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Ambassador Meg Whitman: Why Kenya, why Africa?

The U.S.-Kenya partnership is strong, built on sixty years of shared values and interests.

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by MERCY ASAMBA

Opinion30 April 2023 - 08:36

In Summary


  • •Kenya is the most stable democracy in East Africa,
  • •Kenya is the gateway to the East African market of almost 500 million consumers,
US ambassador to Kenya Meg Whitman.

I am happy to kick off our U.S.-Kenya Business Roadshow with all of you today and to announce that we will be partnering with Prosper Africa throughout the year to engage businesses and investors in cities across the United States. Our next stops include San Francisco and Chicago.

A lot of people have often asked me, “Why did you want to be the ambassador to Kenya?”  And as I’ve told many, when President Biden mentioned Silicon Savannah and Kenya’s economic growth potential, I did not need convincing.

The U.S.-Kenya partnership is strong, built on sixty years of shared values and interests.  Our partnership has enhanced security, increased prosperity, and improved the lives of Kenyans and Americans.

It only takes a few visits around Kenya to see the development and growth potential.  There are many reasons why global businesses should consider Africa – and specifically Kenya – for trade and investment opportunities. Today I will answer the question: Why Africa, Why Kenya?

When I was a CEO – I’ll be honest – I probably thought of Africa about 1% of the time.  Many of the businesses I managed were heavily involved elsewhere.  But if I were back in the boardroom, Africa would be on my radar for two simple reasons:  supply chain diversification and net-zero emissions.

If the War in Ukraine and the COVID pandemic taught us anything from a business perspective, it is that single sourcing from any one country is not smart.  Single sourcing is a recipe for supply chain disruption and shortage.

What the War in Ukraine and the pandemic did to spur supply chain diversification, climate change has done the same for energy use.  Businesses are pushing for net-zero emissions to meet their climate change mitigation goals. Kenya currently generates 93% of its electricity from renewable sources and this percentage is only going up with increased investments in solar, geothermal, and wind. If you invest in Kenya, you will have access to ubiquitous green energy and you will be well on your way to meeting your companies Scope 2 greenhouse gas emissions goals.

So, if you have not thought of investing or growing your business in sub-Saharan Africa, ponder these words from a CEO of a major consumer tech company I recently spoke with.  He said, “supply chain diversification is now an essential element of our business and so is the need to be totally green.  In that sense Kenya seems to offer us a one-two punch to success.”

Some of you may know that I love data and I often say to my team “let’s muck around in the numbers.”  At the Embassy, we’ve been doing a LOT of mucking around in trade and investment data.  What I’ve learned over the past eight months has been surprising and paints a much more dynamic business outlook for Africa than most Americans realize. Here are some I found particularly interesting.

WHY AFRICA?

By 2050, one in four humans, a quarter of the world’s population, and one in three working-age people, will live in Africa.

Africa is a young continent – the youngest in the world with 60% of the population under the age of 25.

Africa is the last, and largest, emerging market and offers the last big supply chain and consumer prospects, with opportunities like the ones Southeast Asia presented 20 years ago.

WHY KENYA?

You now know Why Africa should be on your radar.  But let’s zoom in on Why Kenya should be your target destination.

Here are some reasons:

– Kenya is the most stable democracy in East Africa,

– Kenya is the gateway to the East African market of almost 500 million consumers,

– Kenya is the regional logistics hub,

– Kenya is the leading regional finance hub,

– Kenya is the leading destination for foreign direct investment and venture capital,

– Kenya has the Silicon Savanah, with super smart engineers,

– Kenya has young, educated, English-speaking workforce,

– Kenya generates over 90% of its energy from renewable sources, and,

– Kenya’s largest export market is the United States.

Let me repeat:  Kenya’s largest export market is the United States.  And we feel Kenya is ready for export lift off as it diversifies.

Let’s unpack a few of these areas:

Democracy

I arrived in Kenya days before the August 2022 general elections.  What I witnessed was nothing short of remarkable.  Kenya held what many analysts and commentators say was the freest, fairest, and most credible election in Kenyan history.  The election was observed by international and local election organizations and upheld by the Kenyan Supreme Court.  Power was transferred orderly and peacefully at the time.

Gateway to East Africa

Kenya is the gateway to East Africa.  Eighty percent of East African regional trade passes through Kenya’s Mombasa Port.

