Unveiling Kenya: A prime destination for companies seeking African opportunities
By Valtter Louhivuori, Head of Nairobi office, Finnfund
When traveling in Africa, the first thing to strike you after the impressive scenery is the sheer size of the continent. The flat map projection we are used to seeing on our school walls distorts the view of the world by deflating areas closer to the equator. The land area of Africa could fit the U.S., China, India, Japan, Mexico, and most of Europe combined. Understanding the size of the continent partly helps in comprehending why the 53 African countries differ significantly from each other.
Compared to its African peers, Kenya is seen as the poster child of green energy, the most stable democracy in East Africa, and an economic hub of the region. Despite the impact of Covid-19, Kenya’s economy has grown by an average of 4.5% per year over the past 10 years. At this sustained growth rate, Kenya’s economy will double every 15 years. For comparison, doubling Finland’s economy at its current growth rate would take more than 140 years. The growing economy and expanding middle class create demand for quality products and services, for which Finnish companies are often known. Firms that create value locally benefit from the availability of local labor, resulting in cost-competitive end-goods against imported finished products often facing high import duties.
Finnfund has been operating in Kenya for more than 20 years and the country is the largest single country in our investment portfolio. We currently have approximately 10 investments in the country. Finnfund’s investee companies benefit from the availability of highly educated and experienced workforce in Kenya. The dynamic private sector, pleasant climate, and overall quality of living in Nairobi further aid in attracting global talent to Kenya. Nairobi is the tech and financial hub of East Africa, which is why Finnfund opened a local office in the city in 2022. Our local presence helps us to build networks, better understand the local market, and work more closely with our investee companies in the region. Finnfund’s Nairobi office identifies, assesses, and executes investment opportunities while promoting Finnish expertise to our investee companies. As a member of Team Finland, we work closely with Business Finland and Embassy of Finland in Nairobi to assist Finnish companies in entering the Kenyan market.
While Kenya holds opportunities for Finnish companies, it also poses its challenges. Obtaining permits takes time, the regulatory environment can be unpredictable, corruption exists, logistics costs are high, and energy and other infrastructure need improvement. Therefore, understanding the local context and working with experienced local partners is crucial.
Nairobi’s skyline has rapidly changed during the real estate boom recorded in the past decade and opportunities lie in the increasing demand for quality construction. The improving digital infrastructure and expanding 5G coverage, driven by Safaricom and Airtel, are paving the way for new digital solutions and services. Meeting the basic needs of the growing population will also attract additional players in more traditional sectors, such as healthcare, education, and agriculture. As a regional hub, Nairobi is a natural gateway to the East African Community and should be studied by any company looking for new opportunities in the region. Team Finland network in Nairobi is here to provide advice, contacts, and financing for Finnish companies, so the first steps need not be taken alone.