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This will be the first in our new series, “Mobile Market Look”, where we look at mobile markets in Africa and other emerging countries around the World. Kenya is one of the hotbeds in terms of mobile innovation and sophistication and we hope you enjoy this article and please feel free to leave any comments you may have.

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Africa has been growing at an unprecedented rate and Kenya is one of the fastest growing tech and mobile markets in the World. Known as “Savannah Silicon Valley”, Kenya is home to over 500 startups in the mobile and digital industries. Kenyans are extremely tech savvy and 70% of the population owns a mobile phone, with 16 million Kenyans accessing the internet through their phones. Nairobi, the capital of Kenya, is home to the ihubs, incubator space for the tech community that includes 10,000 members an over 150 incubator start-up companies. Companies such as Google, Intel, and Samsung have a presence in Nairobi and IBM set up its first African Innovation Lab in Kenya. If you are in the mobile or tech industry, whether as a company or an investor, Kenya is a country you should get to know and want to do business in.

Kenya is the most developed economy in East Africa with a good education system and a strong business environment. Kenya is a young country with 70% of the population of 44 million people under the age of 35. Kenya also has its issues as 50% of the population lives in poverty and unemployment, although officially listed as 10.5%, can be as high as 40%. There are obstacles, but there are also opportunities. And no opportunity is bigger in Kenya at this time than the mobile money and mobile payment market.

Kenya’s Mobile Market Landscape

Kenya phones Kenya has the most sophisticated mobile money ecosystem in Africa, and maybe the World. Infrastructure improvements, and lack of rigid regulations by the Central Bank of Kenya and the government, have led to market growth and an increase in digital services. M-Pesa, established by Safaricom in 2007, started the current mobile payment revolution and now transacts over $5 billion annually which accounts for 17% of Kenya’s GDP. Over 2 million mobile money transactions take place every day and according to MEF studies mobile money and mobile payments still present the greatest opportunity for growth in Kenya. It is estimated that 85% of the population has used mobile money at some point and most Kenyans prefer mobile money to cash because of the ease of use and the safety. Most African nations are cash-based and people still carry large sums of cash on them, especially when they are sending money to relatives in remote parts of the country, so mobile money offers a safer and easier alternative. Kenya’s financial institutions have picked up on this and are jumping on the bandwagon and creating their own mobile money products. Equity Bank has its own M-Kesho mobile money product and I&M Bank has its own prepaid Safari Card available on the M-Pesa platform.

Even with growth and prosperity Kenya faces security issues and economic problems. There have recently been terrorist attacks on the Kenyan coast by Al-Shabaab, a Somali terrorist group associated with Al-Qaeda, and no one should forget the terrorist attacks that took place at the Westgate Mall in Nairobi over a year ago. The country has a high poverty rate and weak infrastructure and on the business side there is a lack of capital and belief and faith by investors towards the Kenyan market, and also the Sub-Saharan African market as a whole. Even the mobile market is experiencing its own issues. There is a current price war which has benefited the consumers by leading to decreased prices and more mobile subscriptions, but has created lean profit margins and less profitability for the mobile operators. There is also the concern of the dominance of Safaricom and M-Pesa who currently has the dominant mobile marketshare of 70%. Other mobile operators such as Airtel, Yu, and Orange have a presence but pale in comparison to Safaricom.ihub Kenya

Obstacles do exist, but even with these problems and many others the mobile industry in Kenya is experiencing good times. Mobile phone penetration is 78% in Kenya and Africa had an annual mobile growth rate of 82% between 2000 and 2013, highest in the World. There are currently 500 million mobile subscriptions in Africa and there is expected growth in subscriptions of 50% over the next 5 years. Kenyans have also taken to smart phone technology and 67% of all phones sold in Kenya are smartphones. Kenyans like to listen to music, play games, look for sports updates, and watch TV and video on their phones. They also like social media and Kenya has the second most Twitter users in Africa behind South Africa and the second most Facebook users in Africa behind Nigeria. So the promise and potential is bright and the opportunities for business and investment is maybe the best it has ever been. Kenya is definitely a place you should want to be!

