The Silicon Savannah – an insider’s view

Nairobi city-2This article by Kenneth Griffith originally appeared on LinkedIn and is published with permission.

Nairobi has gotten a lot of press over the past few years as the rising “Silicon Savannah” of Africa – a hub for tech start-ups in Sub-Saharan Africa. Most of the press is legit, but there is also a bit of hype. I’ve been a participant in Nairobi’s tech scene since 2012 when I discovered the iHub, a year after moving here in 2011. I thought I would share my notes here for those who want to get a real picture of what is going on in the “Silicon Savannah.”

Overview – What is the Silicon Savannah?

Kenya is the classic “savanna” climate, with massive grasslands supporting large herds of animals. Likening Nairobi’s tech scene to Silicon Valley gave rise to the moniker “Silicon Savannah”.

iHub – Where it Began

Though Nairobi had successful tech start-ups before, such as Cellulant and Craft Silicon, the creation of the iHub was the beginning of Nairobi’s start-up culture taking on its own identity.

The iHub was started in 2010 by the guys from Usahidi. It serves as a convergence point for techies, entrepreneurs and investors, leading to a vibrant culture of tech start-ups, and start-up hubs that have sprung up around the iHub within a four kilometer stretch of Ngong Road in Kilimani. The list of tech spaces in this part of town now includes:

The iHub
Growth Africa
Startup Garage
Nailab
M-Lab

In addition to the accelerator spaces, there are three universities in Nairobi busily training the next generation of programmers and techies. These are:

Stathmore University (iLab)
Nairobi University (C4DLab)
Jomo Kenyatta University (JKUAT)

There are several more, as well.

Believe the Private Organizations not the Government

Promoters of a Kenyan government project called “Konza City” have lifted the “Silicon Savannah” moniker from the real thing (Kilimani) and applied it to their as-yet-nonexistent development on the Athi plains, 60 km East of Nairobi. Konza City is a planned high tech city, where we are told there will be call centers and a major tech hub like Mumbai, India. The plans look good, but the reality is that the design for Konza City is missing a power plant. In a country where the existing power users already overload the infrastructure so that we have scheduled blackouts during the dry season, it is nothing but folly to build an entire high tech city with the hopes that Kenya’s power infrastructure will be able to feed it. First, build a power plant, then build Konza City. Else, it will become known as “Konza Ghost Town”.

But I digress….

Strengths and Weaknesses of Nairobi’s Start-Up Environment

Let’s start with the weaknesses, so I can end on the upside.

First, there is a shortage of experienced computer engineers. Nairobi’s universities are doing a good job of cranking out class after class of computer science graduates. However, there is a deficit of experienced programmers with at least 10 years on the job – the kind of people you need to lead a team of fresh graduates. The few who are here are fought over by IBM, Nokia, Cellulant, Safaricom, Craft Silicon and Equity Bank. This means that the start-up scene in Nairobi has to pay similar prices for experienced talent that you would have to pay in London or Silicon Valley. The upside is that with a few more years, this problem will solve itself.

Second, there is a disconnect between start-ups and available capital. Unlike Silicon Valley where merely presenting an idea without a single line of code will result in ridiculous quantities of money being thrown at you by hapless VC’s who apparently suffer from a shortage of good projects (see Clinkle); in Nairobi, you have many teams with apps that work who die on the vine because they couldn’t raise $50,000 in capital.

Third, there is a lack of experienced business mentors to help the young folks with the ideas to turn them into a real business model. Nairobi does not really have an angel community, yet, although we are moving in that direction. Angels are important for more than money. Angel investors are extremely valuable for their business experience. Nairobi needs to cultivate a circle of mentor-investors to help start-ups get off the ground.

Fourth, Kenya is famous for MPESA, but MPESA is stingy with their API – i.e, they haven’t released one yet. After six years Safaricom still haven’t published an API that mobile app developers can use to do in-app transfers. There are a few third-party solutions to this problem, but they are clunky and expensive. When mobile money providers start publishing API’s we will see a true renaissance in Kenya.

Last, the Kenya government loves to take credit for the Silicon Savannah, but in reality they seem to specialize in throwing up roadblocks. The rules for obtaining work permits for foreign knowledge workers and investors are particularly difficult and expensive. This doesn’t make sense for a country that wants to become the tech hub of Africa.

Positives

Nairobi also has some great upsides for the tech space. First, there is a strong cohort of fresh graduates from the computer science departments of the various universities. Intel, Microsoft and Nokia sponsor classes and program to train these young folks in mobile application development at mLab, iLab, and JKUAT. There are quite a few brilliant and talented young men and women coming out of these programs. But be prepared to fight Nokia, IBM and Safaricom to hire them.

Second, the Internet infrastructure is really good. There are multiple fiber cables coming into Kenya now, and multiple internet service providers in Nairobi offering fiber to business and fiber to the home connections. The prices are not cheap, but they are reasonable.

Third, there are now going on ten accelerator programs in Nairobi. This provides an excellent support base for start-up companies in the region. Fourth, the demographics in Kenya are perfect for growing businesses for the next forty years. In short, large families are still popular in Kenya, and it takes people to create a growing economy.

Finally, we have a country where 70% of internet access is through mobile devices. The combination of mobile money with mobile internet means that Kenya is truly ready for the next generation of mobile services. Kenyans have accepted the idea of money on the phone. Having breached that psychological barrier, Kenyans are ready to embrace the full power that mobile computing and smart phones can offer. This is the major reason why the Silicon Savannah has better projects and better ideas than the hide-bound USA and Silicon Valley.

Kenyans have a lot more real problems which haven’t been solved, and which can be solved with mobile devices than America or Europe does. Kenya’s Silicon Savannah is the ideal environment for development opportunity and entrepreneurship. Western investors should ignore the crime and political tensions and move here to participate. Those who do have the opportunity to make an enormous impact and make a fortune in the process.

Conclusion

Though much of what you read in the press about Kenya is hype, there is a real fire underneath which is generating all that smoke. Kenya has strong growth fundamentals, a strong work ethic, and a culture of saving and investment. Add to this the Silicon Savannah and you have the recipe for a great success story in Africa.

Kenneth Griffith is the Co-founder of Chamapesa, a revolutionary savings management app in Kenya. He was elected to pitch at DEMO Africa 2013 after graduating from VC4Africa’s Cohort program.