SILICON SAVANNAH IN THE MAKING
In the heart of East Africa, a quiet technological revolution is underway with Kenya rapidly evolving as a dynamic hub of innovation.
Kenya serves as an economic hub in East Africa due to its strategic location, well-developed infrastructure, and vibrant economy. It is a key player in regional trade and commerce, with a diverse economy that includes sectors like tourism, agriculture, manufacturing, and finance. Kenya's Vision 2030 initiative aims to position the country as a globally competitive and prosperous nation, further solidifying its economic significance in the region.
In the last decade, this popular tourist destination has undergone an impressive rise in tech and innovations, making information and communication technology (ICT) the key growth driver. East Africa has a young and well-educated population, so it is a great place to look for skilled developers. Established tech giants like Microsoft, Google, VISA, and PwC have already recognised its potential.
The Larger Picture
Kenya gained independence from British rule on December 12, 1963, after nearly 80 years of colonial rule. Since then, Kenya has made tremendous progress. However, British colonial rule which was characterised by unfair labour practices, structural racism, and forced resettlement, needed structural reforms post-independence.
Kenya's political stability in an otherwise volatile region, contributes to its geostrategic importance. Since independence, the country has been a relatively stable democracy with regular elections and peaceful transitions of power. This stability makes Kenya an attractive destination for foreign investment and a key partner in regional peace and security initiatives.
Kenya plays a significant role in regional politics and diplomacy, exerting influence beyond its borders. It is a key member of regional organisations like the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA), contributing to regional integration and cooperation. Additionally, Kenya's involvement in peacekeeping missions and diplomatic engagements on the international stage enhances its strategic importance in East Africa. Recently, it offered its services to resolve the growing dispute between Somalia and Ethiopia over port access in the breakaway region of Somaliland.
The Indian Connection
Kenya has a long Indian connection, although not always pleasant. For the construction of the railway line from the Kenyan coastline to the Ugandan interior to enable the exploitation of the wealth of Africa, the British colonists brought around 32000 Indian indentured labourers between 1896 and 1901. Over 2500 labourers died, many devoured by the notorious man-eating lions of Tsavo, a death rate of four per mile of track laid.
Many of these labourers stayed behind and called in their relatives and family to create a new life in the African savannah. By independence, most non-agricultural businesses were in Indian hands in most major urban centres. After independence and until the early 1970s, there was resentment against South Asians, and thousands who possessed British passports migrated to Great Britain while those not as fortunate returned to India. From a high of nearly 200,000, the South Asian population in Kenya dwindled to a low of 78,000 in 1979. Today, approximately 80,000 Kenyans (including an estimated 20,000 Indian citizens) are of South Asian origin, making them less than one per cent of the population. In 2017, President Uhuru Kenyatta, son of the late Jomo Kenyatta, declared the Asian community Kenya's 44th tribe in recognition of their contribution to the nation since its independence.
Prospects for Closer Indo-Kenya Ties
The 1981 India-Kenya Trade Agreement accords the Most Favoured Nation status to both. It led to the establishment of the India-Kenya Joint Trade Committee (JTC) at the Ministerial level in 1983.
Trade Prospects. Kenya is one of East Africa's fastest-growing economies, with GDP growth averaging 6 per cent annually from 2010 to 2017. The country's significant political, structural, and economic reforms have contributed to its steady economic growth. Kenya's economy has demonstrated remarkable resilience in the face of recent shocks, including the long-term fiscal ramifications of the COVID-19 pandemic, the global consequences of the war in Ukraine, two consecutive years of drought, tight monetary policy, and currency devaluation. The Kenyan government has taken significant initiatives to create a more business-friendly climate, jumping 12 places in the World Bank's Ease of Doing Business rankings from 92nd to 80th in 2017. During the last 27 years, the Kenyan exports to India have increased at an annualised rate of 6.66 per cent, from $14.6M in 1995 to $83.1M in 2022. Main Kenyan exports to India include soda ash, vegetables, tea, leather and metal scrap. 2017, during President Uhuru Kenyatta's visit to India, MoU was signed on cooperation in the agriculture sector and allied sector, and LoC for US$100 million for agricultural mechanisation was signed. According to the Kenya Investment Authority KenInvest, Kenya’s second-largest investor is India. India had a high net trade with Kenya in 2022, with exports of Mineral Products ($556 million), Chemical Products ($541 million), and Machines ($321 million). Kenya had a high net trade with India in 2022, with exports of chemical products ($37.8 million), vegetable products ($16 million), and metals ($9.75 million).
