Kenyan Tech Startups’ Contribution to the Nation's Economy

Kenya is one of the world’s most entrepreneurial countries, with a thriving tech startup ecosystem. And it’s not just in major cities like Nairobi; tech startups are sprouting up all over the country, from Mombasa to Kisumu. According to a report, Kenya now has over 1,000 tech startups, up from only 200 in 2014. These startups not only develop new products and services, but they also have a significant impact on the Kenyan economy, having attracted over $1.2 billion between January 2015 and November 2022.

M-Pesa, for example, is a mobile money transfer service that allows users to send and receive money using their mobile phones. The service has been hugely successful, with over 17 million users in Kenya. M-Pesa has helped to increase financial inclusion in Kenya, as well as reducing the costs of money transfers.

Ushahidi is yet another Kenyan tech startup making waves. Ushahidi is a crowdsourcing platform that allows users to map and report violence or natural disaster incidents. The platform has been used in several crises, including the Kenyan election violence in 2007-2008 and the 2010 Haiti earthquake. Ushahidi has also been used for good, such as mapping potholes in Nairobi.

Nairobi’s iHub is a tech incubator and co-working space. iHub is home to several startups as well as a developer, designer, and entrepreneur community. iHub gives startups a place to work on their products and get feedback from the community. iHub also hosts regular events like meetups and hackathons.

How Tech Startups are contributing to Kenyan Economy

Although there is still much to be done the rise of tech startups in Kenya is a very positive development for both the citizens and the economy, here are just a few ways the sector is contributing to economic growth in Kenya:

• Jobs Creation: The most obvious way that tech startups are contributing to the Kenyan economy is through job creation. A recent study by the World Bank found that startup companies are responsible for creating millions of jobs around the world. These jobs are not just limited to the tech sector – they also include positions in sales, marketing, customer support, and more. And as these startups grow, they’ll continue to create even more jobs.

Disrupt Africa’s The Kenyan Startup Ecosystem Report 2022 puts the total of people employed by Kenyan tech startups at 11,462, with an average headcount per startup standing at 37. The fintech sector accounts for 27 percent of Kenyan startup employment, with 3,100 jobs, according to the report, while between them the fintech, agritech, and e-commerce and retail-tech sectors account for over 50 percent of jobs.

• Attracting Foreign Investment: Kenya has become a hotbed for foreign investment in the tech sector in recent years, with investors excited about the country’s potential. According to Disrupt Africa’s The Kenyan Startup Ecosystem Report 2022, the country is the continent’s second most popular investment destination after Nigeria. 242 tech startups raised a total of $1,281,918,200 between January 2015 and November 2022. So far in 2022, 63 Kenyan startups have received funding, bringing the country’s total for the year to $506,686,000, almost doubling the amount it raised in 2021, and setting a new record.

More Benefits

• Boosting Exports: Kenya is well-known for its coffee, tea, and flower exports, but technology startups are helping to boost other exports as well. Ushahidi, a Kenyan startup that develops open-source software for crisis response, is used in over 150 countries. Kenyan startups are exporting hardware as well as software, such as solar-powered laptops from BRCK. These laptops are intended for use in rural areas with limited or no access to electricity, and they are already in use in over 20 countries.
• Generating Tax Revenue: Another significant way that tech startups contribute to the Kenyan economy is through tax revenue generation. These startups are paying more and more taxes to the government as they grow and become more successful. This tax revenue is then used to fund critical public services such as education and healthcare. In other words, tech startups not only create jobs and boost exports, but they also help to improve Kenyans’ quality of life.
• Improving Access to Essential Services: Lastly, tech startups are aiding in improving access to critical services in Kenya. Several number of startups, for example, are now working to improve access to clean water and sanitation. There are also startups working to improve access to electricity, healthcare, and education. In many cases, these startups are providing these services in areas that the government has long neglected.

There’s no doubt that tech startups are having a major impact on the Kenyan economy. And as these startups continue to grow and thrive, that impact is only going to become more and more evident, hence the need for the government to continue to create a conducive environment, startups friendly policies, and the requisite infrastructural development to attract more investments into the sector as well as enabling the current startups in the country to thrive.