Kenya - Country Commercial Guide
Digital Economy
Last published date:

Overview

National Focus:  Government Digital Economy/Growth/Transformation Plans or Strategies  

The Government of Kenya (GoK) has positioned the country as a regional hub for technology and innovation, resulting in significant information communication technology (ICT) investment by major tech firms and in local tech startups.  The country currently hosts six undersea cables, connecting it to the rest of the world.  Kenya’s digital prowess has earned it the nickname, “Silicon Savannah,” and it has developed into a destination market and testbed for emerging technologies, including cloud and artificial intelligence (AI).  Google, Amazon Web Services, IBM and Microsoft all have made large investments and established development centers in Kenya.  Kenya is also home to a vibrant startup ecosystem, including Semiconductor Technologies Limited (STL), which received a United States Trade and Development Agency (USTDA) feasibility grant in May 2024 to develop a new semiconductor fabrication facility that will help diversify and strengthen global supply chain for legacy chips used in many commercial applications.  In May 2024, Kenya was also selected by the US Government to be the first African country to receive funding from the CHIPS and Science Act of 2022.

In September 2023, President Ruto, accompanied by Ambassador Whitman and Embassy Nairobi’s commercial and economic team, conducted a roadshow to Silicon Valley where he pitched to US technology companies’ investment opportunities and incentives in Kenya’s Silicon Savanha.  In April 2024, Secretary of Commerce Gina Raimondo led a US government and business delegation to the AmCham East Africa Business Summit and, among other things, inaugurated a Digital Transformation with Africa Pavilion that showcased US and African solutions in agriculture, healthcare, energy, ICT and other sectors important for Africa’s development.  During the visit, Secretary Raimondo also addressed over 20 African ICT ministers assembled in Kenya for a regional ICT conference.  In May 2024, President William Ruto’s paid a State Visit to the United States and met with President Biden, Secretaries of State and Commerce and held a roundtable with US technology companies at the White House. During the State Visit, Microsoft announced a partnership with United Arab Emirates’ G42 to construct a $1 billion state of the art, one-gigawatt green data center to power the growth of AI and provision of cloud and data storage services in the region.  

Kenya has also expanded access to high-speed internet, improving digitization of government services, and developing skills for the digital economy.  As the Kenyan government pursues additional procurements in each of these areas, progress will be spurred by support from the Kenya Digital Economy Acceleration Project (KDEAP), a $390 million World Bank program that started operations in 2024.  The GOK also aims to mobilize an estimated $100 million in private capital to expand broadband infrastructure.  

In February 2023, the GoK announced the Digital Superhighway Project, which seeks to strengthen the country’s ICT backbone. The Digital Superhighway will prioritize the expansion of Kenya’s fiber network coverage countrywide with plans to lay 100,000 kilometers (62,000 miles) of fiber optic cable and erect 25,000 public Wi-Fi hotspots.  The country’s Digital Masterplan aligns with global technological advancements and supports the rapid rise of Kenya’s digital economy and growing startup ecosystem. The government sees ICT as a critical enabler for other sectors, including health, education, creative economy, and agriculture.    

Key Government Bodies:

  • The Kenyan Ministry of Information Communication and the Digital Economy (MICDE) is the major policy formulation body in the digital, ICT, telecommunication and media sectors.
     
  • The ICT Authority (ICT-A) of Kenya is a key State Corporation under the MICDE with a broad mandate to enforce ICT standards and enhance electronic communications.  The authority also implements the World Bank’s KDEAP program and maintains all government ICT contracts.
     
  • The Communications Authority (CA) of Kenya is the regulatory authority under MICDE for the communications sector, responsible for the development of the information and communications sectors including broadcasting, cybersecurity, multimedia, telecommunications, and electronic commerce.  Important duties include licensing all systems in the telecommunications industry and managing Kenya’s frequency spectrum. 
     
