Why investors see Nairobi as digital disruption epicentre

Kenya is increasingly attracting private equity funds, especially in the technology segment. A number of investors have lined up, eyeing a cut of the multi-billion deals being witnessed in Nairobi and other regions of the African continent.

A group of 30 technology entrepreneurs with links to Silicon Valley recently raised $200 million (about Sh22 billion) to be pumped in tech start-ups in Kenya and elsewhere in Africa.

The new Africa-focused fund backed by Stockholm-based Norrsken firm, said it will focus on provision of early-stage funding to promising start-ups and upcoming and innovative techpreneurs in Kenya and the region.

The fund did not, however, say how much cash will be pumped into Kenya, only emphasizing that Nairobi “is the new place to be for global investors”.

“Eyes are turning towards Africa as the next epicentre for digital disruption. Technology is enabling emerging enterprises to leapfrog legacy ways of doing business,” noted Ngetha Waithaka, a general partner of the new fund, Norrsken22.

“Leaders are emerging but a lack of growth capital is holding them back.”

Investors are banking on Africa’s tech-savvy youth to drive innovation and deepen enterprise culture.

“Africa has a population of 1.2 billion, where 60 percent are below 25 years old. In the next decade, this young, digital-first generation will change not only the future of Africa but of the world,” said Niklas Adalberth, founder of Norrsken Foundation in a statement echoing similar observations by other funds.

The International Finance Corporation (IFC), the investment arm of the World Bank, underlined the investor sentiments and recently stated that it is aggressively scouting for opportunities in Kenya and other African cpountries.

Aside from technology realm, investors are also eyeing other sectors of the African economy. During his Kenyan visit, IFC managing director Makhtar Diop said the institutuion is eyeing housing, pharmaceutical deals with the Kenyan private sector.

IFC has already invested in about 125 local firms so far, acquiring significant stakes in some companies, but with most of the investments in the form of long-term loans.

IFC has pumped billions of shillings in Kenyan companies such as Co-op Bank, Equity and KCB.

Last December, the African Import and Export Bank (Afrexim Bank) said it wants to pump money into Kenyan firms in various sectors as the Pan-African lender eyes an increased role in the Kenyan economy.

Afrexim, which finances and promotes African trade, said it will work with both government and private sector in financing strategic project.

“We are looking at providing support in different areas,” said Afrexim director and global head of client relations Rene Awambeng.

Recent studies have noted that the improvement in ease of doing business, high return potential across all sectors, a well-diversified economy and consolidation in sectors such as financial services has created an avenue for increased PE activity.

In the financial services, several analysts have said they expect consolidation in the banking industry and innovations to be the main drivers of activity.

Nairobi is seen by investors as a key financial and innovation hub as well as a gateway to East Africa and the whole continent.

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