March 24, 2006

Kenya crime rivals corruption as threat to investors

By Fredrik Dahl

NAIROBI (Reuters) - Crime in the Kenyan capital is so rife
that the city is famously known as "Nairobbery" -- a pun on
what is seen as a serious obstacle to attracting foreign
investors and lifting the country out of poverty.

"We are living in dangerous times," the Sunday Standard
newspaper said in a recent report on crime, showing how people
felt east Africa's richest country had become more risky.

The signs of a society struggling to contain robberies,
murders and rape are evident everywhere in the sprawling
capital of roughly 3.5 million people which is east Africa's
main commercial hub and home to one of the continent's largest

Private security guards stand outside banks and shops,
people in the well-off suburbs live behind high walls and
electric fences, visitors are told not to go out after dark.

Rape has become so common that billboards warn against
"human beasts." Almost everybody has a tale of being a victim
of crime or knows someone who has and local media run daily
stories about armed robberies, carjackings and gun battles
between police and armed gangs in broad daylight.

Paul Andre de la Porte, who heads the United Nations
Development Program in Nairobi, said crime was more of an
obstacle to private sector inflows than corruption, which has
dominated headlines with high profile figures accused of being
involved in multimillion dollar scams.

"If we could get rid of the level of insecurity that we
have in Kenya, that would be a major breakthrough for its
socio-economic development," de la Porte said.


The economy -- helped by booming tourism -- has picked up
since President Mwai Kibaki won power in 2002, growing by some
5 percent last year from an average of 2 percent in the late
1990s under his autocratic predecessor, Daniel arap Moi.

But critics say it still underperforms partly due to the
government's failure to deliver on promises to root out graft
and violent crime, and fix poor roads and other infrastructure.

The most recent comparative statistics show that Kenya
received less in crucial foreign direct investments than its
poorer neighbors Uganda and Tanzania -- $46 million in 2004
compared to $237 million and $470 million respectively.

Apart from deterring investors, analysts say insecurity can
also hurt existing firms by pushing up costs and restricting
operations. Many businesses close early in Nairobi where owners
swiftly pull metal grills over windows to protect goods.

Merchant International Group, a London-based consultancy
which measures investment risk by assessing 10 criteria, gave
Kenya a worse grade than many other African countries, in part
reflecting its problems with corruption and organized crime.

Despite being one of sub-Saharan Africa's most developed
and stable countries, Kenya received the same overall rating
for this year's first quarter as volatile Ivory Coast, while
Sudan was judged to be slightly less risky, despite violence in
its Darfur region.

"We consider there is an insecure climate in terms of
foreign investors operating in the country," said Rashna
Writer, head of the consultancy's global risk department.

A United Nations study last year said crime was a key
factor in preventing countries across Africa from rising out of
poverty. It listed the high proportion of young, unemployed
people, glaring income inequalities and rapid urbanization as
reasons for high levels of violent crime.

Samuel Mwaura Waweru, chief executive of the Kenya Private
Sector Alliance business lobby group, said things were not as
bad as some believed in Kenya but added there was a problem.

"Poor security scares away potential investors, they don't
come," he said. "It impacts negatively on the existing
investors because they have to try and make up for security
deficiency in-house, which is expensive."

De la Porte said he believed Kenya could see annual growth
of at least 7-8 percent, provided the government successfully
cracked down on crime and corruption and donors raised aid
levels sharply to help create a better investment climate.


Police say they are making progress, with figures showing a
12 percent fall in overall crime last year, but some critics
say they see little sign of this on the ground.

"Considering the mounting reports of rape, robberies,
murders, carjackings, ethnic clashes, arson and other crimes,
that assurance rings hollow," the Nation daily said in an

Kenyan and foreign aid agencies said in a report last year
that rape, incest and indecent assault had increased fourfold
in the country of 32 million people over the past four years.

A recent travel warning from the United States -- whose
Nairobi embassy was the target of a deadly bombing attack in
1998 blamed on al Qaeda -- also underlined security threats.

"In addition to the terrorist threat, there are increasing
incidents of criminal activity ... especially after dark," the
State Department said in December's statement.

Such language irritates Waweru, who says the situation has
improved and that it is worse in many other countries.

"Kenya has one of the best security records for tourists,
yet in spite of that the country is presented as having a
security crisis," Waweru said. "Because of that perception the
potential investors are discouraged."

His words were echoed by businessman Bhupen Gala, owner of
a textile business that employs about 200 people.

"It is not so bad. I've not seen a single robbery on this
road," Gala said in his shop in central Nairobi where he sells
clothes made at a plant on the outskirts of the city.

"Red tape is a bigger obstacle than robberies."