6 minute read
Africa is not commonly associated with innovation and edgy trends. Whereas South Africa, Mauritius, Morocco, Tunisia, and Kenya are top five groundbreakers of the continent with the innovation index ranging from 21 to 40. Africa’s fast-technology adopters like Kenya revolutionizes social structures and changes business image in just decades. Internet balloons, the blockchain, industrial innovation program, and growing middle class are only some keywords describing Kenyan economy. So, what is the future of Kenya?
Africa’s financially attractive
Vision 2030 and Kenya’s Industrial Transformation Program aims to realize the potential of national industries, accelerating their development and GDP growth, and creating 435,000 new jobs. The complex targets of the programs will unveil novel opportunities for export, development of various industries from IT and tourism to agriculture and fish processing. Meanwhile, the plan also targets actively enhancing infrastructure by building 500,000 affordable houses for Kenyan citizens. The newly established environment will be strategically favorable and help the country transit to value-added manufacturing. Kenya has already made progress in this segment in 2016 and reached 80th position out of 190 countries worldwide. Nowadays, the country leads to an immense inflow of FDI with $2bn by December 2016. By 2020, Kenya is expected to improve its performance and attain to the 50th position in the global ranking.
Kenya’s active development in a diversity of segments is a positive sign for international market players and cultivates high interest in it from a business perspective. For example, Kenya’s 2% GDP growth and the upsurge of fiscal income by 10% in the past year ensured Chinese investors in Kenya’s credibility. Now, Kenya can rely on Chinese FDIs and invest acquired finances into promising Vision 2030’s and Kenya’s Industrial Transformation Program’s objectives. Whereas taking advantage of these opportunities will turn Kenya into the realm of economic stability with continuous FDI inflows to support its advancement.
Revolutionizing Kenyan consumer trends
Kenya’s modifications and rising power of SMEs in GDP growth triggered an upsurge in consumer purchasing power. The consumer base in Kenya’s now mostly consists out of prosperous clients – middle class, and this trend ensures affluence and growth of the retail industry. Generally, top five spending categories are represented by a quarter of total spendings going for food, 14% for a living and personal care, 13% for bills, 9% for transport, and 6% for household appliances. Kenya’s middle-class market remains attractive for international companies, but Kenyans’ loyalty to national brands changes the rules of the global game. GeoPoll has shown that 58% prefer locally made products. Also, Kenya’s procurement laws provide that all public entities should source at least 40% of their inputs from the local market. Same goes for payment methods, 59% of transactions are cash transfers and 32% made through M-Pesa, a local mobile application enabling easy transactions across the country. In the recent future, Kenya can pursue a pathway of export dominion while still having a well-protected diversified domestic market. This game changer will provide a great boost to local players giving them a chance to take the most delicious slices of Kenyan “market”.
Quiet tech innovation:
Emerging Internet Balloons
Kenya is now galloping through innovation and sometimes even becomes a pioneer in testing new technologies. Three-fourths of the population lives in the rural areas where as much as 60% of residents do not have an access to electricity. Looking for the solution to the issue in the recent past, M-Kopa Solar developed a home-based platform to deliver solar energy across Kenya. This innovation partly resolves the issues with electricity shortage due to the poor grid structure. Also, the Kenya Bankers Association attempts to make a life of Kenyans easier with Pesalink that reduces transaction costs and makes banking services affordable. These cutting-edge innovations make Kenya important part of the global tech community and attract innovators across the world to seek opportunities for their business ideas.
While the Internet is an irreplaceable element of everyone’s life, but ⅓ of the Kenyan population still has no Internet access. A collaboration of Loon and Telcom Kenya takes “Internet for all” concept one step further and resolves the issue. In 2019, Loon plans to launch its Internet balloons to provide Kenyan rural areas with the 4G Internet access. Similar changes across Kenyan industries will slowly turn the country into a silent cradle of innovation with a huge potential and make attractive to tech-enthusiasts across the globe. Being an African pioneer in technology adoption gives Kenya a kick-off in its development and sets an example for other countries.
Better investments for SMEs
Kenya’s economic growth is vastly dependent on the development of SMEs and the initiative of entrepreneurs. Lack of investment and issues with financial access are the major barriers preventing entrepreneurship from nurturing prosperity. Twiga and IBM conducted a pilot loan program for small kiosks in Kenya. The average loan of $30 increased order butches by 30% and profits by 6%. the businesses had to return the loan in 4-8 days with 1-2% interest rates. The development of micro-loan program for SMEs has clear benefits and expected to bring an additional $20 billion in revenues to the Kenyan economy.
But, the absence of information about SMEs’ and entrepreneurs’ solvency puts banks and investors at high financial risk. IBM Research Department in Kenya suggested that better tracking of records would help maintain all information in order and evaluate the credibility of SMEs. With blockchain, the banks will be able to observe the whole loan history of a client and approve the required sum accordingly. According to Solomon Assefa, a vice president at IBM Research in Kenya, higher and controlled access to finances will give a chance to small kiosks and local farmers to flourish and contribute to overall GDP growth. Whereas, rising interest in SMEs and access to finances will remodel Kenya’s entrepreneurship culture, make it similar to Western economies, and push Kenya towards entrepreneurship society.
Growing Population Defines Kenya’s Future
Kenya’s urbanization continues its growth with accelerated speed. By 2050, Kenya’s population is expected to reach 40 million with 50% living in cities. Even though the middle class is growing and gaining its immense influence on retail, service industry and national business culture, Kenyan society is still contrasted. High levels of corruption and no governmental support raise doubts whether the goals of Vision 2030 and Kenya’s Industrial Transformation Program will be reached. Recently, two of Kenya’s governmental authorities were charged with $3.2 billion fraud when building a railway road. The project was funded by Chinese investors, who showed great interest in improving logistics in Kenya. Fraudulent and dishonest actions like that might scare off the investors and drastically decrease the inflow of FDI. Kenya’s pathway is still unclear – it focuses on innovative development, but still has infrastructural issues. The future of Kenya is promising, but will it be able to overcome the barriers to embrace the full beauty of innovation, support, and sustainability.