Kenya is slowly losing its cloud as the preferred regional destination for investors financing new and upcoming ICT firms to technology start-ups in Rwanda and Uganda.
While the country still accounts for the bulk of investments in technology, the two East African nations are starting to get a pie of the money that has traditionally come to Kenya.
According to the GSM Association, the global lobby for mobile network operators, Kenya is among the three countries that have in the past found favour among investors but is ceding this position to her peers - Rwanda, Uganda, Ghana and Senegal.
This is partly fuelled by better policies that investors find friendlier in the case of Rwanda. Preference for Uganda is despite retrogressive policies for the sector by the Government such as the recent social media tax.
“Kenya, Nigeria and South Africa remained the most popular investment destinations, accounting for 80 per cent of total funds raised by start-ups in the region,” said GSMA in its latest report dubbed The Mobile Economy in sub-Saharan Africa.
“However, there is a downward trend in the combined share of investments for the three markets, from more than 80 per cent in 2015 and 2016, shows growing investor appetite for other markets notably Ghana, Rwanda, Senegal and Uganda.”
The loss of the funding and market share notwithstanding, local start-ups received the second largest share of funding after South Africa.
According to GSMA, 27 Kenyan tech start-ups received Sh14.7 billion ($147 million) in 2017 to fund their businesses.
In South Africa, 42 start-ups received funding of Sh16.7 billion while 17 Nigerian start-ups were financed to a tune of Sh11.4 billion ($114.6 million.
Among the high profile investments made in firms operating in Kenya include an Sh860 million investment in mobile solutions start-up Africa’s Talking whose new investors include the International Finance Corporation, Orange Digital Ventures and Social Capital.
mSurvey, a customer feedback platform headquartered in Nairobi, also received major financing that is expected to help it expand to Nigeria and South Africa. Investments in the company were led by TLcom Capital, with investment from Social Capital, Kapor Capital and Golden Palm who pumped Sh350 million in the company. Tech start-ups in Rwanda received Sh3.67 billion in new funding last year while Ugandans received Sh1.6 billion, growing from negligible amounts in previous years.
Other than losing some of the new funding going to start-ups, Kenya is also seeing a fewer number of technology hubs being established in the country.
For years, the country has been second to South Africa in Sub-Saharan Africa in terms of the number tech hubs, a position now occupied by Nigeria.
Kenya now has 30 hubs growing from 27 in 2016 while Nigeria doubled the number of its tech hubs over the same period to 55 hubs from 23. These tech spaces are critical in promoting ideas among young ICT firms as well providing them with business support and services to enable them build their companies.
“There were 355 active tech hubs across Sub-Sahara Africa in 2018, up from 239 in 2016. Nearly half of the all the tech hubs in the region are located in four countries – Ghana, Kenya, Nigeria and South Africa,” said GSMA.
Fewer investor funds getting into the tech start-ups and marginal growth in technology hubs is in addition to the reduction in the value of ICT exports by the country, all of which is not a great sign for the Vision 2030 pillar.
According to the Kenya Economic Survey 2018, ICT exports went down by 42.7 per cent last year compared to 6.6 per cent growth recorded in 2016.
This could be partly attributed to the lengthy electioneering period that may have seen investors in the sector slow down activities as they adopted a wait and see approach as well as a maturing industry.
Overall, the ICT industry grew 11 per cent largely due to a surge in mobile telephony and uptake of the Internet.
Despite the seeming slowdown in investments in the technology sector as well as flat activities compared to a decade ago, analysts say innovation in the ICT sector Kenya has not slowed down but changed in direction.
This is as the industry matures after a fast-paced phase experienced for more than a decade now. The industry has also been getting its fair share of investments from local and foreign investors.
Other than the tech start-up scene, global technology giants have been scrambling for a piece of Kenya’s multi-billion broadband market stoking competition with local telecommunication service providers and presenting fresh challenges for policy makers.
Google, Microsoft and Facebook have of late made significant investments in deploying broadband across various parts of Kenya introducing attractive new offerings for consumers.
These include Google’s Project Loon, which uses high-altitude balloons to deliver broadband to underserved areas.
The project features specialised balloons, each the size of a tennis court, with solar panels that power the affixed telecommunication equipment flying 20 kilometres above the earth’s surface.
The balloons can fly for more than 100 days receiving and redirecting LTE data from base stations on the ground onto users’ phones. There is also Facebook’s Express WiFi project, a public wi-fi hotspot service providing consumers with pay-as-you-go Internet services.