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 Kohli Ventures
20 September 2014

Kenya – The Land of Opportunity

“As a global tech entrepreneur, I know very well that if you are going to discover treasure, there is little point looking for it in already well ploughed fields;” says Tej Kohli, Founder and Chairman of Kohli Ventures.

At Kohli Ventures we are passionate about the opportunities that lie in the emerging markets, the areas where 70% of world’s growth is forecasted to come from over the next few years. Whilst there are a number of factors driving this, technology is the core organising principle of them all.

Kenya is a market that excites our team enormously, and for good reason. It has a stable, pro-investment government, is in a strategic location with an important port and a well-developed business infrastructure. Significantly, it also has a common language – English, and the literacy rates in Kenya are the highest in Africa. As a result, it boasts highly educated and innovative talent which has help create what is now East Africa’s largest and most dominant economy.

Today Kenya has become a premier outsourcing destination and is becoming a hotspot for the world’s biggest technology companies to set up regional offices – these include Google, IBM, Oracle, Microsoft, SAP and Cisco.

The attraction of forming a business in the country is enhanced by the fact that it is the least expensive and least time-consuming when compared to other East African countries to register property in; its employment practices are also less rigid than sub-Saharan Africa as a whole.

The Kenyan population is fast-growing and becoming more upwardly mobile.

Their technology adoption rates are surpassing those of the developed world – and, they are hungry for convenience, novelty and status, and they are turning to the web in increasing numbers to satisfy these needs.

For example, of the population of 44 million, 30.4 million Kenyans currently have access to a mobile connection. Some 53% of Kenyans access social networks via their mobile phones which has resulted in a 372% increase in Kenyan Facebook users over the last year.

Hardly surprising then that the World Bank estimates that a 10% increase in the penetration of broadband in a country produces a 1.3% increase in GDP.

We see a future where people can connect to a wider world, enjoy a new standard of living, and enjoy greater choice and autonomy than ever before.

This burgeoning market for web-based transactions is driving an urgent need for new payment processing technologies to support them. To serve online consumers, we need systems that can accommodate a wide range of payment methods and international transactions without compromising on security; we know mobile and web-based commerce is the key to unlocking this future. Africa and the Middle East processed $5.7 billion in mobile money volume last year. No other country has come close to Kenya in terms of mobile money adoption but we believe that this is just the start.

With 21.2 million internet users, 892,000 LinkedIn members and 30,585 business registered domains coupled with 100,000 smartphones being sold every month, the team at Kohli Ventures believes that the Kenyan market is perfectly positioned for some sparkling innovations to emerge – and, it is our belief that the most likely place for these great discoveries, lie in the youth of Kenya.

In September this year, the management team of Kohli Ventures met with the President of Kenya, his Excellency Uhuru Kenyatta as well as the Deputy President of Kenya to explore the opportunities for investment in the country’s technology and IT sector as well as participation in the Government’s regeneration projects.

We are actively seeking exciting ideas that we can help nurture and support through access to both intellectual and financial capital.  There are so many great initiatives taking place in Kenya and a commitment to developing its accommodation, discovery of new fresh water and crude oil, tourist resorts and infrastructure – Kohli Ventures wants to be part of making the Kenya Vision of 2030 a reality.

Deloitte Africa – Construction Trends

The story of potential growth for Africa, the world’s second largest continent is backed by some telling statistics. Standard Chartered Bank forecasts that Africa will grow by 7% pa over the next 20 years, slightly faster than China. According to the International Monetary Fund (IMF), between 2001 and 2010 the continent had six of the ten fastest growing countries globally and the IMF projects that between 2011 and 2015, seven of these ten countries will be African.

One of the growth drivers within the continent is a growing middle class, which brings with it increased consumer spending power and rapid urbanisation. Further growth drivers are the continent’s deepening financial sector and resurgent Emerging World partnerships. Added to this, a significant portion of allure lies in Africa’s large share of unexploited industrial commodities including 25% of bauxite, over 60% of diamonds, 50% of cobalt, 80% of phosphate and more than 90% of platinum group metals.

In markets that are shape shifting to survive in the context of finite resources, recent finds of natural gas and oil in East Africa, as well as mineral wealth in West Africa are ratcheting up the continent’s magnetism. Geographic hotspots for mining as well as oil and gas include Mozambique, Angola and South Africa in Southern Africa, Uganda, Kenya and Tanzania in East Africa together with countries along the West African coastline, including Ghana which has recently started oil production.

Looking closer at rapid urbanisation, dramatic changes are taking place. Consider that in 2010 Africa had 51 cities with more than a million inhabitants, and only one city (Cairo) with more than 10 million.

By 2040, Africa is expected to have more than 100 cities of more than a million people and seven cities of over 10 million inhabitants.

Projections by PIDA (2011) propose that Kinshasa, with a population that could reach 24 million, will be the largest African city.

The pressure brought on by fast tracking urbanisation is being felt and in a bid to cope, entire new cities such as Tatu City and Konza City in Kenya, and the City of Light in Accra and King City in Takoradi, Ghana are being developed. In Nigeria, the Greater Port Harcourt City and the modern Eko-Atlantic City are being built on reclaimed sea. These ‘self-contained’ new cities, based on the work-play-live concept, are intended to relieve highly congested metropolises and minimise the need for inhabitants to go into the ‘centre’.

What cannot be discounted in Africa’s growth story is that it has 60% of the world’s unexploited arable land, particularly in countries such as the Sudan, DRC, Mali, Zambia, Tanzania, Mozambique and Angola. From a food security perspective Africa could – even needs to – become a go-to agri-hub. Operational and cost efficiencies must be unlocked through better infrastructure such as dams and irrigation schemes and integrated transport corridors.

Another telling statistic in sculpting Africa’s growth story is that only 10% of trade currently takes place between African countries. Comparatively in Europe this figure is as high as 60%. To raise intra-African trade levels it is imperative to get infrastructure to work synergistically, with regional port-rail-road corridors needing to be rapidly developed. There is, on all fronts, opportunity to sculpt African growth in such a way that the continent becomes more self-serving for its people.

Deloitte

The region has some discernible development highlights. Kenya is characterised by a significant roadworks programme financed by the African Development Bank, China, Brazil and Japan. These programmes are critical considering the country was losing close to Sh50 million (USD590 000) daily due to traffic congestion in Nairobi and its environs, primarily due to the time wasted on the road.

A portion of infrastructure development is designed to connect Kenya to its neighbouring countries, simultaneously helping to operationalise the East African Community. For example the LAPSSET (Lamu Port Southern Sudan – Ethiopia Transport) project aims to connect Kenya, South Sudan and Ethiopia. Nairobi is also experiencing significant commercial, retail and residential apartment construction and numerous hotel developments.

Until the past few years East Africa was a sleepy backwater for the upstream Oil and Gas industry, but the discovery of significant quantities of oil in Uganda in 2006 ushered in a bonanza. In fact, more hydrocarbons have been discovered in East Africa in the past two years than anywhere else. The onshore oil discoveries in Uganda were followed by discoveries in Kenya. Offshore we have seen world-class discoveries of gas in Tanzania.