In addition, Jomo Kenyatta International Airport in Nairobi is the busiest airport in East Africa, served by 40 passenger airlines and 25 cargo carriers, including FedEx and DHL.  Kenya has some excellent infrastructure.

Nairobi’s also has a vibrant technology community known as the Silicon Savannah and the Kenyan government is committed to establishing Nairobi as the premier destination for tech sector investment and innovation in Africa.

Many U.S. tech companies have already figured this out and decided that they need to be in Kenya, including the names you see on the screen.

Less known, but also hugely impactful tech companies like Copia Global, Semiconductor Technologies Limited, Twiga Foods, Market Force, Power Financial Wellness, and many electric vehicle startups are here too.  I’ve met these companies, visited their operations, and what I see happening here has many of the critical components that make Silicon Savannah a reality.

At the nexus of finance and technology sits one of the most impressive companies I have ever seen: MPesa.  MPesa mobile money was developed by Kenyan innovators in 2007, and by 2010, MPesa had become the largest mobile money network in the world.

MPesa has annual revenues of $1.3 billion U.S. dollars, $360 billion flows through the platform yearly, and has an open API with 60,000 developers.

It solved one of the biggest challenges in the mobile money market sector:  mobile, secure, ubiquitous, low-cost payments.  MPesa has over 50 million customers in 7 countries, is involved in over 70% of Kenyan transactions, powers over 5 Million businesses, and 59% of Kenya’s annual GDP flows through it. Let me tell you something: I know a little about this industry having bought and owned PayPal at eBay.  I assure you MPesa is extraordinary. MPesa alone demonstrates the brilliant business minds at work here devising African solutions to Global problems.

Foreign Direct Investment

Kenya leads in foreign direct investment and venture capital too.  While venture capital flows decreased by 35 percent globally last year, total funding in Africa actually increased by 8 percent.  And more impressively, while venture capital to Nigeria was down 36 percent and essentially flat in South Africa, funding to Kenya increased by 33 percent, one of the highest growth rates on the continent.

Adjusted for GDP, Kenya receives significantly more venture capital than anywhere else on the continent, generating roughly triple the venture capital to GDP ratios of Nigeria, Egypt, and South Africa.

Unlike its continental competitors who attract predominantly fintech led investments, Kenya’s venture capital flows are more diverse, led by e- commerce and cleantech, followed by fintech, agritech, and enterprise investments.

And what’s even more unique for Kenya, in 2022, Kenyan female-founded startups raised $146 million in equity, again more than any other country on the continent.

Renewable Energy

More than 90% of Kenya’s on-grid electricity is currently generated from renewable sources, primarily geothermal, wind, and solar.  A few weeks ago, I had the pleasure of visiting Kipeto Wind farm in Kajiado county.  Kipeto, the second largest wind farm in Kenya, is proudly supported by the U.S. International Development Finance Corporation and PowerAfrica.  It’s amazing that Kenya has committed to reaching 100% renewable energy by 2030 and is already close to achieving its goal.

Workforce

From a workforce perspective, Kenya is English-speaking, has high literacy rates, and a strong primary, secondary, and tertiary education system.  In fact, 86% of the labor force has some post-secondary education, outpacing the regional average of 72% and the country boasts some excellent universities. Every firm I have talked with raves about the quality of the Kenyan workforce.

U.S. is Kenya’s Largest Export Market

In 2022, the United States became Kenya’s largest export market, edging ahead of neighboring Uganda.  In total, Kenya exported about $890 million in goods to the United States last year.

In addition, the United States exported around $600 million in goods to Kenya.  $1.5 billion in total U.S.-Kenya trade is fairly balanced and is expected to increase as the United States and Kenya negotiate a first-of-its-kind bilateral trade agreement between the United States and a sub-Saharan African country known as the Strategic Trade and Investment Partnership. This agreement, currently being negotiated, will be a model for the rest of the continent once signed.

Too good to be true

So now you know why I am so enthusiastic about the Kenyan investment climate, but I will note, however, there is room for improvement.  The Kenyan government has made great strides and is committed to creating a business-friendly environment.  If it is to accomplish this goal the government will have to address the following items. And the first is taxes.

Taxes

Kenya must have a consistent, transparent, and fairly administered national tax policy to attract and retain foreign direct investment and accelerate economic development and I congratulate President Ruto for announcing at the Amcham Summit he is committed to implementing one by June.