  • The Office of the Data Protection Commissioner (ODPC) is the designated government agency (separate from MICDE) that ensures the appropriate handling of personal data in Kenya as enshrined in the Data Protection Act (DPA) of 2019.
  • Kenya Broadcasting Corporation (KBC) is the state-run media organization that broadcasts in English, Swahili and other local languages.
      
  • Postal Corporation of Kenya is a state-owned corporation responsible for postal services in Kenya.  

 

U.S. Government’s Focus on Kenya & The Digital Transformation with Africa (DTA) Initiative  

As a sign of Kenya’s prominent position in the digital ecosystem, U.S. Secretary of Commerce Gina Raimondo inaugurated the US Government’s Digital Transformation with Africa (DTA) pavilion at the American Chamber of Commerce (AmCham) East African Summit April 24-25.  The DTA is a signature initiative of the Biden-Harris Administration designed to expand digital access and literacy and strengthen the digital enabling environments across the continent.  The US Commercial Service Kenya partnered with AmCham Kenya and the U.S. Trade and Development Agency to host 20 leading technology companies from the United States and Africa to showcase their cutting-edge solutions across sectors at the DTA pavilion.    

At the DTA pavilion, Secretary Raimondo touted the impacts of the DTA initiative on Africa’s economic development, announced various private sector commercial deals, and a historic partnership enshrined in a  joint statement with Kenya to facilitate data flows, empower digital upskilling, and harness the potential of AI.  The Secretary stated that, “I chose Kenya as my first official trip to Africa because of their leadership in digital transformation and to demonstrate the US business community’s commitment to Kenya and across the continent.”  During the same visit, Secretary Raimondo also brought with her members of the President’s Advisory Council on Doing Business in Africa, who engaged in broad discussions with the GOK and other regional governments in town for the AmCham Regional Summit as part of their fact-finding mandate to advise the Biden Administration on enhancing trade and investment with Africa.    

Additionally, as a sign of the maturation of Kenya’s technology ecosystem and the strong US-Kenya strategic partnership, the United States announced during President Ruto’s State Visit to the United States in May 2024 that Kenya would be the first African country to receive support for its budding semiconductor industry under the CHIPS Act as an International Technology Security and Innovation Fund (ITSI) partner country.  

The US embassy and its Foreign Commercial Service in Kenya maintain active partnership with AmCham Kenya’s Digital Economy Task Force, a key commercial diplomacy platform for improving Kenya’s digital and ICT policy and regulatory environment.  The task force holds roundtables regularly for exploring and building industry consensus on regulatory and ease-of-doing business issues and encouraging the GOK to address them, including issues related to AI, cybersecurity, and cross-border data flows.

Projected Digital Economy Growth (general trends, competitive environment, major purchasers)

General Trends

Kenya is considered the leading technological and innovation hub of East Africa and stands at the forefront of mobile broadband connectivity, mobile financial services, and a robust ICT infrastructure. According to the Business Monitor International (BMI), Kenya’s ICT sector grew by an average of 10.8% annually in the last decade, with the digital economy expected to contribute up to 9.24% of the country’s GDP by 2025.  ICT remains one of the fastest-growing sectors, with internet penetration at 85.2 % (Internet World Stats). The GoK-approved goal of universal 4G coverage, digitalization of government services, and the growth in smartphone usage is spurring growth in e-commerce and other digital services.

In 2023, Kenyan entrepreneurs attracted close to $800 million in funding, mostly in technology, climbing to the top spot in Africa, and on a pure dollar basis Kenya received more startup capital than any other country on the continent, outperforming Nigeria, Egypt, and South Africa.  Kenya’s startup ecosystem is particularly strong in climate tech, e-commerce, fintech, agritech, healthtech, and edtech.  In 2023 alone, Kenya saw a 15% increase in healthtech startups and a 10% increase in edtech startups compared to the previous year.  

