Tech giants take the fight for clients to local startups

More global tech giants are pitching tent in Kenya, sparking a wave of excitement and apprehension in equal measure in the ICT sector.

But this has not come as a surprise. Kenya, East Africa’s biggest economy and regional hub, has a thriving start-up scene and has for long been touted as Africa’s Silicon Savannah.

Tech investors and multinationals have developed a keen interest in internet services, fintech (financial technology), digital payments, health and agricultural innovations and have their eyes on Kenya’s Small and Medium Enterprises (SMEs).

US tech giants such as Google, Microsoft and Amazon are competing to be the cloud service provider of choice for local companies.

Last month, Google announced plans to invest in its first-ever Africa Product Development Centre (ADC) in Nairobi.

The American tech giant is positioning itself to serve a growing base of internet users on the continent estimated to hit 800 million by the end of this decade.

In the same month, global payments giant Visa opened an innovation studio in Nairobi – the first in Africa – aimed at co-developing digital payments and commerce solutions.

The facility, which will serve the continent’s sub-Saharan region, is part of a network of global innovation centres operated by Visa since 2016 in locations, including San Francisco, Miami, London, Dubai and Singapore.

In 2019, Microsoft opened an Africa Development Centre (ADC) in Kenya. With locations in both Nairobi and Nigeria, these represent Microsoft’s first-ever engineering offices in Africa.

Amazon has also expressed interest in setting up a base in Kenya through its Amazon Web Services Inc (AWS).

The new AWS local zone(s) in Kenya will join 16 existing AWS local zones across the United States and an additional 32 AWS local zones planned to launch in 26 countries around the world in the course of this year.

AWS local zones deliver single-digit millisecond latency performance at the edge of the cloud to hundreds of millions of people worldwide.

Speaking on the interest of the tech giants in the country, Visa General Manager for East Africa Ms Corine Mbiaketcha noted that the country has an innovation track record.

Government support is also key, she added.

“When it comes to technology, Kenya is known as Africa’s Silicon Savannah, this means an environment where the government is supportive of innovation through regulation and an education curriculum that promotes technical background,” said Ms Mbiaketcha during the recent launch of the Visa sub-Saharan Africa Innovation Studio in Nairobi.

The facility is aimed at co-developing digital payments and commerce solutions.

It is part of a network of global innovation centres operated by Visa since 2016 in top locations, including San Francisco, London, Dubai, Singapore and Miami.

Speaking at the same event, Central Bank of  CBK Governor Dr Patrick Njoroge warned of a problem where big techs are benefiting from Africa’s digitalisation.

He called for a need to “rebalance the benefits.”

Dr Njoroge, however, noted that there have been significant benefits for the sub-Saharan African region, especially when it comes to financial inclusion.

“Kenya was at 27.6 per cent financial inclusion in 2006, and in 2021 this number had increased to 83.7 per cent,” he said.

The CK boss urged innovators to be people-centric and commended Visa for picking Kenya as the regional centre for the innovation studio.

“If it (innovation) happens in Kenya, it will also happen in other sub-Saharan African countries. That’s why it’s important to test things here and have the innovation studio here,” said Dr Njoroge.

The entry of the tech giants into the Kenyan market also means more jobs and opportunities for techies.

Google, for instance, is hiring engineers, product managers, user experience designers and researchers to staff its new centre, said Suzanne Frey, vice president for products, and Nitin Gajria, the head of Google Africa.

This is as the multinational invests $1 billion (Sh115 million) in various projects on the continent over five years, according to CEO Sundar Pichai, to help economies accelerate their digital transformation.

Microsoft also targets to hire 100 engineers at its ADC as the firm sets sights on increased partnerships with indigenous small- and medium-sized businesses.

Microsoft had tapped ex-Equity Bank’s Finserve chief Jack Ngare to be the first managing director of the Africa Development Centre.

Interestingly, Google has poached Mr Ngare to join its cloud business as a technical director in the office of the chief technology officer.

There’s also been some concern from some quarters that the entry of the multinationals will lead to a brain drain and talent war in Kenya’s startup ecosystem.

A report by Financial Times in October last year explored this phenomenon, noting that the US tech giants pay top dollar, making it harder for local businesses to recruit and retain key staff.

“But not long after Microsoft entered the Kenyan market, local start-ups felt the pinch of its presence. The tech heavyweight began an aggressive hiring spree, aiming to fill 500 software engineering roles at the ADC’s two hubs by 2023. Smaller companies in the area, such as Lori, Cellulant, Twiga Foods and others, who had invested in and trained young engineers, were swiftly outbid,” said the story by Antoaneta Roussi.

Kenya has since the late President Mwai Kibaki’s era committed to technology. This started with is with The Vision 2030 economic blueprint, which paved way for the establishment of the Konza Technopolis City project aimed at creating a hub of technology innovation in Africa.

In recent years, tech investors have upped their activities in the country.

A 2020 report shows that Kenya was among the top four African countries by value invested through Venture Capital investment.

The AfricArena 2021, by Partech, an investment platform for tech and digital companies, shows that Kenyan startups raised Sh33 billion through venture capital investments, which was second to Nigeria’s Sh33.3 billion in 2020.

The proportion of venture capital investment in Kenya as a proportion of GDP stood at 0.32 per cent, making it the highest in Africa

The per capita venture capital investment in Kenya was Sh630 in 2020, which is the highest in Africa, said the report.