The bill led the African Private Equity and Venture Capital Association to rate Kenya ‘among the leading hubs of start-up businesses in Africa’
Sub-Saharan Africa is getting a lot of attention from investors right now, and with good reason. Opportunities for investment and development abound, but Kenya stands out as the place investors should focus on for a variety of reasons.
While Covid-19 has interrupted and delayed many plans, it didn’t stop Kenya publishing a new Start-up Bill in September. The bill is designed to encourage the creation of new businesses for local and foreign investors and foster business incubation.
In effect, it creates a link between investors, the Kenyan government and research institutions as the genesis of a sustainable start-up ecosystem. It also provides a legal framework for start-ups by facilitating their registration and creating links to enable them to access capital from financial institutions and investors.
The bill led the African Private Equity and Venture Capital Association to rate Kenya “among the leading hubs of start-up businesses in Africa” in an October 2020 report, highlighting it as a country experiencing rapid entrepreneurial growth.
Even before Covid-19 and the bill, Kenya offered an enabling environment for business. The World Bank’s “doing business” scale, which rates the ease of doing business across the world, scores Kenya 83% when it comes to starting a business. You can’t help but admire the efforts the Kenyan government is making to foster growth and attract business investment. It has worked hard at creating incentives that make trade more accessible and attractive by providing the kind of business predictability that the rest of the world expects.
Among the initiatives it has put in place are more vital access to credit, better protection of minority investors, and modernising critical infrastructure such as electricity supply. It’s clear that the country is open for business and thinking ahead to a post-coronavirus-19 world. It’s also worth noting the International Monetary Fund’s (IMF) World Economic Outlook Report of April 2020 forecast Kenya’s GDP growth at 6.1% throughout 2021, the highest forecast for any country in Sub-Saharan Africa.
Obviously, Covid-19 means all countries can now expect substantially slower GDP expansion. Still, a recent Deloitte report on post-coronavirus economic recovery in Sub-Saharan Africa acknowledges that previously high-growth economies, such as Kenya, are likely to rebound in 2021 as economies rebuild.
The hospitable Kenyan business environment has seen growth in significant sectors such as fintech, an essential enabler in growing a nation’s middle-class. Kenyans have money to spare, and they’re enjoying spending it, providing an opportunity for growth in consumer sectors too.
A key AfCFTA player
Looking beyond its borders, Kenya is the leading member of the East African Community (EAC) customs union and common market (which includes Burundi, Rwanda, Tanzania and Uganda). The EAC has put in place trade facilitation reforms that make it easier, cheaper, faster and more straightforward to trade, not just between themselves but with other countries too.
The experience has taught Kenya the importance of community, making them a key player in the African Continental Free Trade Agreement (AfCFTA), which came into force in May 2019. The aim of this forward-thinking agreement makes huge strides in helping African businesses integrate into global supply chains by a variety of significant means. These include lower tariffs, eliminating non-tariff barriers, reducing bureaucracy, and simplifying customs procedures.
The AfCFTA represents a significant opportunity for member countries to boost their growth, reduce poverty, and broaden economic inclusion for their people. The agreement will strengthen Africa’s income by $450bn by 2035 (adding $76bn to the income of the rest of the world), and increase Africa’s exports by $560bn.
The challenges of 2020 have interrupted the finalisation of the AfCFTA, with some negotiations and structures yet to be finalised. Still, it makes Africa a particularly compelling option at a time when countries in both the West and East are more divided than they have ever been.
As a flagship project of the AU, the AfCFTA has political support at the highest levels, not least because it is emblematic of the will of African countries to take responsibility for their people, offering everyone a brighter future. That’s worth supporting, especially when it makes business sense.
Kenya is ready for growth, and anyone looking for opportunities post-calamity would do well to consider it.