Competitive Environment

Kenya’s abundant green power and high internet penetration rate makes it an attractive destination for technology companies seeking to reduce their carbon footprint in a tech friendly environment.  Kenya generates over 92% of its electricity from renewable sources and future additions to the grid will all come from solar, geothermal, hydro, and wind sources. The Kenyan government aims to scale to 100 percent renewable energy by 2030.  Investing in Kenya provides companies access to ubiquitous green energy, helping companies meet their scope 2 and 3 greenhouse gas emissions goals. Kenya is in the process of finalizing carbon markets regulation under its Climate Change Act, enacted in 2023.

While major US tech companies have invested in product development centers in Kenya with regional purviews, they face strong competition from Huawei in the services and equipment space.  Other competitors come from the EU, UK, Israel, Japan and Korea.  Additionally, Kenya’s own Safaricom is the dominant player in the telecommunications market and is expanding its range of offerings, including cloud computing, cybersecurity, and other services.    

Notably, in August 2023, the MICDE repealed its 30% domestic equity requirement for technology companies.  This policy had been a major barrier for long-term foreign investment into the ICT sector and its removal has seen companies like AWS continue with plans to make large investments in Kenya, such as its recently launched development center.  Kenya’s 2023 removal of the VAT on exported services led to a significant rise in call center and business process outsourcing operations in Kenya, leveraging the region’s strong connectivity and advanced English language skills.  

Major Players

Kenya’s diverse private sector is a major, growing customer for ICT goods and services, but may not be able to afford more costly solutions.  More specifically, the banking and financial sector is a key source of procurement opportunities, especially in the areas of cybersecurity, fintech and cloud services.  The growing healthcare sector is another source of opportunity, especially in records and information management and storage solutions.

Kenya also hosts the United Nations’ Africa headquarters, the global headquarters of the United Nations Environment Program, and the United Nations Human Settlements Program, making it a hub for the international donor community and non-governmental organizations, which provide another potential market for solutions providers.  At the consumer and retail level, Kenyans generally have an affinity for U.S. goods and services, but price sensitivity often limits adoption.

Market Challenges

Regulatory Environment: Kenya is party to trade agreements and has implemented national regulation with implications for the digital economy. Measures to be aware of include:

International Agreements Impacting Digital Policy: Kenya is a party to the African Continental Free Trade Agreement (AfCFTA. The United States is not a party to this agreement, but some of the broad disciplines contained within the AfCFTA Digital Protocol will affect the overall business regulations in AfCFTA countries in which U.S. companies operate.  The Digital Protocol was concluded in February 2024, but there are ongoing negotiations on a wide range of annexes that are expected to fill in critical details.  Once the Digital Protocol is in force, AfCFTA parties have a transition period of five years to align their national laws, rules, and regulations with the obligations under the protocol.    

The impact of the AfCFTA Digital Protocol will be wide-ranging.  Among other changes, it will create transparency obligations to publish all digital-related regulations and to oblige parties to accept the legal validity of electronic documents, allow contracts to be concluded by electronic means, and allow electronic invoicing and paperless trading.  It seeks to address some of the “last mile” issues in eCommerce such as streamlining the licensing of logistics services providers, for example. It tackles issues such as making digital payments and settlement systems more interoperable.  The protocol foresees a provision on customs duties on electronic transactions (an issue that is also under negotiation more broadly in the World Trade Organization).  The Digital Protocol also seeks to address cross-border data transfers, data localization, source code management, and other key policy issues that can affect international trade and investment.  

Data Privacy and Cross Border Data Flows: Kennya’s data protection framework was established through the Data Protection Act (2019). The legislation applies to both local and foreign entities processing the personal data of Kenyan residents. The Office of the Data Protection Commissioner (ODPC), established by the Act, is responsible for overseeing implementation, compliance, and enforcement. The Data Protection Act provides guidance on data processing and storage, including rights of data subjects, cross-border data transfers, processing of personal data relating to children, notification requirements for data breaches, punishable offences, and dispute mechanisms. Issues such as cross-border data flows and data localization remain a priority for U.S. industry with clear guidelines yet to be set, which can make the operating environment difficult for companies to navigate. Currently, the Data Protection Act (2019) requires data controllers and processors to provide proof to the Data Commissioner that appropriate safeguards are in place for all data transfers and that the recipient jurisdiction has a comparable data protection regime.  

