With US President Barack Obama expected to open the Global Entrepreneurship Summit in Kenya on Saturday, the East African country has seen a lot of attention of late.
In a media briefing on Tuesday Kenya's President Uhuru Kenyatta said about 1,400 delegates are expected at the summit, which runs until Sunday.
Much of Kenya's fame has come from mobile money platform M-Pesa (developed in the UK), which has allowed any one, including those in rural areas, to send and receive payments by cellphone.
Added to this, a number of accelerators and incubators have cropped up in recent years in Nairobi (the latest which opened this month is Bidx, a company that links start-ups to investors). The government also plans to roll out a controversial techno city (see this earlier post).
Today Kenya's capital is often known as Silicon Savannah (see this earlier story by The Economist).
So much going for it
Apart from solid economic growth (the economy is expected to grow at between six and seven percent from 2015 to 2017, after growth of 5.4% last year). The country has a lot going for it.
Internet adoption is growing (at 39% it exceeds that in Iran or India, according to a UN 2014 survey) while current average broadband speeds are around the same as in South Africa and Malaysia, according to the Ookla Net Index.
The country also scores high on innovation and financial markets in the World Economic Forum's 2015 Global Competitiveness report. It ranks at 86 out of 130 countries in the 2015 Global Entrepreneurship Development Index, which places it fifth out of 29 African countries.
It's no wonder that local entrepreneurs and investors such as Michael Macharia of Seven Seas technologies (in this CNBC interview earlier this week) are so positive about Kenya.
Cut the red stuff
However the country still has some way to go to cutting red tape - it's ranked way down at 136 by the World Bank in the east of doing business - behind a number of other African countries, but ahead of India.
Kenya does particularly badly when it comes to registering a business, mainly because of the high cost per capita in registration fees, (on this measure it is ranked in 143 position).
While it recently made getting credit easier by passing legislation that allows the sharing of both positive and negative credit information, it made dealing with construction permits more costly and made paying taxes more costly for companies by increasing employers’ social security contribution rate, notes the bank.
How great is it?
Another problem, notes a Ventureburn story in October, is that the tech start-up scene seems dominated by expats. Locals complain that it is hard to access finance. But in some ways it makes sense, as those returning with capital, experience and connections might be more advantaged. In time locals who never ventured out of the country should take to tech start-ups too.
But a story by The Wired magazine last year suggested that much of the Silicon Savannah hype is built on a myth, propped up by foreign donor funding. Others counter that to tackle its many problems the continent can really do with more social enterprises.
Last week Kenya's Business Daily noted that while the number of Kenyans involved in the informal sector has risen from six million in 2004 to 10 million in 2012, most are engaged in casual jobs paying low wages, rather than better paying formal jobs.
The tech scene may have created alot of hype for the East African country - but perhaps what Kenya's case hints at is that while innovation is good, the basics have to be in place if it is to meet its Vision 2030 goal of becoming a middle-income country and rid itself of places like Kibera slum (pictured above).
Timm is a South African who writes on small business in emerging economies. He has yet to visit Kenya. Follow Small Business Insight on Twitter at @Smallbinsight and on Facebook.
Can purpose-built technology cities turn regions in emerging economies into the next Silicon Valley?
This is what some may be asking after plans by Russia and now Kenya to boost their start-up scenes through massive hub cities have recently come under fire.
In December critics told the UK’s Guardian newspaper that Kenya’s Konza Techno City, a planned $14-billion techno city, won’t solve financing problems facing the country’s rising tech scene.
The city, which the Kenyan government believes can serve as a hub for the east African technology industries, aims to open in 2019 and employ 200,000 people.
Critics say the city’s planned location is too far from the capital Nairobi (over 50km away) and that funds allocated for the development would be better spent giving commercial lenders incentives to invest in new startups. Better ICT training programmes, would also help.
Out in Russia
On the outskirts of Moscow, Russia’s $5.4-billion Skolkovo “innovation city”, has faced allegations of corruption, while construction delays, and political conflicts have dogged the project.
The question is whether the project, which kicked off in 2000 and aims to have 20,000 technologists and entrepreneurs living there by 2020, will be able to stimulate entrepreneurship in Russia.
While a team toured San Francisco in November last year looking for new recruits, there are already over 1,000 companies resident at Skolkovo, while a number of big US companies have signed agreements to locate there.
Generous incentives include a waiver on paying income tax, value-added tax, or property tax for 10 years.
But Russian entrepreneur and blogger Anton Nossik, believes the government’s approach of handing out tax-exempt money to selected startups is “very wrong”.
“Rather than a serious institutional approach, such as passing laws that would give businesses the incentive to innovate, you’re just gambling that some participants in your project will succeed,” he says.
Much harder perhaps will be to create a culture of risk-taking, information sharing and an openness to new ideas, which entrepreneurship expert Vivek Wadhwa says underpins the success of Silicon Valley.
But UCT economics professor Dave Kaplan believes techno clusters can be a success, if they are managed correctly and if they meet sufficient demand for their development.
Getting it right can help companies to create synergies among themselves, while they benefit from common infrastructure, he says.
South Africa’s own innovation cluster – Technopark in Stellenbosch, one of the country’s promising start-up regions could be one of these successes.
Opened in 1987 by the University of Stellenbosch with a R10 million loan from the government, the development today has over 100 resident companies. These include not only successful local bank Capitec and EMSS Antennas which manufactures radio antennae for the MeerKAT project.
Strength in community
Franz Struwig (pictured left), who in January sold his start-up iKubu to a Garmin, a multinational company that specialises in GPS, said the three years he has been based at Techno Park had a “massive impact” on his company.
Struwig developed a radar to fit to bicycles which detects traffic approaching from behind. Previously he was based in nearby Somerset West, after moving from Pretoria.
He says it’s a strong techno community and fellow tenants are very open, often sharing their ideas with other resident companies or providing him with input on his company’s strategy plan.
“So it’s a very accepting community and then quickly they (other companies) would pull us into their weekly meetings and monthly meetings and people like to hook each other up. So the moment they hear about an opportunity that is a possible fit you find someone e-mails you or gives you a call,” he said.
Don't just copy
Many cities want to copy Silicon Valley. But Ross Baird, executive director at Village Capital, and Rob Lalka its director of strategy and partnerships, argued recently in Forbes magazine that it's wrong to do so.
Silicon Valley they point out took hard work, smart policy, good money, and better luck over decades to create. In addition Silicon Valley-style companies create a lot of wealth, but they rarely create jobs at a meaningful scale (Instagram employed 12 people when Facebook acquired it for $1-billion).
They argue that before leaders ask “How can we help startups?” they should first ask themselves these two questions: “What are we good at?” and “How can we leverage those assets to solve large-scale problems?”
Timm writes on small business. This article originally appeared in the February 2015 issue of Small Business Connect. Click here to sign up to his newsletter. Follow him on Twitter at @Smallbinsight and on Facebook.
Stephen Timm is a