Kenya loses to Nigeria in start-up rankings

Kenya lost its position to Nigeria in the latest ranking on the conduciveness for start-ups, dropping to position 62 out of 100 countries.

The Global Startup Ecosystem Index 2022 published by StartupBlink also rated 1,000 cities where Nairobi and Mombasa also both dropped in ranking.

StartupBlink is a global data bank for start-up ecosystems, which is meant to serve developers, innovative organisations and researchers.

The report shows Mombasa dropped 135 positions to 891 as Nairobi fell 27 spots to 163.

The report notes that helped by the massive leap of the Lagos start-up ecosystem, Nigeria ended up switching places with Kenya to become the second highest African country in the index after rising two spots to 61st globally.

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This rise by Nigeria also saw the populous West African nation emerge on top of Kenya at position four regionally (Middle East and Africa) as Kenya settled for the fifth spot. In this region, Israel, United Arab Emirates and South Africa held the first three positions, respectively.

Unlike Kenya, Nigeria has three cities ranked - Lagos, Abuja and Ibadan.

Nigeria's climb, the report says, is the result of Lagos' success.

"Lagos has seen a massive jump of 41 places to 81st globally," the report reads, adding that Lagos is the first African city to break into the global top 100, a milestone that should be celebrated.

It notes that Lagos already ranked 99th in 2019 but lost this position in 2020. This rise, the June 2022 report says, shows the immense potential of the ecosystem in Lagos.

Key sectors

"Lagos is ranked 24th globally in the food-tech industry and 43rd in e-commerce and retail. Lagos' achievement in Foodtech should be celebrated because Lagos is the only African city to reach the global top 30 for any of the 11 industries," says the report.

South Africa is the other nation that benefited from Kenya's drop. It is the only country in the continent ranked among the top 50.

The report notes that Cape Town has decreased by two spots to 147th globally, but has moved up to the second highest ranked city in Africa at the expense of Nairobi.

Among the top 20 ranked cities in the Middle East and Africa, Lagos was position three after Tel Aviv Area ad Dubai, which were positions one and two, respectively.

Nairobi was position nine.

Even though Kenya dropped one spot in this year's ranking, it tops the Eastern Africa region and is the third best in Africa.

"The gap between the total score of the two countries (Nigeria and Kenya) is small, suggesting Kenya has an opportunity to reclaim the 2nd spot in Africa next year," the report reads.

Nairobi's drop of 27 spots swept it out of the top 150 cities even as it still ranks first in Eastern Africa.

"Nairobi, which ranked 1st in Africa in 2020, has lost three positions to rank fifth in Africa, now preceded not only by Lagos, but also by Cape Town, Johannesburg, and Cairo," the report says. "Nairobi is ranked 37th in Fintech, 71 in the energy and environment industry, and 80th in food-tech."

Mombasa's position at 891 is worrisome, considering it joined the ranking in 2021 at a higher spot at 756. These are 135 spots below.

"Kenya needs to reverse the decreasing trend of its ecosystems in order to reclaim its second position in Africa," the report says.

The report acknowledges Kenya as one of the most advanced economies in the continent, as the country has become an innovative tech hub, particularly for mobile money payment solutions. It cites M-Pesa, a mobile money service that allows individuals and businesses to receive and send money through their phones.

Kenya is regarded as a gateway to a mature economy and has a growing culture of entrepreneurship. The fact that it is an English-speaking country as its official language is an added advantage.

The report lists Kenya alongside Nigeria, Egypt and South Africa as the top attractive destinations for funding for start-ups.

"In 2021, the number of tech startups raising funds in Kenya was on the rise, with several startups securing solid investments. Tushop, for example, received Sh360 million ($3 million) in pre-seed funding, while Wasoko, a tech start-up, is set to become Kenya's first unicorn," the report reads.

The government is also lauded for supporting the start-up ecosystem development in the country with the launch of Konza Technopolis, a tech hub.

"The new Startup Bill 2020 was introduced, and if passed will establish a new framework for entrepreneurship in Kenya," it says.

Nairobi's advantage

Considering the fact that Nairobi hosts tech giants like Google, Microsoft, Samsung and Intel, which makes the city more attractive to top tech start-ups apart from having accelerators like Antler and Pangea Accelerator, Kenya still has the ingredients to recover its position and climb even higher.

"Unlike Nigeria, Kenya - with a population of just over 50 million - will not be able to create a critical mass of unicorns from within its local market. The key to becoming a regional hub will be by continuing to focus on regional and global scalable startups," the report says.

But even as Kenya will be looking forward to reclaiming its position from Nigeria, it should be noted that Egypt has also been poised by the report as a strong competitor.

Globally, Egypt's position went up five spots to number 65.

"Egypt has improved its position in Africa by one spot, to fourth, and with a comfortable lead from Mauritius at fifth. Egypt remains the highest ranked country in the North Africa region and climbed to seventh place in the Middle East and Africa region," the report details.

"The big question for Egypt is whether the country can continue to show good results, allowing it to aim at the second or third regional position, displacing Nigeria or Kenya."