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How Nairobi built a thriving tech community
By Greg Scruggs
NAIROBI, Kenya — In 2009, a submarine fiber optic cable landed on the beaches of Mombassa, about 500 kilometers (310 miles) east of here. The president, ministers and dignitaries greeted its arrival with the same fanfare as heralded undersea telegraph lines more than a century ago.
They were right to be excited. Six years later, Nairobi is bursting with technology startups like Shop Soko, a sort of Etsy for Africa that allows shopkeepers to sell handmade goods to consumers worldwide. The Kenyan capital has also emerged as the African base for high-tech heavyweights such as Google, IBM and Intel. From 2002 to 2010, the value of Kenya’s tech exports rose from US$16 million toUS$360 million.
In Nairobi’s Kilimani neighborhood, where the tech scene is centered, ten-story office buildings clad in glass are shooting up everywhere. Meanwhile on Nairobi’s southern outskirts, the government is planning a development known as Konza Techno City, a special economic zone aimed at attracting technology companies.
Nairobi’s tech boom is a fitting backdrop to a global dialogue happening here this week. Urbanists from around the world are meeting to craft the agenda for Habitat III, the U. N.’s once-every-20-years conference on cities, which takes place next year. In some ways, Nairobi represents a hope for the planet’s increasingly urban future, as concentrations of people, investment and infrastructure in fast-growing cities produce jobs, innovation and wealth. (Citiscope will be covering the Nairobi event at citiscope.org/HabitatIII.)
Yet Nairobi also represents the challenges of urbanization. Not far from Kilimani sits Kibera, Africa’s largest slum; about half of Nairobi’s 3.3 million people live in informal settlements. Nairobi is beginning to choke on traffic congestion. Even in Kilimani, intersections lack traffic signals, so crossing the road on foot is a dangerous game of chicken. And while those glass towers may have good internet connections on the inside, the sidewalks on the outside remain dirt.
Social enterprises on the rise
There’s reason to believe that Nairobi’s tech industry will be a positive force for change. Especially among the entrepreneurs in the startup scene, there’s a strong feeling here that what’s good for the slum dwellers of Kibera is also good for techies of Kilimani.
Shop Soko is a good example. The company’s founder, Ella Peinovich, came to Kenya from the U. S. as an architecture student working on sanitation issues. She later relocated to Nairobi and started her company with a Kenyan partner in 2012.
Peinovich got the idea after years of buying crafts and jewelry to resell at her mother’s art gallery in Wisconsin. As a customer, she watched craftspeople sell their wares on the side of the road and at local markets. They suffered from dirty conditions — a blanket on a dusty patch laden with products — and faced security risks given all the cash they would hold by the end of the day. Access to a global market through Shop Soko improved these vendors’ revenues by an average of 400 percent, while creating safer working conditions and greater financial stability.
“Silicon Valley is about efficiencies, like how to get your dry cleaning delivered faster. Nairobi is about solving real-life challenges,” says Peinovich. “You’re in a developing context. Any business creating jobs is socially conscious.”
Peinovich and her partner started Shop Soko at GrowthHub, an incubator and accelerator space in Kilimani where companies are nurtured from birth and then mentored into adulthood. Most of Nairobi’s startups can trace their origins to GrowthHub or to iHub, a nearby co-working space where there’s a foosball table, plentiful couches and an in-house coffee bar. About a quarter of the businesses hatched in these two offices are social enterprises.
Another one is called SokoText (soko is Swahili for “market”). This is an SMS-platform that aggregates the purchasing power of street vendors. For now, it is limited to purchases of vegetables. Vendors message their orders to Soko Text, which pools the orders together and buys in bulk directly from farmers. The company then ships orders to a distribution center close to where the vendors live — typically an informal settlement. It saves the vendors the time they used to spend traveling to wholesale markets. And it saves them money by cutting out the middleman.
Then there is BRCK, a startup co-founded by Erik Hersman, who also founded iHub. BRCK is aimed at the problem of spotty internet access. It sells a rugged Wi-Fi router that uses cellular signals to provide mobile Internet for up to 20 users for eight hours of battery life.
Initially a solution to iHub’s occasional connectivity problems – even with the fiber optic cable, mobile data networks, while slower, proved more reliable – BRCK has filled several niches. Development and aid professionals swear by it when traveling into the field. Rural schools consider it a godsend as the router’s built-in hard drive can store preloaded educational content. It also has appeal for more recreational users, like BRCK co-founder and chief operating officer Philip Walton, who laughs, “My kids were clamoring to get online around the campfire last weekend. So I fired up the BRCK and presto.”
