions.
Invest in Export Business
In recent years, tensions between the United States and China have been rising as the two super powers compete for superiority. The recent trade war between the two countries has turned out to be a new cold war.
For Kenya, there lies an ideal investment idea. For example, it is widely known that the US and Kenya are negotiating a trade deal that will probably remove tariffs on many products. Kenya is also member of the Africa Growth Opportunity Act (AGOA), which removes tariffs. Meanwhile, the government has constructed the Standard Gauge Railway and is also upgrading the old railway.
However, all this means that there is an opportunity in investing in export items that target foreign companies like the United States and China. You can think of items like clothes, agricultural products, and machining tools, among others.
Fortunately, you can use several options to reach foreign buyers. Among the most popular are Alibaba, AliExpress, Etsy, and Amazon.
Invest in Digital Content
In recent years, the way media is consumed has changed. For example, most people are streaming digital content in platforms like YouTube, Netflix, and Amazon Prime. As a result, many media companies like Nation Media Group, Royal Media Services, and MediaMax have been laying-off their staff. At the same time, we have seen many people build their digital platforms to become among the biggest players in the country. A good example is the WaJesus Family (see one of their videos below), which has a YouTube channel with more than 245,000 subscribers. Their videos have attracted more than 25 million views.
Therefore, we believe that investing in content is a good idea. However, you will need several things to succeed. First, you need to identify a good niche to invest in, invest in a good camera, and also being good at what you do. Indeed, we have seen many people create their own channels and give up after a few months of struggling.
Invest in Unit Trusts
While the financial market is not doing well in Kenya, we believe that you can make good returns by investing in unit trusts. These are funds that pool resources together and invest in financial assets like T-bills, stocks, and bonds.
Fortunately, Kenya has among the best-known finance services companies in Africa. Examples of these include Equity Bank, Liberty, ICEA Lion, and Sanlam, among others.
If you have a lumpsum amount of money to invest in, we recommend that you consider putting it into unit trusts. In fact, in some situations, we recommend investing in such trusts instead of buying a home or a car.
Here is an example. Consider a typical money market unit trust invested in ICEA Lion that earns about 10% every year. Also, assume that you had 10 million Kenyan shillings. You can take this money and buy a home. That’s good. Furthermore, you will not need to spend about 50,000 every month in rent.
On the other hand, if you invest in the unit trust, your 10 million will give you at least 1 million shilling every year. That is about 83,000 every month. In ten years, you will be better than the person who spent the money in buying the house.
Invest in Foreign Stocks
Another brilliant investment idea in Kenya is to invest in foreign stocks. This means that you can invest companies like Google, Amazon, and IBM. In the past, doing this was not possible because of the few brokers that offered the service.
Today, you can use several of the leading global brokers to invest in these companies. While many such brokers exist, we recommend using Interactive Brokers, the giant Nasdaq-listed broker. There are two primary reasons why you should use this broker.
First, the broker is publicly traded, meaning that you can access its audited finances easily. Second, unlike many non-public brokers, you can access a lot of information about it online. Finally, Interactive Brokers allows you to invest in less than a share. For example, with Tesla shares trading at $1,400, it can be an expensive thing to most Kenyans. As such, if you have $1,000, you can easily invest in 0.7 shares of the firm.
While the pandemic has hit most people hard, it has also created many opportunities. The five opportunities are just the beginning. You can look at other sectors that are currently in distress and take advantage of them. We believe that the economy will recover in due time and thrive again.