Record Inflows, Fragile Promises: what KOKO and Magadi tell investors about legitimate expectation 

Kenya’s investment story in 2026 runs on two tracks. The numbers have never looked better, yet a run of executive and judicial decisions, including the collapse of KOKO Networks and the suspension of Tata Chemicals’ Magadi operations, has reminded investors that a government signature, a framework agreement, or a century-old lease does not guarantee that the rules will hold. 

The question is no longer whether Kenya is attractive, but what, legally, an investor can count on once capital is committed.

A record year

UNCTAD’s World Investment Report 2026 puts Kenya’s 2025 FDI inflows at US$3.2 billion, up 37.7 per cent on a revised US$2.32 billion in 2024, and more than double the 2022 level.

Kenya’s share of East African inflows rose to 21.9 per cent, even as flows to Africa as a whole fell to US$69.5 billion. UNCTAD credits corporate tax cuts, dividend exemptions for Nairobi International Financial Centre companies, and a grid that draws almost 90 per cent of its power from renewables, an advantage that has helped secure a US$1 billion package including a geothermal-powered data centre.

Sovereign credit has followed. Moody’s upgraded Kenya to B3 in January 2026, Fitch affirmed B- the same month, and S&P affirmed B in August, all with stable outlooks.

The risk beneath the headline

Those ratings remain six notches below investment grade. S&P expects a 2026/27 deficit of 7.1 per cent of GDP against a Treasury target of 5.5 per cent as pre-election spending builds, and there is still no new IMF programme.

The more immediate concern is predictability.

The US State Department’s 2026 Investment Climate Statement observes that Kenya’s annual mix of business-friendly reforms and “extractive” tax measures has unsettled business, and that broad discretionary powers vested in officials create uncertainty. The Finance Act 2026 removed the 5 per cent dividend withholding rate for East African Community citizens and the 15 per cent corporate rate for large residential developers.

Then came Safaricom. On 15 September 2026 the High Court declared the KES 204.3 billion sale of the state’s 15 per cent stake to Vodacom unconstitutional, eleven weeks after completion, citing inadequate public participation, the absence of competitive selection and no Competition Authority approval. The appeal is being fast-tracked. Whatever its outcome, the message is that a completed transaction with the state can be unwound.

KOKO: the letter that never came

KOKO Networks sold subsidised bioethanol to well over a million households, funding the subsidy through carbon credits. Selling into higher-priced compliance markets under Article 6 of the Paris Agreement required a government Letter of Authorisation (LoA).

KOKO held a June 2024 investment framework agreement contemplating such sales, a non-binding letter of no objection and, from March 2025, a US$179.6 million guarantee from the World Bank’s Multilateral Investment Guarantee Agency (MIGA) covering breach of contract. The LoA never issued.

KOKO entered administration on 1 February 2026; its Kenyan company now faces liquidation.

The government’s explanation, given publicly only after the collapse, is that KOKO’s request would have consumed Kenya’s entire tradable carbon allocation; officials have also questioned the integrity of the credits. Under the The Climate Change (Carbon Markets) Regulations 2024 the LoA is discretionary, with no published criteria or timetable.

The lesson is uncomfortable. A framework agreement that contemplates sales but leaves the decisive permission to a later discretion protects very little, and a letter of no objection is, by design, not a commitment. Whether a MIGA claim has been filed is not public. If one succeeds, MIGA would step into KOKO’s shoes against Kenya, with reported exposure of around KES 23 billion.

Magadi: legacy rights meet new law
Tata Chemicals Magadi traces its rights to a 1928 lease. On 28 July 2026 the Mining Ministry suspended its operations, citing royalties, beneficiation, community development agreements, local employment and procurement, and environmental compliance. Tata says it filed everything requested on 11 August. Before any ministerial decision on those submissions, the President told the company in early September to “pack and go”, adding that replacement investors would be required to build glass and chemical plants.

The Ministry’s legal case is narrower. It argues that the 2010 Constitution and the Mining Act 2016 changed the regime, and that Tata relied on its land concessions and first applied for a mineral right only in July 2024.

“Past oversights do not grant immunity from existing laws,” the Mining Cabinet Secretary has said. A joint technical committee is now reviewing the issues and, on 23 October, the High Court held that it had no jurisdiction, leaving the dispute on the administrative track.

What legitimate expectation will, and will not, protect
The Supreme Court in Communications Commission of Kenya & 5 others v Royal Media Services Ltd & 5 others [2014] KESC 53 (KLR) requires an express, clear and unambiguous promise by a public authority; an expectation that is reasonable; a representation the decision-maker could lawfully make; and no conflict with clear provisions of the law or the Constitution. The Court also held that substantial investment, on its own, creates no expectation.

Measured against that test, substantive claims in both cases are weak.

KOKO’s framework agreement promised no volume, and no official could lawfully bind the state to override a statutory discretion and a national allocation tied to Kenya’s climate commitments. Tata’s lease is a stronger anchor, but a lease cannot displace the Mining Act’s licensing requirements if those are found to apply.

Procedural claims are another matter. Article 47 of the Constitution guarantees administrative action that is expeditious, lawful, reasonable and procedurally fair, and written reasons where rights are affected. Years of waiting for KOKO’s LoA without a reasoned decision, and a presidential exit order issued while a ministerial review was pending, are precisely what Article 47, and the fair and equitable treatment standard in investment treaties, are designed to catch. Investors can rely on a fair process; they cannot rely on a particular outcome unless it has been lawfully and specifically promised.

Structuring for the next dispute

• Route deliberately. Kenya has 11 bilateral investment treaties in force. The Kenya–UK BIT 1999 offers investor–state arbitration for any investment dispute, an umbrella clause capable of lifting contractual undertakings to treaty level, and a 20-year sunset period. By contrast, the Kenya–Mauritius BIT, which would have covered the route through which KOKO’s insured investment flowed, is signed but not in force.

• Contract for specifics. Stabilisation and change-in-law clauses, defined approval criteria and grandfathering of incentives should be written into agreements signed by an authority with power to give them.

• Insure, and read the cover. MIGA and private political risk policies are valuable, but a breach-of-contract claim will turn on a commitment the investor can prove existed.

• Build in process. Decision deadlines, escalation mechanisms and an express obligation to give written reasons, mirroring Article 47, turn discretionary silence into an actionable breach.

• Plan enforcement. Kenya is party to the ICSID and New York Conventions, but an award is only as good as the route to executing it, which should be mapped at the outset.

Conclusion
Kenya’s record inflows are real, and so is its regulatory volatility.

KOKO and Magadi do not show that Kenya is closed to foreign capital. They show that Kenyan law protects fair process far more reliably than it protects commercial assumptions.

Investors who treat government assurances as the starting point for negotiation, rather than a substitute for enforceable commitments, will be best placed to stay the course.