Kenya accounted for the second largest volume of venture capital deals in Africa after South Africa between 2015 and 2019, helped by its position as the eastern Africa regional economic hub.
A report by the African Private Equity and Venture Capital Association (AVCA) on VC deals for the period shows that Kenya accounted for 18 percent of the $3.9 billion (Sh415.4 billion) total VC deals in the five-year period, translating to about $702 million (Sh74.8 billion).
South Africa led the continent at 21 percent and Nigeria was third at 14 percent, with the top three countries enjoying the advantage of being the financial centres of the respective regions.
Many firms looking to invest in the region base themselves in Nairobi, taking advantage of the city’s transportation links to global peers, lack of foreign exchange controls and an educated labour force.
“In terms of countries, South Africa, Kenya and Nigeria have attracted the bulk of VC investments between 2014 and 2019, reflecting similar patterns to PE activity on the continent,” said AVCA in its inaugural report on venture capital.
“Fintech dominates the African start-up scene, but afro-entrepreneurship has also exploded within the utilities, logistics and transportation, e-commerce, healthcare and agribusiness sectors.”
There were a total of 613 recorded VC deals on the continent in the five-year period, with 2019 being the standout year with 139 deals, valued at $1.4 billion (Sh149 billion), up from 69 in 2015 worth $400 million (Sh42.6 billion).
The distribution of the number of deals saw South Africa lead with 25 percent, followed by East Africa at 23 percent and West Africa at 21 percent.
Given the preference by VC firms for early stage investments, the majority of the deals ( 65 per cent) were valued below $5 million (Sh533 million), with the median value of a deal in East Africa standing at $2.2 million (Sh234.3 million).
Kenya’s investment climate has in the past five years improved due to efforts to simplify licencing procedures and cut the time it takes to set up a business. The country was ranked 56 in the World Bank’s Ease of Doing Business Index 2020, having improved from position 108 in 2016.