Artificial intelligence (AI):  As of June 2024, Kenya does not have any specific laws or regulations governing AI.  Kenya’s parliament and trade associations have been working to draft AI regulatory frameworks, sometimes with competing visions.  These include the Draft AI Code of Practice and the 2023 Kenya Robotics and Artificial Intelligence Society Draft Bill which would establish an AI regulatory framework and promote reasonability and requirements for actors in the AI value chain.  

In the international arena, Kenya signed in March 2024 onto the United Nations Joint Statement on the Proposed UN General Assembly Resolution on Seizing the Opportunities of Safe, Secure and Trustworthy AI Systems for Sustainable Development.  Additionally, the African Union is tackling continent-wide AI policy and has created a framework that includes recommendations for industry-specific codes and practices, standards and certification bodies to assess and benchmark AI systems, regulatory sandboxes for safe testing of AI, and the establishment of national AI councils to oversee and monitor responsible deployment of AI.  

 Public sector procurement:  Kenya’s public sector spending has been adversely affected by a ballooning fiscal deficit as a percentage of GDP and accelerating debt service payment commitments.  Moody’s has accordingly downgraded Kenya’s credit sustainability to CAA1.  Toward that end, the majority of major infrastructure procurements are now being offered as public private partnerships through the PPP Unit of the National Treasury.  In the digital space, the ICT Authority under MICDE retains leadership over most procurement, with the Ministry of Interior also playing a strong role on cybersecurity procurement.  KDEAP, managed by ICT-A, remains a bright spot where the GoK secured funding from the World Bank to execute digital and ICT related projects.  US companies have had some success winning public tenders in Kenya but given the complicated operating environment, companies are encouraged to engage with the US Commercial Service for guidance and advocacy support.  

Digital Trade Barriers

Digital Services Tax: Kenya currently has a digital services tax (DST) on income from services provided through a digital marketplace in Kenya at the rate of 1.5% on the gross transactional value.  Kenya is participating in the Organization for Economic Cooperation and Development (OECD)’s Inclusive Framework discussions.  While that process is ongoing Kenya continues to apply its unilateral DST on income generated from digital services.  As of September 2024, the GoK is also considering a Significant Economic Presence tax, which could replace the DST, but no final decision has been made.  

Cross Border Data Flows:  Kenya’s 2019 Data Protection Act (DPA) includes unclear provisions governing the cross-border transfer of personal information. The DPA requires that data controllers provide proof of appropriate safeguards as a condition for transferring the data outside Kenya but does not describe what would constitute acceptable proof, leaving companies uncertain if they will be found to be in compliance. The ODPC also requires foreign entities to submit relevant documentation before processing the personal data of Kenyans. While Kenya doesn’t impose strict data localization requirements, there are compliance obligations and sector-specific restrictions to consider. Companies should monitor for any future changes in policy, as the regulatory landscape is still evolving.  


Digital Trade Opportunities

Cross-Sector Enabling Technologies  

Digital Infrastructure/Internet Access: As highlighted above, the GoK, through ICT-A, offers tender opportunities related to last-mile connectivity, public Wi-Fi, backbone, and metro connectivity.  The KDEAP and Digital Superhighway Project funding streams will accelerate opportunities in these and other areas.  Further information can be found on the ICT Ministry’s website or by reaching out to the Commercial Service Kenya.  