As one of the first hardware innovations to emerge from Nairobi’s tech ecosystem, BRCK is pushing up a major problem: import duties on parts used in high-tech manufacturing. The duties make it prohibitively expensive to actually make BRCK in Kenya. “It’s really sad when you look at the bottom and it says ‘designed in Nairobi, Kenya, made in USA,’” Walton says.
Walton is optimistic that trade barriers will be resolved in the next six months, however. And nothing can take away his visible pride when he affirms, “Our all local African team is better than any Bay Area team passed on to Africa.”
Ingredients of success
In late March, soon after delivering the keynote at Kenya’s first ICT Innovation Forum, President Uhuru Kenyatta showed up unannounced at iHub. The visit was a huge coup that has left the tech community still buzzing weeks later. “This is hugely significant,” glows Josiah Mugambi, iHub’s executive director. “The highest office in our country recognizes the role of technology, innovation and entrepreneurship, the possibilities for education and job creation using technology.”
The government has offered more than moral support. Nailab — an accelerator adjacent to iHub that the president also visited — received a US$1.6 million contribution from the Kenyan government in 2013 that will help it expand nationally. More recently, a presidential decree opened 30 percent of public contracts to young entrepreneurs, especially in software and hardware. The government has also committed US$10.7 million to Enterprise Kenya, an effort to link local businesses with international markets.
Such investments come on the heels of more fundamental infrastructure improvements. Broadband connections have significantly improved since the undersea cable went in. Local telecom providers are racing to get fiber optic connections to homes, although business-caliber speeds still cost too much for most individuals to afford. “Five years ago the internet in Kenya made it impossible to run a start-up,” recalls Dennis Orina, iHub’s assistant community engagement manager.
Kenya Power has also made strides in providing more stable electricity service — a necessity for any tech-related company. “Five years ago power outages were maybe an issue, but not now,” Orina says. “Plus we have a backup generator.”
Nairobi’s tech community has also built heavily on the foundation of a previous home-grown innovation — mobile payments. In 2007, the telecom provider Safaricom launched a branchless banking service called M-PESA (“M” for mobile, pesa means “money” in Swahili). Users deposit money on their M-PESA accounts, and use their mobile phones to pay bills, buy goods and send money. More than 19 million Kenyans have accounts — more than two-thirds of the adult population. Each year, the system moves the cash equivalent of 25 percent of Kenya’s GDP.
M-PESA is baked into the DNA of every Nairobi startup product that has an e-commerce component to it. Without M-PESA, it would be much harder for Shop Soko to pay its craftsmakers or for Soko Text to broker deals between farmers and street vendors. “The innovation built on top of M-PESA is incredible,” Orandi exclaims. “As much as half of start-ups wouldn’t exist without it.”
New tech city
Johnni Kjelsgaard founded the parent company of GrowthHub in 2002 and has 20 years of business experience in Africa. He understands the lay of the land. “Nairobi has the best of both worlds,” he believes. “It’s a cosmopolitan, international city where you can live a comfortable life as an entrepreneur, but poverty is knocking on your doorstep so you can test your ideas in urban slums just 20 minutes away or in rural areas less than a half-day’s journey.”
This “paradox,” as Kjelsgaard calls it, means that “you can get customer and technical validation right around the corner.” That proximity gives Nairobi’s tech start-ups, especially the social enterprises, a competitive advantage when it comes to developing products that tap into the informal economy. “Projects from MIT and Stanford come here, and they fall flat on their face,” he says with a chuckle.
These intensely productive connections between rich and poor will be harder to forge in Konza Techno City. The new planned development is an initiative of the Ministry of Information and Communications, which says 110,000 people will live there some day. Located some 64 kilometers (40 miles) south of Nairobi, it will supposedly connect to the capital by a Chinese-built high-speed rail link.
Like any master-planned city conjured out of the ether and dubbed with a hackneyed name, it has a whiff of fancy about it — all it takes is one economic shock to shatter plans like these. Konza is still three to five years from gaining its first tenants, so all GrowthHub’s Muthuri Kinyamu would say is “we’re keeping an eye on it.” He adds, diplomatically: “I see it as an opportunity. Not siphoning talent but building new business.”
iHub’s Dennis Orina is more blunt. “It’s so far!” he gripes. Far indeed for a close-knit tech community that grew up on Nairobi’s gritty dynamism, where entrepreneurs and the talent to make their visions happen are separated only by flights of stairs and dirt sidewalks. Konza’s sidewalks will be paved and the broadband may be flawless, but even the most gleaming new city won’t replace the creative chaos that inspires Nairobi’s techies every day.
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