The Kenyan technology sector has been targeted by the German government and trade associations as an emerging investment opportunity.
Although only 1.2% of Germany's trade was with sub-Saharan Africa in 2010, its trade with the region has grown by 16% in 2011. Now, direct investment could also see a sharp acceleration.
Currently, the share of German foreign investment into East Africa is relatively low, at 0.5%. But German ministers and trade associations are now actively encouraging expansion in investment in East Africa, recently announcing that an Office of German Industry and Commerce will be opened in Nairobi in 2012.
The move is part of an expansion of German representative offices across Africa. However, ministers have indicated that they see East Africa as an important investment zone as they seek new areas of opportunity.
“We expect to see more positive developments in the intensity of the bilateral economic relationship,” said Stefan Kapferer, vice-minister at the German Federal Ministry of Economics and Technology, who added that the German government is “convinced it is necessary to look to Africa. We are looking for stability, peace and security, but also economic opportunities.”
Kapferer added that Kenya, in particular, offered significant opportunities to German investors, particularly in the technology sector. He pointed out that GDP growth in both countries offered an opportunity to strengthen the relationship between them.
In recent years, German investment in East Africa has been concentrated to renewable energy, but the boom in Kenya's ICT sector, with growing infrastructure and bandwidth capability, means firms are now looking to invest in information technology in the country.
“Kenya is a success story of liberalising and regulating the market, and is now participating in the global knowledge community,” said Kapferer. Increased German involvement in the Kenyan technology sector will take place through guarantees of export credit, trade fairs and SME missions, which have traditionally formed the basis of the German economy.
The Afrika-Verein der Deutschen Wirtschaft (German-African Business Association), with more than 650 members, including German multinationals and a large number of SMEs, is also working to expand investment in the East African region. Executive VP Hans Meier-Ewert said the association, which is active in all 54 African states, had joined forces with the German government to host several trade fairs and missions to Kenya, including a recent ICT conference in Nairobi.
Ewert says Kenya's growing technology sector offers unparalleled opportunities for German companies to enter the market. “There has been a dramatic increase in Internet use,” he said, “but there are still opportunities for improvement.”
The association provides members with sector-specific information, organises events related to economic sectors, and maintains a large network of contacts in order to assist members looking to invest in the Kenyan technology sector.
The association also co-operates with some 25 partner organisations in Africa, maintains a network of representatives, and offers members regular briefings on economic and political developments in Africa, as well as individual contacts.
However, the German government insists that East Africa must continue to progress both economically and politically if it is to attract an amount of foreign investment that could really benefit the region.
“Africa must compete with other regions worldwide,” said Kapferer. “It needs reforms and good governance, predictable decision-making, good institutions, an end to corruption, legal certainty and well-trained staff.”
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