Kenya’s Strategic Importance: Within East Africa and Beyond
This August marked a historic election for Kenya: After a competitive presidential campaign – and six days of tallying votes – William Ruto was declared president-elect, as certified by the Supreme Court. While the election will be pivotal to the future of the Kenyan political landscape, it will take some time to see significant impacts of Ruto’s win and the priorities of the new administration.
As the largest economy in East Africa, Kenya represents more than 40% of the region’s GDP. According to Calum Hill, Program Officer, Africa, at BCIU, Nairobi is seen as a relatively stable business climate, often serving as the regional headquarters for U.S. companies and, increasingly, many UN regional offices.
“Kenya is really a regional hub in East Africa for many businesses looking to invest,” Hill says. “There are a lot of U.S. companies that have their regional headquarters in Nairobi, and that stable business climate is important for U.S. companies.”
Contributing to its rapidly growing economy is Kenya’s increasingly digitally connected population and the role it plays as a significant security actor in the region. Enabling this favorable environment for commercial interests will require the new administration to prioritize both information and communications technology (ICT) and security throughout Ruto’s term.
A growing economy
Kenya is still addressing the key development challenges apparent in the rest of the region, including poverty, inequality, political transparency, climate change and vulnerability of the economy. Like in many places, the COVID-19 pandemic exacerbated nearly all these issues. Pre-COVID, economic growth expanded by 5.4% in 2019, with projections estimating 6.6% in 2020. After the pandemic hit in March, the International Monetary Fund estimated Kenya’s economy declined by -0.3 percent in 2020.
That said, Kenya has a dynamic private sector, especially in comparison to other countries with comparable average per-capita incomes. The country’s position as an economic and commercial hub in East Africa, plus accelerated development, solidifies its position as a strong global investment destination.
“In the East Africa block, Kenya has served as a regional interlocker in championing regional integration,” Hill says. “Kenya has long advocated for more integrated road and rail networks to increase trade between East African countries.”
The ICT opportunity
According to the World Bank, about 30% of the population is using the internet, a growing number spurring economic growth. This progress has served as a catalyst for the government to develop the current National Broadband Strategy aimed at transforming Kenya into a knowledge-based economy, with opportunities in the education sector, health IT, and cybersecurity.
Kenya is already the ICT center of East Africa and a regional leader in broadband connectivity, general ICT infrastructure, digital banking and other FinTech services. Nairobi alone is home to a significant startup and tech sector, with ICT representing 7% of the country’s GDP through IT-enabled services. These factors contribute to ICT’s being a “best prospect” industry sector for investment.
Kenya’s stability is vital for the entire Horn of Africa. The country remains East Africa’s largest and most important business, financial and transportation hub, with 80% of the region’s trade flowing through the Mombasa Port. As such, Kenya is the first line of defense against terrorist threats, including Al-Qaeda offshoots like Al-Shabab. Part of solidifying the country as a thriving environment for trade and investment will be the fight against terrorist sects and cross-border management, with Somalia in particular. The Kenya-Somalia border represents a significant security issue, but with each country’s new president comes an opportunity for regional cooperation.
In addition to domestic efforts, Kenya maintains significant diplomatic relationships that prioritize the defense sector through international support. The U.S. has a strategic interest in the country’s security and stability and partners with the Kenyan government on regional and global security issues, including a security assistance program.
Both the ICT and defense sectors will play an important role in the future of Kenya’s economic development. Looking ahead, eyes will be on Kenya’s new administration as it shepherds the economy through its post-COVID recovery and works to maintain the country’s role as a linchpin in the East Africa region.
To learn more about BCIU’s Africa programming, visit our Events page.