- About 80 percent of trade in East Africa goes through Kenya’s Port of Mombasa.
- Kenya is a top destination for venture capital on the continent.
- Renewable sources account for the majority of Kenya’s on-grid electricity production.
The top American diplomat in Nairobi Meg Whitman is turning out to be one of the biggest marketers for Nairobi, calling for increased US investments in Kenya and across Africa.
Kenya and many economies in Africa have a significant number of relatively untapped industries. Emerging sectors such as technology, e-commerce, financial services, healthcare, and energy offer substantial potential for growth.
“When I was a CEO–I’ll be honest–I probably thought of Africa about 1 per cent of the time. Many of the businesses I managed were heavily invested elsewhere. But if I were back in the boardroom today, Africa would be on my radar for two simple reasons: supply chain diversification and net-zero emissions,” Ambassador Meg Whitman notes in part in a statement on the Kenya embassy website.
There are numerous reasons why international US companies should or are considering Africa, particularly Kenya, for trade and investment prospects.
Potential in Africa’s young population
Whitman is best known for her leadership roles at major companies such as eBay and Hewlett-Packard (HP). In 2011, Whitman joined HP as CEO. She later become CEO of Hewlett Packard Enterprise when HP split into two companies in 2015. She led the company through a period of significant transformation and restructuring, focusing on stabilizing its financial performance and driving innovation.
Whitman is seeing great potential in Africa’s young population. With 60 percent of the population under 25, Africa has the youngest population in the world currently. Projections show that a quarter of the world’s population will reside in Africa by 2050.
With chances similar to those Southeast Asia offered twenty years ago, Africa is the last and greatest emerging market. The continent of 1.2 billion people provides the last significant prospects for supply chain and growing consumer markets. The gateway to East Africa is Kenya, Whitman notes, adding that the country is the greatest economy regionally. Around 80 percent of regional trade in East Africa goes through Kenya’s Port of Mombasa.
Additionally, the Jomo Kenyatta International Airport (JKIA) in Nairobi, is the busiest airport in East Africa. JKIA serves 40 passenger airlines and 25 freight carriers, including US behemoths FedEx and DHL. Kenya also boasts first-rate infrastructure, including a standard gauge railway, a network of brand-new roads, and modern ports.
Kenya is a regional financial services hub
For many years, there have been several foreign banks in Nairobi, and numerous international financial organizations, like the World Bank and IMF, have made Nairobi their regional headquarters.
Nairobi is also home to the largest stock exchange in the region. The city also offers essential accounting, legal, and consulting services to maintain and advance this status.
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Further, Kenya is a top destination for venture capital on the continent and has drawn large amounts of foreign direct investment. The total amount of funding in Africa rose by 8 percent last year, despite a 35 percent decline in venture capital flows internationally.
Even more impressive, money to Kenya climbed by 33 percent, one of the strongest growth rates in Africa. In comparison, funding to Nigeria was down 36 percent and investment to South Africa was practically flat.
The US ambassador notes that Kenya receives significantly more venture capital than anywhere else on the continent. Overall, Kenya generates around three times as much venture capital per unit of GDP as Nigeria, Egypt, and South Africa.
Kenya’s venture capital flows are more broad than those of its continental rivals, who primarily draw fintech-led investments. E-commerce and cleantech are the largest contributors, followed by fintech, agritech, and business investments.
Further making Kenya special is the fact that in 2022, more Kenyan women-founded firms received $146 million in equity than any other nation on the continent.
Use of renewable energy on the rise
In the energy sector, geothermal, wind, and solar energy presently account for the majority of Kenya’s on-grid electricity mix.
Additionally, PowerAfrica and the United States International Development Finance Corporation assist Kipeto, Kenya’s second-largest wind farm. What’s more, Kenya has pledged to use only renewable energy sources by 2030 and is already on track to do so.
“Every firm I have spoken with raves about the quality of the Kenyan workforce,” the US Ambassador notes. Kenya is an English-speaking country with high levels of literacy and a robust primary, secondary, and tertiary education system, offering a skilled labour market.
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Kenya’s top export destination is currently the US, just ahead of its neighbor Uganda. Kenya exported commodities for a total of $890 million to the US in 2022.
Over $540 million in garment exports from Kenya to the US were reported in 2022. The apparel sector employs close to 200,000 Kenyans, largely young women. Leading American clothing companies that source from Kenya include PVH, which is made up of Tommy Hilfiger and Calvin Klein, Kontoor, which is made up of Lee and Wrangler. Other US giants importing from Kenya are Walmart and Levi’s.
Top US companies with presence in Kenya
To further boost trade, new alliances have been formed with a number of top manufacturers, including MAS and Mega, Coast Apparel, and UAL. These alliances will result in the creation of at least 20,000 more jobs and a $200 million increase in exports by 2025.
With plans for development, the Turkana Wind Power Project, one of the biggest in Africa and a producer of over 20 percent of Kenya’s electricity in 2022, has lately been acquired in part by Milele Energy, a US firm. Another US company, Symbion Power, is nearing an agreement to build a geothermal plant in the Rift Valley.
A deal for the construction of a new $500 million vaccine factory facility in Kenya has been finalized by the vaccine maker Moderna. For Moderna, this will be their first factory outside of the US and the only one of its kind in Africa. The investment by Moderna will spur the production of over 500 million vaccines annually in Africa.
Additionally, the US exported about $600 million to Kenya last year. The $1.5 billion in total trade between the US and Kenya is reasonably balanced and is anticipated to rise as the two countries work on a first-of-its-kind bilateral trade deal. Once signed, this agreement will serve as a template for the rest of Africa, says Whitman.
“The Kenyan government has made great strides and is committed to creating a business-friendly environment,” Ambassador Whitman notes.
Urgent need to tackle ghosts of corruption
She, however, calls on Nairobi to streamline taxes and tackle corruption to attract more US investments. “While corruption does remain a challenge in Kenya, as in other developing markets, third-party measures of corruption indicate positive trends and modest progress in recent years,” Whitman explains.
Kenya received a “Control of Corruption” score of 0.28 from the US Millennium Challenge Corporation, which is the highest score it has ever received and represents its third consecutive passing result. In comparison to India’s 0.18 and Vietnam’s 0.19, Kenya’s 0.28 score was higher.