Private Investments. Over 60 major Indian companies have invested in various sectors, including manufacturing, real estate, pharmaceuticals, telecom, IT & ITES, banking and agro-based industries, creating thousands of direct jobs for Kenyans.More recent investments by Indian corporations in Kenya include Essar Energy (petroleum refining), Bharti Airtel, Reliance Industries Ltd. (petroleum retail), and Tata (Africa) (automobiles, IT, medicines, etc.). Several Indian companies, including KEC, Karuturi Ltd., Kalpataru Power Transmission Ltd., Power Grid Corporation of India Ltd., Kirloskar Brothers Ltd., Mahindra & Mahindra, Thermax, WIPRO, Jain Irrigation System Ltd., Punj Lloyd, VIL Ltd., Emcure, Dr Reddy, Cipla, Cadila, TVS, and Mahindra Satyams, as well as the Bank of India and the Bank of Baroda, have a presence in Kenya.
Security Partnership. In December last year, both countries issued a joint statement at the highest level to cooperate in capacity building of defence industries, particularly in shipbuilding and shipyard development, in co-development and construction of defence equipment like maritime surveillance equipment, offshore patrol vessels, fast attack crafts, and other arms and ammunition. On this occasion, Prime Minister Modi said that being two Indian Ocean nations, Kenya and India had a “shared priority of strengthening maritime security and combatting piracy and drug trafficking.”
Technology. The Indian Space Research Organisation (ISRO) has extended support to Kenya in space exploration. Discussions have been held on establishing space infrastructure, sharing knowledge and satellite data, and the application of space technology in Kenya. Given the growing importance of artificial intelligence, machine learning, and data analytics in various sectors, these technologies are part of the ongoing collaboration between the two countries. Kenya is called Africa's Silicon Valley or "Silicon Savannah". This is owing to the Kenyan government's significant Information and Communications Technology (ICT) push, the M-Pesa mobile payments revolution, and the establishment of iHub. This startup incubator has converted Nairobi into a technology epicentre.
Possible Road Bumps
Kenya faces significant market issues, including corruption and inadequate governance, as evidenced by its score of 128 out of 180 in Transparency International's Global Corruption Perception Index 2021. Kenya continues to face enormous hurdles to sustainable and inclusive economic growth, worsened by the economic disruptions caused by COVID-19 and long-standing issues such as corruption and economic inequality. Another difficulty that has a detrimental impact on the economy is decreased consumer spending, which has led to increased unemployment and poverty. Lower public investment, budgetary austerity, and political uncertainty exacerbate the Kenyan market's issues.
India’s market challenges also act as a deterrent to mutual trade. These include high tariffs and protectionist policies, often causing exporters and investors to face non-transparent or unpredictable laws and tariffs. Indian customers are also price-sensitive, reflecting many consumer-packaged good trends like smaller packages and fewer product features. Infrastructure is another pain point. Several Indian initiatives to enhance trade and connectivity efficiency offset this issue; however, the impacts of an inefficient infrastructure follow the same polarised growth.
Way Ahead
Economic Opportunities. India is best seen as an aggregation of very varied state economies, each expanding at various rates, powered by different strengths, led in different ways, and likely to continue to progress unevenly. Kenya's growth is expected to average 5.2 per cent between 2024 and 2026, primarily driven by the private sector as business confidence grows and the public sector shrinks. Kenya's growth is also expected to gain from implementing recently agreed trade accords such as the African Continental Free Trade Area and the European Union Economic Partnership Agreement.
Technology Partnership. Some potential future collaborations could include working out innovative water solutions. Building on the success of startups like Majik Water in Kenya that employ ground-breaking methods for generating clean water using condensation and solar thermal energy, India and Kenya could collaborate on developing and implementing innovative water solutions to address water scarcity and ensure water security for all. Another area for collaboration could be the textile industry. Future collaborations could focus on technology transfer, skill development, and modernising the textile value chain.Given the success stories of Indian tech startups in Africa and the symbiotic surge in innovation and growth, future collaborations could involve deeper engagement in sectors like artificial intelligence, machine learning, data analytics, and tailored tech solutions.
People-To-People Contact. Several Kenyans of Indian origin have distinguished themselves as lawyers, judges, doctors and academics. India is the third largest source (besides neighbours) of inbound tourists to Kenya. Many Kenyans visit India for medical treatment. There are about 3,500 Kenyan students currently studying in 50 Institutions throughout India. In 2018-19, over 400 Kenyan nationals received training and scholarship programmes in various fields under the Indian Technical & Economic Cooperation (ITEC) Programme, India-Africa Forum Summit and Aid to Africa Programme.
Key Takeaways
Potential future collaborations between India and Kenya align with the shared goal of sustained and inclusive development.
Both countries have a strong base to build upon, including a British colonial past, the English language, a love for cricket, and
a similar democratic political system.
By leveraging each other's strengths and expertise in economic and technological domains, India and Kenya can create a mutually beneficial partnership that propels both countries towards a brighter future.
Both nations enjoy huge resource
pools
and thus can contribute to the regional and global common interests in securing
the
future.
As India looks at an 'extended neighbourhood' stretching up to the Eastern coastline of Africa and aspires to be a net security provider for the IOR, Kenya assumes increasing prominence in India's geopolitical calculus. India has to match up to its rival China, which has already made deep inroads into Kenya.
