Over the course of history, humans have been trading goods and services using different means. All these means have something in common - the agreement of their value, and thus their use in operations. One example of an ancient form of human exchange was witnessed in Micronesia where they used an exchange method called the ‘yap’ which were massive ray stones. These ray stones were so big that people were unable to move them, however they were still being used as a means of exchange just by knowing who was the owner of which part of the ray stone. The idea behind this is simply that ray stones or any other exchange mean does not have any intrinsic value apart from the fact that people came to an agreement of their value. Cryptocurrencies could be interpreted as the digital version of the ‘yap’ ray stones. Just like internet has changed the way we communicate in modern day, cryptocurrencies are about to change is a modern, digital means of exchange with an agreed upon value. Cryptocurrencies are digital currencies that are not ruled or governed by any institution. They are designed to be used outside of the intermediary rule that is applied today by financial and governmental institutions. It introduces a very independent, yet very secure system. According to the Coinmarketcap, as of August 2017, there were 843 currencies, where Bitcoin, Ethereum, Ripple, Bitcoin Cash and Litecoin remain the best ones mainly based on their value in USD and their circulating supply. Bitcoin alone has on average daily transactions of 288,953 which is the equivalent of 150 million USD. In addition to that, it is important to mention that Bitcoins are released through a process of mining. In the cryptocurrencies system, accounts given to the users are similar to simple blank sheets of paper. In these sheets, every user has to write down any transaction they were part of. What is special about this system is that any transaction written by any user appears in every other users’ sheet. This essentially gives any user the access to transactions happening in the whole system. The only difference is that the users are connected through a computer code network rather than paper sheets. The rationale behind this system of sharing everyone’s transactions is having everybody else confirm their ownership of coins following the basic and historical exchange system rule. The list of all the transactions is called the blockchain system. This blockchain technology works like a database in which all the transactions are stored, and that automatically performs calculations right after any transaction to update the users’ account and show each users’ balance. Cryptocurrencies are growing in popularity and increasingly been used in African nations. According to an article written by Rainer Michael Preiss, an Adjunct Researcher at NTU_SBF Center for African Studies, digital currencies, primarily bitcoin are increasingly taking roots in countries like South Africa, Ghana, Kenya, Botswana, Zimbabwe and Nigeria. Various factors make Africa a potential platform for a successful blockchain economy yet one of the main possible reasons for its growing popularity would be that Africa has a need for an alternative to its local fiat money mainly due to its lack of reliability and accessibility. Bitcoin and cryptocurrency systems in general suggest not only a better alternative to fill these existing gaps but also an opportunity for the population to control their wealth and enhance transparency, giving birth to a new era of stronger social justice in Africa. This innovative means of trade is about to update the way humans exchange and perform transactions. It suggests a practical and transparent way of doing so. These advantages are simplifying the process of trading and could potentially solve certain social and financial issues faced within societies. Tareq Amhoud, Analyst at Infomineo. Sources: https://coinmarketcap.com/ https://www.howwemadeitinafrica.com/cryptocurrency-great-african-opportunity/59402/
Each episode MEA Pulse brings you on a journey to learn about the Middle East and Africa regional economy and business trends with a featured country pertinent to the topic. Hosting Erickson Oduya from Infomineo's Nairobi office, MEA Pulse Episode 3 is a discussion on the rapidly transforming country that foresees many evolving opportunities in investment, business research, and opportunities/challenges as SMEs. Significant forces such as technology adoption and infrastructure developments are facilitating the developing economy. Click play on the Soundcloud player, featuring Infomineo's MEA Pulse Podcast, to gain more insights on how the Kenyan investment environment is evolving, and how Small and Medium Enterprises (SME) can profit from the emerging opportunities. https://soundcloud.com/user-961934619/kenyans-investment-environment Tip for Our Podcast Audiences Cut to the chase by clicking on the MEA Pulse icons in the comment section to listen directly to the section that you are most interested in, or you can simply click on any of the following sections. Erickson's self-introduction Key Forces that are driving the Kenyan Economy Import/Export and Major Trading Partners The Evolving Investment Environment Technology Adoption and How It Affects Other Industrial Sectors Business Research in Kenya The Developing Infrastructure and the According Micro Outlook Conducting Business in Kenya as SMEs Become a MEA Pulse Follower! To keep up with future episodes, don't forget to follow MEA Pulse on Soundcloud! Kenya Country Profile Interested in learning more about Kenya? Download our Kenya country profile for more insights on the country's economy.
