An American Company Investing in Kenya

Why might an American company want to invest in "your country"?
The African country in consideration is Kenya. Kenya is the biggest economy in East Africa and is ranked as the sixth biggest one in the African Sub Sahara. It is a comparatively big nation with just about 45 million individuals. Its capital city, Nairobi, is one of the most advanced cities in Africa and is home to some of the global businesses and establishments such as the United Nations. One of the key reasons for investing in this nation takes into account its strategic geographic position as a hub for East Africa with a port encompassed by deep waters, and macroeconomic stability. In addition, Kenya has superior skilled labor in relation to its neighboring nations and the boats of being the most developed banking sector in the expanse. Kenya is a suitable area for foreign direct investment owing to the fact that in the past number of years, the growth rate of the nation has been steady at approximately 5- 6 percent (Foreign and Commonwealth Office, 2017). Moreover, Kenya has a workforce that is massive and educated. This implies that aside from investment, it is possible to obtain a labor force that is well versed with technology and what is required to advance a business Another reason for investing in Kenya aside from its geopolitical position, educated workforce and growth potential is the advancement in technology. Statistics indicate that the prevailing internet penetration of Kenya stands at 54.8 percent of the general population. This is significantly better than the international average rate of 40 percent. Most of all, Kenya is one of the nations embracing and progressing technology with 10 percent of all mobile money transactions across the globe taking place there (Foreign and Commonwealth Office, 2017).
What are the main risks an American company would face if they chose 'your country' for a foreign direct investment?
There are key risks that an American company would face in selecting Kenya for a FDI. One of the risks is political risk. This is associated to the risk that an independent host government will unpredictably alter the rules under which businesses function and operate. Kenya has previously experienced a great deal of violence and instability owing to political divides. Another concern is the prevailing ethnic divisions within the country that continue to be an instigator of violence in times of elections, which can spark violence in the country. An additional risk for investing risk in Kenya takes into account the criminal undertaking within the nation. This is important because the aspect of crime can substantially increase the costs of conducting business in Kenya. In addition, the police force in the country is ranked as being the most corrupt institution. The implication of this is that businesses and investors will be forced to bribe numerous officers to obtain service provision and at the same time the force can be simply bribed to tolerate crimes (Voorpijl, 2011). Economic risk is another key risk that an American company would face in its foreign direct investment in Kenya. In particular, a risk that that can impact the decision of foreign investors in terms of FDI in Kenya encompasses the stability of the currency, the Kenyan shilling. Inflation together with exchange rate are significant issues for all businesses that take part in trade. In the past decade, there has been comparative stability in the Kenyan shilling. In particular, owing to high levels of inflation and also a downward spiral in the tourism sector worsened by post-election violence, there was a 13 percent decline in the Kenyan shilling against the dollar. In the present day, the shilling is relatively stable. Nonetheless, if these fluctuations would take place in a regular manner, it would make investments made in the future to be not only unreliable but also insecure (Voorpijl, 2011).
Based on your analysis and findings, how can an American company handle these risks? Provide your recommendations
On the basis of the analysis and findings, there are different ways in which an American company can handle and cope with these risks. Early consideration of risk as well as analysis makes it much easier for a company to mitigate such risk before it can have severe consequences on its business operations and bottom line. One of the key recommendations takes into account the establishment and good and healthy relationships with local and state politicians in the nation. As a result, the company will have an increased capacity of decreasing political risk and at the same time risks such as expropriation and impounding. Another recommendation for coping with political risk with respect to foreign direct investment is for the American company to watch out for any destabilizing state of affairs and occurrences within the nation that could give rise to hampering of proper business operation. This can also reduce forthcoming economic risk in terms of poor currency rate against the dollar. There is also another recommendation for employing local personnel. Through hiring local individuals, the company will have increased chances of dealing with numerous aspects of corruption and also any sort of intimidation from government officials. Such local employees are able to understand the operations that take place within the nation, which will provide the American company with a greater understanding on how to conduct its business operations without stepping on anyone’s toes (Gill et al., 2010).






References
Foreign and Commonwealth Office. (2017). Overseas Business Risk – Kenya. Retrieved from: https://www.gov.uk/government/publications/overseas-business-risk-kenya/overseas-business-risk-kenya#politics
Gill, A., Biger, N., & Tibrewala, R. (2010). Understanding and mitigating direct investment risk in the Indian real estate market. Business and Economics Journal, 2010, 1-10. Retrieved from http://astonjournals.com/manuscripts/Vol2010/BEJ-2_Vol2010.pdf
Voorpijl, R. (2011). Foreign Direct Investments in Kenya: The gains and losses of foreign involvement. Radboud University.