Please visit MMIT at www.mmitonline.com and subscribe to our newsletter by contacting us at newsletter@mmitonline.com

Anthony Bio for Blogs

 

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Most people recognize the abundance of natural resources that the Sub-Sahara African continent has been blessed with.  One resource that most people fail to recognize is Africa’s youth.  This resource might be Sub-Sahara Africa’s, SSA,  most precious and vital for continued growth in the 21st century.  Not only is Sub-Sahara Africa one of the fastest growing regions in the World, it also has the largest youth population in the World.

62% of the SSA population, 600 million people, is below the age of 25, and according to the World Bank the number of 15-24 year olds has risen from 133 to 172 million in the last decade and is expected to reach 246 million by the year 2020.  The Guardian estimates that there are 70 million more Africans under the age of 14 in 2012 than there were in 2002 and by 2022 that number will increase by another 76 million.  The median age in Africa in 2012 was 18 years old, which is 7 years younger than the median age in Asia and 16 years younger than China.O-Funds_1

This young population could be a catalyst for growth, global consumption, and global production, but it could also be a huge risk with the large number of unskilled youth who lack jobs and opportunities, which could lead to political and social unrest like we witnessed with the Arab Spring Revolutions in Tunisia and Egypt.  For this article I will first look at the growth potential and then look at the potential risk factors.

For many years Africa experienced a brain drain.  People were leaving SSA to come West for a better education and opportunities.  Over the last decade that trend is starting to reverse and is now becoming a brain gain as more expats return to SSA looking for opportunities due to economic problems in the West, Africa’s strong economic growth, and those who want to return home and make a difference.

A survey by South African private equity firm Jacana found that 70 percent of African students studying for their MBA’s in the US and Europe plan on returning to Africa after graduation.  These expats are bringing skills and knowledge to the continent that is assisting with its current growth.  Also Africa is doing a better job of retaining its workforce.  Recent statistics compiled by the World Economic Forum indicate that many of Africa’s growing economies have significantly increased the retention of educated workers.  Nigeria is a great example of this.   They were ranked 112th in the World for retaining workers in 2008 but by 2013 they ranked 48th.

The growing youth segment is also digitally savvy.  There is a growing digital revolution taking place and technology is lowering the barriers to entry for expats and business and creating opportunities where none previously existed.   Mobile phone technology is the technology of choice and mobile internet usage in Africa is the highest in the World.   It is projected by 2016 there will be over 1 billion mobile phones in Africa.

SSA is also currently experiencing a technology boom. There are currently 90 technology hubs, labs, incubators and accelerators, in over 20 African countries spearheaded by Kenya’s iHubs in Nairobi.  These hubs are developing an atmosphere where new and innovative ideas are created and shared and where people can network with other like-minded people.

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Of course for all of the positive vibes coming out of SSA there are still lots of problems.  According to the African Development Bank, the youth constitutes about 37 percent of the total labor force, but make up about 60 percent of total unemployment. The risk of displaced youth who cannot find jobs, do not have the proper education, training and skills, could lead to a melting pot of political instability and social unrest.thumb.php

Africa needs to be able to create its own jobs.  Currently Africa lacks an industrial and manufacturing base that produces products for export.  Africa is experiencing a jobless growth and according to a McKinsey & Company study the African continent loses 20,000 skilled workers to developed economies every year because of the lack of skilled jobs and opportunities.

There is also the issue of local workers who are upset with the return of expats to their countries.  They feel the expats are taking the best jobs and opportunities and were not there during the harshest of times.  There is a growing sense of inequality and many feel they lack access to the same opportunities as their expat colleagues who have been educated and have worked in the West.  Many feel Western companies would prefer to hire expats rather than locals if given the opportunity.

There are solutions for these problems.  Africa needs to have youth unemployment treated as a core strategic objective of development policy.  There needs to be favorable and flexible labor laws, a focus on the investment in people through education and training, the creation of a favorable and operational business environment that is attractive to businesses and investors, and a creation of wealth rather than just a redistribution of wealth.  This is of high importance and something SSA needs to get right.  McKinsey & Company predicts by 2040 that Africa will have the largest workforce in the World surpassing India and China.  So the opportunity for growth is great, but the opportunity for risk is also great.

Anthony Bio for Blogs