Time to Show Concern for Kenya?

Time to Show Concern for Kenya?

Three weeks ago, Dubai-based bus-hailing startup SWVL announced the suspension of its daily and city-to-city services in Kenya. Weeks later, Kune, a food-tech startup delivering ready-to-eat meals at affordable prices, closed down.

Kune seemed to be having things going their way. French entrepreneur Robin Reecht launched Kune in 2020. Its food delivery service provided Kenyans access to freshly prepared meals at affordable prices. However, with Kune’s imminent shutdown, Kenyans will be concerned about how they can get quality meals at least half, if not three times, less than the typical price of restaurants and fast food.

Kune ran a successful pilot in early 2021 and closed a $1m pre-seed funding round in June last year. So the startup’s shutdown is a dark twist no one might have seen coming.

SWVL explained that the shutdown was a way of achieving positive cash flow by next year.

Recall that we reported that SWVL was considering laying off 32% of its workforce in what the Dubai-based startup described as part of a portfolio optimization program two months after going public. According to them, it will enhance efficiency and reduce central costs to accelerate its path to profitability to turn cash flow positive in 2023.

Kenya
Robin Reecht

These issues in the past days have caused a stir in Kenya’s startup ecosystem. While startups want to strive and accelerate offerings, the external environment contributes to their success.

Current Economic Situation in Kenya

Robin Reecht blamed Kune’s shutdown on the startup’s inability to raise its next round. He also cited the rising food costs in the country as a factor. In 2020, the World Bank reported that Kenya’s economy had been hit hard by COVID-19, severely affecting incomes and jobs. It noted that the unemployment rate increased sharply, doubling to 10.4% in the second quarter.

Many wage workers who are still employed face reduced working hours, with average hours decreasing from 50 to 38 hours per week. Almost 1 in 3 household-run businesses are not currently operating, and between February and June, average revenue from household-run businesses decreased by nearly 50 percent.

The World Bank reported that this situation worsened food insecurity, elevated pain, and human suffering. Although Kenya’s economic performance remained strong in the early months of 2022, external challenges dampened this progress. Russia and Ukraine have made the economy vulnerable to commodity price shocks. Global financial conditions have also tightened sharply, increasing external financing costs. Domestically, this has worsened the situation in Kenya, crippling the performance of startups.

 

Author

Joel Nwankwo

Writer, TECHist and Data analyst.

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