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Kenya Innovation Opportunities

by: Tatjana Guznajeva - Technopolis Group

 

Why should I read this document?

 

When confronted with the differences between your own market and the market of Kenya you will likely feel that you have to adapt your product/service significantly to make it fit the preferences and expendable income of local people. While many may see this as a challenge this can also proof to be a great opportunity for your company! Adapting to a new market, like Kenya, will allow your company to innovate. Not only will operating in Kenya lead to new insights to be more successful in Kenya, you will most likely also pick up on ideas to be more successful in your home market.

 

This document provides a short overview of innovation aspects, business opportunities and challenges in Kenya. It will also give advice on best practices for starting and developing an innovative business venture, considering Kenya’s country context. May it help you to explore Kenya and lead you to innovation and success.

 

Opportunities and tips for innovation and doing business in Kenya

 

  • Kenya is one of the fastest growing economies in Sub-Saharan Africa with a population of 49.8 mln. (expected to reach almost 150 mln. by the end of the 21st century). In the last five years, per capita income has grown from 685 EUR to 1200 EUR, leading to a higher disposable income. Hence, the country has a large consumer market.
  • Kenya is a hub for technological innovation and creativity in East Africa. Nairobi’s Silicon Savannah is attracting entrepreneurs and is expanding beyond the city limits. ICT companies, in particular, might find numerous opportunities in Nairobi.  
  • The agriculture sector in Kenya is one of major contributors to economic growth, however, the development of this sector is hampered by the lack of technologies for irrigation, packaging, processing, transportation and storage.
  • Kenya has a large number of entrepreneurs, a recently improved constitution and better infrastructure than other countries in East and Sub-Saharan Africa. In addition, there is a young and skilled workforce (around 60% of the population is below 30 years old).
  • Kenya has a strong and globally competitive financial service sector that encourages domestic and foreign investment. Moreover, Kenya is a world leader in micro- payments and micro-loans, due to development of social innovation and fast mobile broadband available across the country.  
  • As a result of Kenya’s improved digital infrastructure as well as a large demand and use of technologies, there are large opportunities for technology producers/traders and e-commerce.
  • Kenya is a good place for domestic and international trade, due to the convenient geographic location, infrastructural projects at Lamu Port, Southern Sudan-Ethiopia transport corridor and the new Mombasa-Kampala-Kigali railway. Above-listed projects are expanding, they are seen as good investment opportunities.  
  • Due to growing demand and both public and private investments, the sectors that are likely to grow in the coming years are agriculture, telecommunications, financial services, transport and tourism. Consider one of these sectors for doing business and innovating in Kenya.
  • Dynamic economic and population growth puts pressure on the construction industry. There is a large demand in construction of low-cost commercial, residential and industrial buildings.
  • Kenya strongly relies on import of machinery, textiles and chemical products. The competition of these goods in the market is not very strong, therefore local production or trade could be profitable.

 


On Level 2 you can find information about innovation climate in Kenya, while Level 3 will tell you more about business activities in Kenya.

 

 

This page will tell you about innovation ecosystem, major technology sectors, innovation and business practices in Kenya.

 

Innovation ecosystem

 

Innovation in Kenya is perceived as a solution to social and economic challenges, however, the country does not have a strong scientific and technological base. Social innovation and the sharing economy in Kenya have been growing in the last two decades; currently, there are 44 thousand social enterprises in Kenya and a great number of ‘chamas’ – cooperative investment groups. Despite availability of a large share of young, educated population, a skill gap exists and this hampers scientific development, entrepreneurship and innovation. To address existing gaps, in 2010 the Kenya’s government encouraged the creation of 15 partnerships between universities and major industrial players, most of which are foreign companies. The key areas of the current initiative are manufacturing and automation, water management and software development.

 

Despite existing challenges and a slow process of technological, process and product innovation, Kenya achieved a significant progress in the last decades by formulating innovation, science and technology policies, supporting research at public universities and establishing a national commercialisation agency. The government of Kenya puts innovation at the core of its developmental agenda, therefore the Vision 2030 and the National Science, Technology and Innovation Act emphasise that the amount of investment on innovation, R&D spending will be doubled. Business and startup ecosystems have received a substantial boost, due to improvement of mobile and Internet infrastructure. As a result, a large share of private companies are exploring innovation opportunities connected to ICT.

