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Three issues dominate the Kenyan market: the new constitution, the recent real estate boom and the continuing attractiveness of Kenya to investors.In August 2010 a new constitution was enacted, which partners say will lead to a "complete overhaul" of the legislation governing the capital markets, company law and land law....

Three issues dominate the Kenyan market: the new constitution, the recent real estate boom and the continuing attractiveness of Kenya to investors.

In August 2010 a new constitution was enacted, which partners say will lead to a "complete overhaul" of the legislation governing the capital markets, company law and land law. The hope, in business terms, is that "the legal system will be more translatable to other countries like the UK, for example with the legal framework for derivatives, so it will lead to innovation in the medium to long term," says one partner.

The first major new piece of legislation to come to the fore has been a new Competition Act (published but not yet effective), which has received mixed responses from the legal community in terms of the practicalities of implementation. "It will have very far reaching complications on existing transactions. We adopted EU competition legislation, which is fine, but we need to connect the dots and we don't have the EU regulations that allow for proper implementation," says one partner.

"The legal community was not consulted," says another partner of the raft of new laws, and there is a sense among some firms that the legislation may not be immediately beneficial. "There is some improvement, it strikes in the right direction... but business will go on, adjust, cater and evolve to the constantly shifting business environment in spite of everything and not because of it... the private sector is resourceful and self-supporting," says one partner.

Others, while accepting the challenges, are more hopeful: "It is all very positive, it has been done without consultation of law firms and practical implementation will be difficult, but it is needed," says one.

The second major trend has been the 30-40% boom in real estate work, which seems to be based on a mix of necessity for residential housing and on a speculative bubble. "There is an explosion of property developments and an insatiable demand for home and office blocks," says a partner. Firms see different causes: "There seems to be an excess of liquidity at the moment with some banks giving 100% finance," says one lawyer, while another warns that "they are lending maybe a bit too irresponsibly".The boom has led to a glut in commercial space and a disparity between offer and demand but for the moment, says a partner, "it is lucrative and easy conveyor belt work".

The third trend is that Kenya continues to attract a lot of investment. "Indian investment is very big, for example the Bharti Airtel acquisition of Zain Telecom," says a partner. Others mention infrastructure, energy, wind, geothermal, heavy fuel and road construction as well as syndicated financing in oil and in commodities. "There is increasing M&A activity spurred on by private equity and any number of new funds being raised for Africa," says a commentator: "also lots of offshore oil and gas transactions, some quite interesting propositions at the level below the Shells and ExxonMobils with companies like Anadarko and Dominium".

Although firms agree that "Kenya is more on the radar than previously", thanks to the strength of the Kenyan economy, there are strong concerns over current inflationary pressures. "There are huge currency fluctuations, a very weak shilling; government bonds offer a more attractive rate than the stock market as does property speculation..." says one partner. Another adds: "the weakening shilling, the huge increase in oil and food price and the big impact on the low to middle sector of economy, with only 0.1% of the population propping up the rest... these are risks."