Kenya has been witnessing major growth in entrepreneurship and innovation, led by a rising interest towards new technologies and mobile connectivity. Today, Kenya is leading the way in terms of digital technology development in Africa. The country has been experiencing a boom in internet and mobile savviness with a 90% mobile penetration as of 2016, among which, 44% of mobile users’ own smartphones. Percentage of people using smartphones in Kenya in 2014 and 2016 The leading innovation that Kenya experienced in the past years has been mainly led by mobile money and instant transfer of funds usage. With 96% of households using mobile money in Kenya, it has become dominant over traditional money transfer solutions that are costly and time consuming compared to mobile money services. Moreover, the leading provider of mobile money, M-PESA, also appealed to rural areas and it is believed to have raised 2% of the population out of poverty. This is as a result of the tendency of users, especially women, to be more enticed and open to doing business with the ease of funding and money transactions offered by M-PESA [2]. Survey results to: “Do you use any mobile money service?” Moreover, Kenya is ranked first in Sub-Saharan Africa in terms of technology transfer and expenditure on research and development [4]. The government’s engagement in technological advances provided greater opportunities for Kenyans in being more innovation driven and thus, enabled them to be attracted by entrepreneurship and risk-taking. Some of the initiatives led by the Kenyan government to increase the citizen’s approach to entrepreneurship are represented in several public sources of funds for entrepreneurs. These funds target different parts of the population, such as funds dedicated to increasing entrepreneurial access to young people and women as well as sector dedicated funds [5]. The Kenyan government has also put a lot of emphasis on new technologies, through extensive investments in internet infrastructure. In 2014, Kenya was reported to have emerged as a leader in the internet market within the region, holding the highest bandwidth per person in Africa at one of the lowest rates, further increasing internet penetration in Kenya to 52.3% [6]. As a consequence of all the above incentives combined with the accelerating development in the country, many Kenyan entrepreneurs have been recognised for their efforts and inspiring stories. In 2014, nine Kenyans were among Forbes publication on the 30 most promising entrepreneurs in Africa [7]. In 2016, 75 Kenyans were among the 1,000 startup entrepreneurs in Africa that benefited from the Tony Elumulu Foundation Entrepreneurship Program (TEEP), a program that grants an overall $100 million to 1,000 entrepreneurs selected from a pool of 45,000 applicants in 54 countries [8]. In addition to that, the attractiveness of Kenya in terms of entrepreneurial development led the way to the country hosting the 6th edition of the Global Entrepreneurship Summit in 2016. The event was held in the presence of President Barack Obama and presented the US government’s commitment to global entrepreneurship and highlighted the potential in the country [9], emphasising on the attractiveness of the country and the need for investment especially for women and young entrepreneurs [10]. What’s next? The increased government interest towards raising entrepreneurship and digital innovation and acceptance have raised an entrepreneurship-friendly environment, allowing entrepreneurs to connect with peers, create partnerships, boost knowledge and secure investment. While Kenya’s future looks very promising, there is no doubt that the development plans being pursued by its government to tackle corruption and improve education and infrastructure, in order to be in line with the increasingly competitive global startup landscape, will require much effort and continuous monitoring. Sofia Hazim, Analyst at Infomineo. Learn more about Sofia. Sources: [1] Google Consumer Barometer 2016 https://www.consumerbarometer.com/en/trending/?countryCode=KE&category=TRN-NOFILTER-ALL [2] Kate Baggaley, Mobile money helped 2 percent of households in Kenya rise out of poverty, (Dec 2016) http://www.popsci.com/mobile-money-helped-2-percent-households-in-kenya-rise-out-poverty [3]Sauti Za Wananchi, Money Matters: Citizens and financial inclusion in Kenya, (Dec 