Kenya is one of Africa’s top destinations for investment, with $676 million in venture capital funding alone in 2022 for Kenyan startups. Corporate law expert Sylvia Kithinji spoke to Craig Sisterson about what the future holds.

The volume of venture capital and private equity investment in Kenya in recent years, despite the global macroeconomic climate challenging many countries, underlines its status as a “very favourable” investment destination long-term, says leading lawyer Sylvia Kithinji.

“There are many things going for Kenya, including our relatively stable political environment, infrastructure capacity, our people and education levels, and positive demographics,” explained Sylvia, the Head of Commercial & Corporate at Ashitiva Advocates. “Kenya also has a broad and vibrant private sector cutting across many industries: financial services, ICT, health, manufacturing, logistics, agriculture, water and sanitation. So there are a broad range of viable investment options in Kenya, and that seems to have grown over the last few years.”

Sylvia, whose firm is co-hosting a sector roundtable about investment in Kenya on 12 September 2023 with Pinsent Masons and the Nairobi International Financial Centre, noted that a Burbidge Capital report outlined at least 59 deals happening in Kenya in the first half of 2023, which would be almost 80% of the 75 total deals across the entire East African region.

“There is a lot of interest in Kenya in terms of investment distribution for private equity and venture capital, but also other forms of investment,” she commented. “Kenya is also specifically becoming a destination for venture capital investments in technology in the financial services sector. We’ve seen a lot of activity over the last few years given the innovation in Kenya in fintech and the digital economy space.”

In April, a new report from the African Private Equity and Venture Capital Association (AVCA) noted that Kenyan startups received US$676 million in venture capital funding in 2022 – the fourth-most deals on the continent and the second-most funding.

“With our sector roundtable, we want to create a platform for deliberate discussions about deepening private equity and venture capital investments in Kenya,” Kithinji said. “We’re looking to have players from different backgrounds and sectors provide their perspectives and expertise. We want to bring investors, PE firms, VC firms, DFIs and sector associations into the same room with public sector officials, to make proposals on what an enabling policy and regulatory environment would look like.”

While investment in Kenya is strong and growing, more can be done, says Sylvia. She would like to see Kenya become a domicile for PE and VC firms setting up funds locally.

Sylvia also notes that while Kenya’s regulatory environment is “fairly supportive” of investment, there is room for improvement. Some hurdles facing investors include constraints on ownership, tax inefficiencies, slow licensing processes, and other factors that can impact private equity and venture capital investment.

She believes more could also be done to improve entrepreneur and investor readiness. “It’s not just about identifying the right opportunities, but also scaling those investments to become viable long-term businesses,” Sylvia said. “The ingredients for success include not just capital injection, but also finding the right investment fit, right level of technical assistance, coaching, support and creating an appropriate deal structure. That is what I see as our value-add.”