Kenya has dropped four places in the index that measures the capacity of countries to attract local and foreign investments, a new report has shown.
The fourth edition of Absa Africa Financial Markets Index 2020 show Kenya lost seven points to score 58 out of 100 points, placing it at the seventh position from last year’s third.
Four countries — Nigeria, Botswana, Namibia and Ghana — leapfrogged Kenya to join South Africa and Mauritius who retained top two positions with 89 and 79 points respectively.
Neighbours Uganda retained position 10 while Tanzania slipped from seventh to rank 12 as Rwanda also dropped from the ninth position to 13.
The report, a product of Absa Group and Official Monetary and Financial Institutions Forum, rates countries based on six pillars including market depth, access to foreign exchange and market transparency.
Other pillars are tax and regulatory environment, capacity of local investors, macroeconomic opportunity and legality and enforceability of standard financial markets master agreements.
Kenya dropped positions in five out of the six pillars, with its foreign exchange regime coming into focus again.
The country scored 57 points on foreign exchange pillar in comparison to 65 scored last year, condemning it to tenth position in this pillar. It was fifth last year and first in 2018.
International Monetary Fund in 2018 reclassified the Kenya shilling from ‘floating’ to ‘other managed arrangement’ to reflect the currency’s limited movement due to periodic regulatory intervention.
Foreign exchange pillar evaluates a country’s openness to foreign investment based on the ease of moving capital, flexibility of foreign exchange regimes and availability of reliable foreign exchange data.
Kenya also lost three points on market depth pillar to score 53, partly because of the impact of Covid-19 on Nairobi Securities Exchange market capitalisation and activity.
On legality and enforceability of standard financial markets, Kenya slipped from second to sixth after losing 39 points.
However, Kenya jumped two positions to rank ninth on market transparency, meaning that it has made strides in tax and regulatory environment.
The Absa index allows for cross country comparisons, opening policy discussions between regulators, capital markets, investors and corporates on how to build markets that can mobilise capital and promote investment.