Kenya’s Entrepreneurial Ecosystem Thrives Despite Terror Attacks

Kenya's Entrepreneurial Ecosystem Thrives Despite Terror Attacks
Kenya’s capital Nairobi is one of East Africa’s largest cities

AFRICANGLOBE – Kenya’s entrepreneurial ecosystem is thriving, despite a spate of terror attacks over the last few years, including one earlier last month which left hundreds dead and injured. Overseas hotel bookings have been hit hard with last-minute cancellations, but along the country’s well-travelled coastline, on a white, powder sand beach near Mombasa, there is evidence of Kenya’s new, and growing domestic market: the small, but significantly rising Kenyan middle class. A Kenyan family of four occupies the entire main house of Almanara, a small, luxuryresort. Each villa is equipped with no fewer than three bedrooms and a staff of chef, waiter, and housekeeper. And all cost a minimum of $300 per person, per night.

Leo Giovando and his wife Gemma opened Almanara in 2008. It wasn’t exactly great timing, given economies in two of Kenya’s greatest tourism markets, the US and the UK, were tumbling. An increase in tourist-related attacks along the coast over the last few years has brought government-issued warnings, which also hasn’t helped business. The Giovandos could have easily gone under. Instead, Leo says, they turned their attention inwards.

“We’ve become more reliant on domestic tourism since a lot of the incidents occurred. Our resident market exceeds the foreign market, by far. Even if you separate out indigenous Kenyans from expats and other ethnic groups, they still come in as our top source market.”

Sophisticated spending power is also visible at Tribe, Nairobi’s first design-led property, which also opened in 2008. The hotel and its guests live up to its oh-so-hip name, and their Sunday brunch is practically a religious experience for Nairobi’s vibrant, urban professionals. The American-style buffet isn’t exactly Kenyan, but lays on comfort food to members of the recently returned diaspora, many of whom are driving Kenya’s enterprises and creating opportunities for new ones, armed with skills, and disposable income.

Sam Gitungo is 45 years old and works in sales for a global IT company. After 18 years living in the US, he left a six-figure job to return to Kenya in 2011.

“I add more value in the IT industry in Africa, because the West is tapped out. I earn a lower salary in Kenya, but I can invest in local businesses and buy land.”

He isn’t the only one looking for land. It’s a hot topic in Kenya, where, instead of 401ks, professionals plunk down hard-earned cash for acreage. Gitungo has his eyes on a piece of land along a busy road, perfect, he says, for a gas station.

Soha Ehsani’s family has been developing property in Nairobi for 25 years. They arrived as Persian immigrants, and built Village Market, one of the city’s first shopping malls. Since then, they’ve expanded, and are partners in Tribe Hotel, as well as other commercial properties. Their Century City project represents the family’s first foray into the residential market developing million-dollar homes in the affluent northern suburb of Runda. But, property values are high and Ehsani says demand for middle class housing in the $300,000 range is so strong, builders can’t keep up.

“A lot more Kenyans are going out, spending money, but in the property market there’s a huge mismatch – the supply isn’t good quality and there’s still demand because they’re not getting the value.”

Kenya’s top earners are tea, coffee, floriculture and tourism, fluctuating between the four. But, tech entrepreneurs from Europe and elsewhere are fuelling a young, dynamic network of creative, innovative thinkers attracted to the ease of use factor in Nairobi, something rarely associated with African cities.

At a table surrounded by 20 and 30-somethings – all of them expats, some are involved with incubators, regional news sites, and other startups with a distinctly local flavor.

25-year old Dane Martin Neilsen is founder of an African music-sharing app.

“The last 5-10 years, if you have an entrepreneurial mind, Europe just hasn’t looked that attractive, mostly because of the recession. It’s a lot easier to get started here and there’s a lot of opportunities. I planned to stay 9 months and launched Mdundo 6 months later. All my employees are Kenyans.”

Many shun the government’s catchy phrase, Silicon Savannah, to describe Nairobi’s ecosystem, claiming it exaggerates the width and breadth of the community. Yet, the government has broken ground on a 5,000 acre site about an hour from the capital, the future home of Konza technology park. The site will be a mini man-made city, populated with a science park, convention center, shopping mall, hotels, schools, hospitals, golf course, financial district, and most importantly, in a place burdened by traffic, high-speed mass transportation.

Freight transport is expensive in many parts of Africa, including Kenya. Entrepreneurs say certain things, including imports, take longer and cost more than budgeted for, often by at least 25%, because of high taxes, duties and transport. A new railway line, due to be complete in 2018, will connect Nairobi to the valuable port city of Mombasa, and will eventually extend to neighboring Uganda, Rwanda, Burundi and South Sudan. It’s expected to have enormous impacts on regional, and overseas trade, cutting transportation costs by more than half.

There is much hope being placed in the hands of a relatively new government, that of President Uhuru Kenyatta, elected two years ago. Projects like Konza were batons passed to him. He campaigned, and won on promises to tackle corruption and create jobs for the young and unemployed. It’s a monumental task, but Kenyatta has taken steps to increase transparency, and has shown a low tolerance for corruption in his administration, routing out unethical ministers. But, the recent terror attack at Garissa University exposed deeply entrenched corruption at the highest levels of Kenya’s police force. The transition will take time.

Some criticize Kenyatta for his bold statements towards Kenya’s traditional allies, the US and the UK. Both nations have issued travel advisories. Kenyatta’s sharp denials about safety concerns and manuevering of other issues, like conditions on a deal with the UK for British soldiers to train in northern Kenya, continue to harm the country’s tourism business, say industry experts. Dr. Mohanjeet Brar, commercial director of Gamewatchers Safaris and board member of Ecotourism Kenya and ATTA (Advancing Tourism to Africa), says diplomacy is necessary to reverse the situation.

“We’ve had a lot of negative PR, and the perceived threats have had a massive impact. This has become a political issue. These relationships must be repaired for tourism to thrive. The safari experience is very, very protected, not just for the animals, but for the tourists.”

Brar, and others in Kenya’s tourism industry, say the safari business, still heavily reliant on overseas tourists, is struggling. With occupancy rates hitting all-time lows, compounded by VAT and rising park fees, many have had to lay off staff. Luxury beach breaks appeal to middle class Kenyans more than the bush. During a recent weekend at Nairobi’s National Park, just an hour out of the city, there were plenty of city dwellers packed in 4x4s to watch the lions roar, and the giraffes standing guard over the zebras. For Brar and his colleagues, the challenge lies in convincing those with extra cash, that it’s worth spending their shillings on indulgences like an overnight at his Tented Camp,the only one in the park. But, if the influx of entrepreneurs continues, Brar’s job may become easier…20-something workaholics could be tempted by a night under the stars, even if billed as a co-working retreat. And, after all, working remotely takes on a whole new meaning when it’s from a tent, surrounded by roaming animals.

I’ll spend the next few posts on start-up safari, featuring some of Kenya’s most interesting tech, social enterprise, consumer, and solutions-oriented entrepreneurs before heading west to Uganda and Rwanda. No vaccinations required.


By: Amy Guttman