2016) http://www.twaweza.org/go/sauti-ke-2016-financial-inclusion [4] The Global Entrepreneurship and Development Institute, Kenya, Sub-Saharan Africa and Global Entrepreneurship in 2016, (July 2015) https://thegedi.org/kenya-sub-saharan-africa-and-global-entrepreneurship-in-2016/ [5] Robert Malit, 7 public sources of funding for Kenyan entrepreneurs, (Feb 2016) http://www.herbusiness.co.ke/public-sources-of-funding-for-kenyan-entrepreneurs/ [6] Elayne Wangalwa, Kenya leads Africa's internet access and connectivity, (Sep 2014) http://www.cnbcafrica.com/news/east-africa/2014/09/09/kenya-leads-internet/ [7] Mfonobong Nsehe, 30 Most Promising Young Entrepreneurs In Africa 2014, (Feb 2014) https://www.forbes.com/sites/mfonobongnsehe/2014/02/04/30-most-promising-young-entrepreneurs-in-africa-2014/2/#d403d176d00e [8] Capital Business, 75 Kenyans to benefit from Sh10bn Africa entrepreneurship program, (Oct 2016) http://www.capitalfm.co.ke/business/2016/10/75-kenyans-benefit-sh10bn-africa-entrepreneurship-program/?doing_wp_cron=1488385464.7398579120635986328125 [9] The United States Agency for International Development, (July 2015) https://www.usaid.gov/sites/default/files/documents/1860/Entreprenurship%20fact%20sheet.pdf [10] Global Entrepreneurship Summit 2015 http://www.ges2015.org/
The African continent, a beacon of African growth, remains one of the fastest-expanding economies globally. Despite this promising trajectory, the economic foundation of many African nations is still predominantly tethered to commodity production and exportation, especially crude oil, underscoring a critical need for diversification and development of internal value-added operations. Oil is a natural resource that commonly attracts a high amount of foreign investment and boosts the main economic indicators of a country. It can be easily used as a proxy for natural resource based economies. Moreover, due to the current commodity crisis for certain economies, with the barrel price sinking in 2014-15 to its lowest level since 2003[1], it is easier to highlight some differences in performance between oil producing and non-oil producing African countries. It is also important to highlight such differences since it provides an opportunity to assess the convenience and sustainability of a development process based on these natural resources. Oil and Non-oil Producing Countries Nineteen of the 54 African countries are currently oil producers, however, it is worth noting the number of produced barrels can considerably vary from one country to another. Those countries are home to about 56% of the African population.[2] Fig.1 - African crude oil producing countries[3] In terms of wealth, the gap between the two groups of countries is evident, when it comes to GDP and GDP per capita. Nevertheless, the growth rates for both indicators show how the recent trends are not necessarily related to the oil economy. In relative values, the non-producing countries show better performance than the producers, but the progress of the two groups of countries can be reasonably compared over the years. Fig. 2 – GDP in USD bln[4] Fig. 3 – GDP growth[5] Fig. 4 – GDP per capita in USD[6] Fig. 5 – GDP per capita growth[7] It is easy to identify the higher impact that the 2014-15 price crisis had on oil-producing countries, whose overall GDP and GDP per capita fell by 10.0% and 12.2% respectively in 2015. The same crisis could have also been an important factor in the good export dynamics. As the following chart shows, the oil-producing countries’ export precipitated in 2015 (-49.0%), as a result of a negative trend during the last five years. Even the export from non-oil producing countries fell during the same period, but the overall decrease is moderate (-2.0%). Fig. 6 – Export of goods in USD bln[8] Fig. 7 – Export of goods growth (decrease)[9] In terms of attractiveness, the oil economies continue to attract the most attention from foreign investors, despite the fall in oil prices. The producing countries received increasing FDI (+4,7%) with a fluctuating trend in the course of the years. In the last years, the oil-free countries received around 21% to 56% fewer inflows compared to the oil producers, yet still showing an overall +1.0% growth. Fig. 8 – FDI inflows in USD bln[10] Fig. 9 – FDI inflows growth[11] Beyond indicators strictly related to the economy, it is interesting to