Corruption

Without a doubt corruption is also a critical issue and one that must be addressed for Kenya to reach its full potential in all areas of development.  Corruption leads to misuse of public resources, slows economic growth and job creation, and damages the investment climate.  Corruption also undermines equal participation in the prosperity of this country and erodes public trust in institutions.

However, 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.

According to the U.S. Millennium Challenge Corporation’s country scorecards for 2023, Kenya’s score for “Control of Corruption” was 0.28 representing its third passing score in a row and highest score to date.  To put this number in context, Kenya’s 0.28 was superior to India’s 0.18 and Vietnam’s 0.19.

Debt to GDP

Kenya, like many developing countries, is burdened with high debt, limiting its ability to fund public services and infrastructure in line with its ambitions.  According to the IMF, Kenya’s debt to GDP ratio is 69% but this number is not an outlier amongst regional averages.  For comparison, Malaysia’s debt to GDP stood at 69% in 2021 while India’s ratio was 83% in 2022.

Cargo Clearance

Another issue I often hear about is cargo clearance.  Despite improving logistics infrastructure, the delivered cost of a container shipment to Kenya does remain significantly higher than for container shipments landing in Europe or Asia.  While there is room for improvement on the cost, clearance times at the Port of Mombasa have been reduced from over 11 days in 2010 to 3.5 days in 2022.   This reduction occurred despite cargo consistently increasing over the past five years, from 27 million metric tons in 2016 to nearly 35 million metric tons in 2021.

Manufacturing

This is an excellent opportunity to put to rest the argument that Kenya is not a manufacturing country.  True, Kenya has room to grow in this sector, but manufacturing is happening here.  Let me give you a few examples.

Gearbox, a high-mix low-flow electronics manufacturer in Nairobi, runs a state-of-the-art surface-mount assembly line and in November 2022 began manufacturing Raspberry Pi’s Pico product for the African market.  Gearbox’s production quality meets or exceeds that of Raspberry Pi’s other production sites in Wales and in Japan, producing a first pass yield of 99.6%.

Semiconductor Technologies Limited (STL), a U.S.-owned semiconductor manufacturing and nanotechnology company domiciled in Kenya, is growing rapidly, and has hired more than 80 Kenyan engineers in the past two years.

Kenya’s Revital Healthcare is one of the largest manufacturers of medical products in Africa, producing 48 devices and exporting to 28 countries.

Isuzu’s East Africa assembly plant has been operating in Nairobi since 1977, selling more than 90,000 units with over 15 models.

There is also a robust and growing electric vehicle manufacturing and assembly industry in Kenya.  Kenya is the future for Africa’s two- and three- wheel e-mobility and e-buses.

Lastly, when we talk about trade, we must talk about apparel and apparel manufacturing.  Last year Kenya recorded its highest ever apparel exports to the United States, over $540 million, employing nearly 200,000 Kenyans, mostly young women.

Leading U.S. apparel brands sourcing from Kenya include PVH, which includes Tommy Hilfiger and Calvin Klein; Kontoor, which includes Lee and Wrangler, and several more including Walmart and Levi’s.

– And what we hear is these brands want more Kenyan apparel manufacturing, both because of the high quality of labor and for Kenya’s leadership in renewable energy.

Brands are steadily moving production operations to Kenya from Sri Lanka, Bangladesh, Ethiopia, and China because of what Kenya has to offer.  And more of this is on the way.

“THERE’S SOMETHING HAPPENING HERE”

There is clearly something happening here.  It is abundantly clear to me, and I hope by now it is abundantly clear to you, Kenya is open for business.  Here are additional data points to consider:

These are the major U.S. companies that have already made the jump to Africa with regional or continent-wide headquarters in Kenya, many previously mentioned.

Major multinationals have regional offices in Kenya, including powerhouses like LG, Toyota, Volkswagen, Peugeot, Standard Chartered, and Old Mutual.

The medical ecosystem in Kenya keeps expanding with Hologic, GE, Cigna, Pfizer, Abbott, and Varian Medical Systems already here.

And there are more exciting developments happening every day.  American sports associations like the NBA, the NFL, MLB, MLS, and entertainment icon, The Grammys, are all currently looking for a foothold in Kenya.

The television and movie industries are discovering Kenya – just look at the fact that Kenya now has a Real Housewives of Nairobi!


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