Private sector growth stems from trust and optimism

Several Kenyan start-ups, particularly in the agritech space, have recently announced new venture capital investments that will boost their growth.

 Twiga Foods, an agribusiness logistics company just secured $30 million in a Series B round led by American bank Goldman Sachs, with the participation of a handful of other VCs.

Twiga Foods that has operated in Kenya for five years plans to spread to Nigerian market. 

 The company aims to tackle high waste rates and lack of effective distribution of agriculture in Africa. As CEO Peter Njonjo put it, “Essentially the problem we’re trying to solve is reducing how much it costs for the average African to spend on food.” Food security - one of the pillars of the Big Four agenda - is more about cost of food than its availability. 

But a central challenge facing Twiga Foods - and one facing many other Kenya-based agritech start-ups - is the dependency on the informal economy.

Twiga sources orders from informal retailers who do not have secure cash flow sources and thus have difficulties securing loans.

Consequently, Twiga collects data on retailers in order to assess their ability to pay back loans.

Another Nairobi-based start-up making changes in agriculture is Wefarm, which operates a digital network and marketplace for smallholder farmers.

It recently raised $13 million in Series A investments. Sendy which recently received $2 million US in funding, is an on-demand logistics start-up. It is headquartered here and operates in Kenya, Uganda and Tanzania, has expansion plans for the rest of East Africa. 

All of these investments follow the success of the Nairobi-based, finance-sector startup BitPesa. BitPesa, which recently rebranded as AZA Group, is Africa’s only provider of foreign exchange and distribution outside of the formal banking world.

The Development Bank of Southern Africa has recognised their potential and recently provided $15 million in debt financing.

The company was founded by two American women who arrived to Kenya and saw the superb atmosphere for conducting business here.

Foreigners coming to set up shop in Kenya have recognised the atmosphere of openness, investment and potential for profit, fostered and supported by President Uhuru Kenyatta’s administration. Across Africa, SMEs must overcome the dearth of financial infrastructure to help businesses grow.

By combining technological and financial tools, AZA Group uses a modern approach to tackle uniquely African challenges. 

The main developmental focus of much government investment during the last decade here has been on large infrastructure projects.

Since 2018, President Kenyatta has redirected that towards the Big Four Agenda.

The purpose of this move is to unlock economic growth potential across all sectors. Spending on infrastructure development necessitated a great deal of borrowing from foreign debtors, which put pressure on the government to service debts. 

The shift towards promoting the Big Four Agenda, combined with the recent successes of Kenyan start-ups, is changing the economic landscape for the better.

While borrowing for loans is necessary for both a national economy and a private company’s growth, the ability to service the debts is of no less importance. And as local Kenyan companies begin to gain international recognition for their innovative approach and can-do attitude, business confidence will be strengthened.

The agritech companies listed above are but a small example of the many diverse SMEs popping up in Kenya over the past year and a half.

It is well-known that a country cannot enjoy wealth and economic development if both the private and public sectors are not prospering by working together.

This kind of prosperity can only truly be achieved in Africa if there is social and economic stability. 

Young people are only willing to take risks if they know that their failures can be shaped more as learning opportunities than financial crippling.

The same goes for foreign investors. A bank like Goldman Sachs would not invest in a company based in a country with an unpredictable future and a little oversight and accountability. 

Developing trust and confidence was Kenyatta’s first order of business by shaking hands with Odinga. As a result of cutting across tribal lines to foster our nation’s unity, business and financial growth has never been stronger.