recognise how the richer oil-producing countries are on average more developed than the others. With reference to human development aspects such as life expectancy, education, and income per capita (enclosed in the elaboration of the Human Development Index), the African oil producing countries show better performance than non-producers. The following chart shows this gap, despite the fact that HDI growth trends are comparable among the two groups of countries. Fig. 10 – Human Development Index[12] Consequences and Recommendations The recent crash in oil markets and commodity prices has harshly affected the global economy, with no immunity offered to developing countries. Saudi Arabia for instance, once thought immune to the downturn in oil prices, was recently declared at the verge of bankruptcy and forced to make its first international bond sale[13] to bring in necessary cash. In Nigeria, the falling oil prices have been claimed to have “a painful effect” on the country’s economy, with the necessary slowdown of the production and a negative impact on the rest of the industry[14]. In Angola, the oil crisis is believed to have unmasked how poorly managed the country really was in the last decade, giving visibility to all the economic and social deficiencies that were concealed by the high growth percentages[15]. Even some non-producing countries have been affected by the negative situation. For example, in Mozambique the realisation of various large projects aiming to benefit from the country’s natural gas resources, whose selling price is strictly related to oil price, has been continuously delayed these past years. This conjuncture created a series of erroneous expectations leading the country into a major economic downturn, with the government taking on more debt assuming an easy repayment, once revenue from LNG started flowing[16]. The IMF pointed out how most of the African countries where energy and mining exports accounted for a larger share of GDP will need to make “sizeable adjustments” to their domestic spending. On the other hand, countries that have invested in infrastructure and strengthened domestic consumption are all expected to grow at rates between 6-7% and more in the next few years. This is the case for the Ivory Coast, Kenya, Rwanda, Senegal and Tanzania[17], leading to the clear but not so obvious conclusion that diversification is an inescapable factor for sustainable growth. Antonio Pilogallo, Associate at Infomineo. Learn more about Antonio. [1] Source: http://www.bbc.com/news/world-35345874. [2] Source: Infomineo analysis on WB data [3] Source: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2241rank.html. Given the very small amount of crude oil production, Morocco has been considered as a non-producing country. [4] Source: Infomineo analysis on WB data [5] Source: Infomineo analysis on WB data [6] Source: Infomineo analysis on WB data [7] Source: Infomineo analysis on WB data [8] Source: Infomineo analysis on UN Comtrade data [9] Source: Infomineo analysis on UN Comtrade data [10] Source: Infomineo analysis on UNCTAD data [11] Source: Infomineo analysis on UNCTAD data [12] Source: Infomineo analysis on UNDP data [13]Source: http://www.forbes.com/sites/timdaiss/2016/10/23/we-are-doomed-to-bankruptcy-unless-changes-made-says-saudi-official/#6e9b68d24471 [14] Source: http://www.bbc.com/news/world-35345874 [15] Source: https://www.washingtonpost.com/news/worldviews/wp/2016/08/02/how-the-crash-in-oil-prices-devastated-angola-and-venezuela/?utm_term=.816db1e8ab7d [16] Source: http://ww2.frost.com/frost-perspectives/impact-oil-and-gas-price-slump-mozambiques-economy/ [17] Source: https://www.weforum.org/agenda/2016/04/10-things-the-imf-wants-you-to-know-about-africas-economy
The Kenyan banking sector is composed of 52 institutions, including 43 commercial banks, 1 mortgage finance company and 8 deposit-taking microfinance institutions. The sector is dominated by multinational banks (such as Standard Chartered, Barclays, etc.) and Pan-African groups (such as KCB, Equity Bank, etc.). As of December 31st, 2010, the country included 1,063 bank branches and 1,974 ATMs (Automatic Teller Machine). In addition to the mainstream banking models, the sector in Kenya is characterized by the increased use of E-banking services which became the preferred mode of banking instead of an alternative channel. (more…)