Kenya, Nigeria and Africa’s New Hope for Growth
On the top two floors of a five-story building on Strathmore University’s campus in Nairobi, students with tablets and laptops are gradually changing the face of the East African economy. As part of the university’s master’s program in mobile telecommunications, they spend their days developing computer apps tailor-made for African markets. Their creations include Valuraha, an app that simulates trading on the Nairobi stock exchange as a teaching tool, and Henga Systems, which tracks activity on a mobile phone owner’s M-Pesa bill-payment account. A research academy at Strathmore, @iLabAfrica, has helped nurture such ideas with financial backing from about 20 companies, including Google (GOOG), Samsung (005930:KS), and Safaricom, a Kenya-based mobile phone service provider. The academy has produced 36 startups since 2011, more than half of which are still operating.
The success of such initiatives is being fueled by a 540 percent increase in mobile phone connections across the world’s poorest continent since 2005, says research firm Gartner (IT). The thriving IT economy is providing fresh impetus for the African growth that started to accelerate 20 years ago, when global prices for iron ore, oil, copper, and other commodities started their long rise, yielding billions in wealth. Almost 60 percent of Kenya’s 40.7 million people have Internet access, and 78 percent have mobile phone subscriptions. Safaricom, which began selling mobile phone services in 2006, is now East Africa’s biggest publicly traded company.
The tech boom is one of many factors boosting African economies, helping offset the effects of civil wars, Islamist militant violence, and the worst-ever outbreak of the Ebola virus across West Africa. Sub-Saharan Africa’s economy is forecast by the International Monetary Fund to grow 5 percent next year, one of the fastest rates in the world. Kenya and Nigeria are among 16 sub-Saharan countries whose economies are expected to expand more than 6 percent, according to the IMF. “The engines of growth in these markets are increasingly diverse,” says Simon Freemantle, a political economist at Johannesburg-based Standard Bank Group (SBK:SJ). “You are not simply finding growth coming out of a single exporter or a single commodity, which has previously been the case in many countries. This allows for more income accumulation outside of a high-level political and economic elite.”