Data Centers: Cloud computing services are arguably the fastest-growing segment in Kenya’s IT services sector based on the number of investments attracted and explored in recent months.  Investment in hyperscale data centers by leading tech firms continues to drive growth in the cloud services market.  This is mostly driven by affordable and abundant sources of renewable energy (especially geothermal) to power data centers, better broadband connectivity, and strong value propositions for cloud-based services in the country.  The government plans to establish green energy plants for sustainable electricity supply to ICT systems to ensure reliable and accessible services.  

Artificial intelligence: As noted above, Kenya is the technological hub of East Africa and is an early adapter of new technologies on the continent, including AI.  The AI market in Kenya is projected to reach $240 million in 2024 and is expected to have an annual growth rate of 28.22 percent by the year 2030 (Statista).  That said, the Kenyan private sector and consumers are price sensitive, so AI products will need to be competitively priced.  In addition, there is a need to upskill and train local practitioners on the use and applications of AI.  Larger multinationals as well as international and non-governmental organizations present in the country may offer additional market opportunities.  

U.S.- Kenya Joint Statement:  In April of 2024, MICDE signed a joint statement with the US Department of Commerce to facilitate future engagement on Data Flows, Harnessing AI and providing resources to support digital upskilling. The United States and Kenyan Government affirmed a shared priority to support collaborative growth in Cross Border Privacy, AI development and Governance, and addressing digital skills and literacy in Kenya’s workforce.      

Computer Hardware and Software: Computer hardware accounts for nearly 70% of the IT market in Kenya.  Trends in remote working/studying are expected to drive growth in demand for hardware and software.  The government announced plans to set up a local software industry in support of investments made by various U.S. companies such as Microsoft, IBM, Cisco, and Google, among others, who established software engineering research and training hubs in Kenya.


Specific Industry Sub-sectors

Cybersecurity: Online crime in Kenya increased significantly in the last few years due to the rapid digitization of the financial sector and increased online payment transactions.  In 2023, cyber criminals using the name ‘Anonymous Sudan’ launched a D-DOS attack on Kenya’s public and private sector digital infrastructure with significant downtime, affecting services that included eCitizen, and mobile money apps amongst others.  Kenya also suffered other D-DOS attacks during the year.  Given the threat of cybercrime, cybersecurity solutions will be required to secure data and online applications for both the government and its citizens.  In 2024, the Kenyan cybersecurity market is expected to reach roughly $56.13 million.    

The Internet of Things (IoT):  The Kenyan IoT market is expected to reach $670 million in 2024, according to Statista, with the main areas of growth being in the healthcare and agricultural sectors.  Kenya’s public and private hospitals seek U.S. solutions to meet demands from both the growing private sector hospitals that cater to the middle class and public sector hospitals stiving to meet the GOK’s Universal Healthcare goal.  Telemedicine is also an area of growth to serve Kenya’s more remote populations.  There is also an increased demand for the use of drone delivery services in both the health and agricultural sectors.

FinTech: Kenya is a global leader in early financial technology services adaptation, as illustrated by Safaricom’s highly successful M-PESA phone-based money transfer, payments, and microfinancing service.  M-PESA has presence in 11 countries and almost two-thirds of Kenya’s GDP passes through the payment system.  In Kenya, more than 80 percent of adults rely on some form of mobile money service.  The success of M-PESA has spurred a competition between telcos and banks to provide additional fintech services to Kenyans, providing opportunities for U.S. companies with new solutions in these areas, in addition to cybersecurity which is critical in this sector.  

Digital Trade Events:

ITW Africa (Nairobi September 10-12, 2024)
Africa Com 2024 (Cape Town, Nov. 12-14, 2024)
Africa Tech Summit (Nairobi, Feb. 12-13, 2025)
Connected Kenya Summit 2025 (date TBD)

For more information and assistance please reach out to CS Kenya Digital Trade Officer:

Josh Startup, Digital Trade Officer
U.S. Commercial Service, U.S. Embassy Nairobi 
U.S. Department of Commerce | International Trade Administration
Tel: +254 (20) 363-6728