 

Innovation sectors and technology

 

Innovation in Kenya is strongly connected to addressing local challenges. The government has prioritised four development sectors for innovation: manufacturing, universal healthcare, affordable housing and food security. As a result, there is a growth of entrepreneurship and technological development in these sectors. Due to support of international donors and development agencies, Kenya is developing renewable, green technologies and testing environmentally sustainable solutions.

 

The development of ICT or related technologies are most common in Kenya. The government, entrepreneurs and investors realise that digitalisation can transform Kenya’s economy, therefore increasing flows of investments are directed towards these technologies. In the last decade, ICT technologies have been actively applied for development of traditional sectors, such as agriculture. The deployment of artificial intelligence, robotics for agricultural production are expected to boost the economy and contribute to poverty alleviation (35.6% of Kenyans live below the international poverty line in 2016).

 

Innovation culture and practices

 

Similar to many other African countries, Kenya skipped some stages of technological development, for example, the landline infrastructure is less developed than the mobile broadband network. As a result, Kenyan entrepreneurs welcome modern technologies from Western countries and are actively experimenting with their application in the local context. Kenyan population is very entrepreneurial and optimistic about the potential of innovation and technologies. In contrast to other Sub-Saharan African countries, twice the firms in Kenya are introducing process innovation and around 20% more Kenyan companies are introducing new products or services and have their own website. Despite that Kenya’s business community is vibrant, it lacks coordination between firms and business ideas to maximise profits and increase social utility. In addition, many Kenyan entrepreneurs and innovators do not spend sufficient amounts of time for business planning and testing vitality of business ideas. Consider this when you start an innovative enterprise in Kenya.

 

 

This page highlights major economic sectors and iconic products, shows business trends and explains how easy it is to do business in Kenya. In addition, you will find a list of websites, which provide some hands-on information.

 

What is the country known for?

 

Sectors

 

Agriculture, horticulture, forestry, fishing, mining, transport, tourism, plastic, building and construction, oil refining, commercial ship repair, and information and communication technology.
The service sector comprises 47.9% of GDP in 2017. Within the service sector, real estate, retail, transport, finance and education services represent around 40% of all services. The second biggest sector is agriculture (35.3% of GDP), while industrial sector accounts for 17.2% of GDP.  

 

Iconic products

 

Iconic products are: coffee, tea, spices, trees, plants, plastic, mineral fuels, furniture, batteries, vegetables, clothing, accessories, cigarettes, fruits, nuts, ores, slag, tobacco, and pharmaceuticals.

 

How easy is it to do business in Kenya?

 

Based on the World Bank ranking:

 

  Kenya EU Average Emering markets average
Overall - ease of doing business 92 30 83

 

According to the World Bank ranting, it is more difficult to do business in Kenya than in other emerging markets, on average. Among the greatest barriers for entrepreneurs are corruption, complex and inefficient bureaucratic procedures and a poor physical infrastructure. It is relatively expensive and time-consuming to start business in Kenya, due to inefficiencies in the public institutions. Obtaining construction permits in Kenya is one of the lengthiest procedures, as it takes at least 159 days. Getting electricity and registering the property are also very time-consuming processes, due to need to collect certificates from several local  and national level organisations.  

 

On the bright side, it is easier to get credit in Kenya than in most other African countries, due to stability of the financial system and variety of financing sources. The existence of several trade agreements and faster inspection by customs authorities facilitate the trade across borders in Kenya.

 

Business trends in Kenya

 

Kenya attracts the highest number of Chinese Foreign Direct Investment projects in contrast to other African countries. This brings new sources of finance and opportunities for development, accelerating the country’s integration into the global economy.

 

Agriculture employs the largest share of Kenya’s population (around 61%). The Kenyan government and foreign investors try to assist in transition from agriculture-based to an industry- and service-based economy. Automation, use of artificial intelligence and data analytics are one trend in Kenyan companies, the growth of local and foreign manufacturing firms is apparent, while the agricultural sector needs substantial modernisation.

 

E-commerce is fast-growing in Kenya, this is partly driven by the willingness of consumers to check reviews, compare prices and quality of goods before purchasing. The Digital revolution is affecting the entire population and the way business is done in Kenya. Social media, advertisements, customer interaction channels, interactive technologies are increasingly changing business models, cosumer behaviour and preferences.

 

More hands-on info

 

 

 
 

Bibliography

 

Level 1:

 

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Level 2:

 

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Level 3:

 

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Oxford Business Group (2015). Kenya’s economy growing quickly. Retrieved from: https://oxfordbusinessgroup.com/overview/rising-star-economy-growing-and...
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