The Rise of Global Tech Hubs in Kenya // The Impact on Startup Ecosystem

The rise of Global Tech Hubs in Kenya //  What this could mean to start-ups

Kenya has since the early 20s committed to technology. This started with The Vision 2030 economic blueprint, which paved way for the establishment of the Konza Technopolis City project aimed at creating a hub of technology innovation in Africa.

Over the period, Kenya has grown to become the Tech Hub for East Africa and what’s even more gained the Silicon Savannah title, meaning that Kenya is a ripe environment where the government is supportive of innovation through regulation and an education curriculum that promotes technical background. 

This has since seen the growth of startups like Twiga Foods, Lori Systems, Copia and Sendy, which sprout out of the Kenyan Market garner huge funding, and are now gaining a global appeal.

The landscape has gone further to attract a pool of investors both locally and internationally. 

In fact, a  2020 report shows that Kenya was among the top four African countries by value invested through Venture Capital investment.

The AfricArena 2021, by Partech, an investment platform for tech and digital companies, shows that Kenyan startups raised Sh33 billion through venture capital investments, which was second to Nigeria’s Sh33.3 billion in 2020.

The proportion of venture capital investment in Kenya as a proportion of GDP stood at 0.32 percent, making it the highest in Africa. The per capita venture capital investment in Kenya was Sh630 in 2020, which is the highest in Africa, said the report.

The innovation scene has experienced and propelled the growth of tech hubs and co-working spaces in Nairobi further showcasing Nairobi as a haven for innovation hence paving way for the ‘big boys’ to scramble for the space.

From Microsoft to VISA setting up their innovation hub in Kenya, and Google launching its first product development center,  as well as  AmazonWeb Services, announcing AWS local zone cloud infrastructure, the decision for these tech giants to set up local offices all comes down to one thing: meeting client demand. And that demand comes from Kenya’s growing economy and small but fast-growing startup sector.

The downside

While on one hand, this is great for the nation startups are experiencing a huge impact. The entry of the tech giants is expected to rattle local startups and mid-size companies that may struggle to compete or retain top talent, especially from an employee retention standpoint.

For example, there has been massive recruitment by Google and Microsoft. Microsoft for example begun an aggressive hiring spree, aiming to fill 500 software engineering roles at the ADC’s two hubs by 2023. 

While this is a huge opportunity for engineers and developers smaller companies in the area that had invested in and trained young engineers, are swiftly being outbid.

A report by Financial Times in October last year showed that these US tech giants pay top dollar, making it harder for local businesses to recruit and retain key staff.

While this is not a problem specifically for Kenya, recently Microsoft also announced that they will be hiring about 2,500 workers in Israeli. 

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An article in Haaretz newspaper warned that the expansion could jeopardize Israeli companies’ ability to grow. Alongside a “severe shortage” in employees, local companies could struggle to “compete with the deep pockets of these tech giants”.

The good side

Well, it is not all trouble in paradise for startups and mid-sized companies, yet  the entry of the tech giants into the Kenyan market also means more jobs and opportunities for techies.

Having the tech giants set up their tech hubs in Africa also goes a long way to increasing the exposure of a booming tech industry as a whole. 

While we might look at it from an employee retention standpoint, the presence in these more remote areas doesn’t end with employing workers alone but also includes encouraging young people to take up careers in STEM to enter the technological fields.

This is important, especially at a time when there is a widespread discussion regarding the need to open the gates of high-tech to more communities. Increasing awareness and creating role models will aid this goal.

Earlier in the year, Google announced it would invest $1bn in Africa over the next five years to ensure access to faster and cheaper internet. 

Microsoft announced plans to roll out a mentorship program with university partners and run marketability workshops for students. Amazon Web Services is supporting an acceleration program for businesses in South Africa.

Such initiatives mean big tech benefits the entire ecosystem rather than just extracting from it. This is would also regain the faith of the young start-ups and mid-sized companies.

Conclusion

With a supportive business environment, sufficient funding flows and strong connections, Africa and Kenya specifically can become a tech superpower.

All in all, we are looking forward to these exciting times when the world’s largest companies are competing on the one hand then on the other hand Kenya still remains a ‘bed rock’ of innovation as more innovative startups that are disrupting traditional business models in different sectors come up every day and even as more entrepreneurs adopt new technologies and new ways of working like coworking.