Nairobi’s growth—what did they do right?

 Nairobi’s growth—what did they do right?

Deriving its name from the Masai phrase ‘Enkane Nairobi' (place of cool waters), the city has grown quickly to the extent of replacing Mombasa in 1907. Initially it was a rail depot for the Uganda-Kenya railway.

In African countries, modernisation standards have always been a dream, but few have succeeded. What makes Nairobi join the Gulf countries, particularly Dubai, the United Arab Emirates capital in the rapid modernization race?

An established hub of business and culture, the city hosts thousands of Kenyan businesses, as well as a large number of international companies and organizations. Recently, Elon Musk’s SpaceX Starlink internet announced its launch in Kenya in the second quarter of 2023 and will take on existing internet companies (Safaricom, Telkam, Faiba and Zuku). All these run on optic fibre technology.

Africa’s Silicon Valley

Nairobi has transformed into an epic technology center so fast, with StartUp weekends, accelerators, and incubators that have brought together a collection of investors. By 2016, the country had one of Africa’s highest number of US dollar millionaires estimated 8400 in number.

In April of last year, Alphabet Inc’s Google opened a development centre in Nairobi for its continent-expansion base. A number of companies have established their African headquarters in the city which creates linkages for modern growth of both the economy and the ICT sector.

Kenya follows Nigeria in the number of startups that are launching, according to Africa: The Big Deal. Nigeria leads with more than a hundred startups with a combined $1.2 billion—including two $100 million and mega deals. Next is Kenya with $1.1 billion.

Most multi-national companies consider both the labor market and the consumption market for their products/services. Kenya’s service sector contributed 54.41% to the economy’s GDP by 2021.

Start-up environments are characterized by innovation, collaboration and risk taking. These and other essentials are required as motivation frameworks. As a fast-growing city, Nairobi offers not only all these benefits, but also fulfilling the needs of investors and the market.

With hyper-efficient mobile infrastructure—Kenya’s mobile penetration rates have been skyrocketing with subscriptions surpassing the total population amount by 12% and impressive contribution to GPDP (starting 2007 by FinTechs such as M-Pesa).

Government support

In any success story, the role of the government cannot be ignored. Much as Kenyans have adopted a smart and competent standard under their ‘’X’’ talent factor. However, the regulatory policies set up by the Kenyan government that protect consumers to tax policies and incentivizing investment have paved a smooth way for its modern growth.

Kenya is the largest economy in East and Central Africa contributing more than 50% of the region’s GDP. With $0.448BN in total investments in 2021, Kenya is the new business destination for Africa. Most of the global companies are more inclined to invest in countries with low risks as their investment environment.

FDI concentration has been on the rise and stronger than most East African countries, with a higher stream of private investment than most of the other countries. In 2013, it had attracted 12 private equity deals valued at over $110.5 million and was ranked in 2015 by PwC as the most attractive environment for FDI.

Politically, Kenya has outmatched so many African countries by far with multi-party democracy and an enlightened parliament that creates laws that protect private property and shields against mishandling of such property without compensation.

The country has also been identified as easy to do business with. In the World Bank’s Doing Business Index for 2017, Kenya climbed 21 positions to rank 92nd out of 190 countries. That included jumps of 34 positions for ‘Starting a Business’, 21 positions for ‘Getting Electricity’, 25 positions for ‘Protecting Minority Investors’, and 48 positions for ‘Resolving Insolvency’.

The UN notes that there is going to be more demand for modern retail over the next five years. However, the supply chain for shopping is ready to meet the challenge. By next year, a further 1.3 million square feet of modern retail space will be completed in Nairobi. This is as the city expands from being the economic focus of East Africa into its biggest contemporary shopping destination.

As a result of the Kenyan government's favorable macro-economic and fiscal policies, investment is triggered. With avolatility in the market, investor confidence is reduced and most of the potential firms are scared off.

In addition to government investments in basic infrastructure, the rapid growth of the city can be attributed to other factors. For example, modern health care facilities, smooth road networks, security, education facilities, access to clean water and electricity, and IT infrastructures.

 

Geographical location

The country has access to more than seven (7) ports, which have made it easier for the country to conduct international trade both within and outside of the region. Countries like Uganda, Rwanda, Burundi, Sudan and DRC pass their cargo through Kenyan ports. What threat does it pose for landlocked countries to be surpassed by Kenya so fast? Geographical locations are often either constraints or opportunities for development.

Kenya is strategically located as a gateway to the East and Central African region. With a border to the Indian Ocean, Kenya is well suited as a production and distribution base. This will enable us to service Africa, Europe, the Middle East, South Asia and other Indian Ocean islands.

The biggest challenge to countries using Kenya’s ports as a transit of trade is—while bi-lateral trade is important most of these countries will only trade with Kenya if their goods transit through it. As a result, the impact on trade is big.