Can Kenya Make a Run for Economic Gold?
Did you notice Kenya’s surprising performance at the 2012 London Olympics? Take a look at this New York Times infographic of the final medal standings in London – there’s Kenya standing tall as the leading medal-winner on the African continent and even ahead of other nations – like Mexico or Turkey or India or Argentina – that we typically consider to be among the world’s next great emerging markets. Including Beijing, Kenya’s top athletes have now taken home 25 medals from the past two Olympic Games – and that might just foreshadow the rise of Kenya as a new economic innovator on the world stage.
To buy into this argument, of course, it helps to understand the link between Olympic performance and economic performance. Ahead of the 2012 London Olympics, the research team at Goldman Sachs published a report called Olympics and Economics 2012 that probed the potential correlation between Olympic greatness and economic greatness. What they found was that certain economic variables served as a reliable proxy for future Olympic performance. As Goldman wrote, “Gold goes where the growth environment is best.” In other words, when you create a world-class environment for economic growth to occur, you are also far more likely to create the environment for world-class athletes to flourish. (That should cheer up all the economic naysayers and doom-and-gloomers in the USA, especially after we edged out China for the top spot in London)
Separately, the IMF has already forecasted that Kenya will be one of the world’s seven fastest-growing economies over the next five years. Not surprisingly, that’s starting to attract global attention: investors are also allocating more money to Kenya now that the nation has been added to the MSCI Frontier Markets index. Meanwhile, the entrepreneurial stories out of Kenya continue to make their way into the West’s mainstream media and the Chinese continue to aggressively move into East Africa with new infrastructure projects, including the creation of Kenya’s first superhighway.
The primary key to making the Kenyan economic miracle a reality, of course, has been Kenya’s embrace of mobile. Mobile penetration rates are astronomically high, with The Economist estimating that as much as 68% of Kenya’s adult population now uses mobile banking. Kenya’s embrace of M-PESA has driven mobile disruption of markets from banking to farming to healthcare. And, this, in turn, this is leading to widescale economic benefits and the creation of a true start-up culture.
And, while we may not typically think of cities like Nairobi in the same breath as Shanghai or Dubai – the fact is that Nairobi looks a lot more like the hyper-industrialized West than we might admit, with its traffic congestion and population density. When IBM decided to create its first-ever tech research hub in Africa this summer, the tech giant chose Nairobi. One of the main topics that IBM researchers plan to study is the traffic congestion of major urban centers. The snarling traffic jams on New York’s bridges or in its tunnels, or the busy crosstown traffic in Manhattan, has nothing onNairobi’s epic traffic jams. Inspired by IBM’s Kenyan example, it’s easy to imagine other tech R&D giants exploring potential partnerships in order to learn more about mobile health and mobile banking.
It’s clear that something fascinating is going on in Kenya, even if you’re not an economist, investor or venture capitalist. Kenya could become a template for the next wave of global development, as a relatively resource-poor nation that uses mobile technology to leapfrog its economic competitors. There have been a few hints already that the nation is ready to break out – the latest being Kenya’s surprising performance at the London 2012 Olympics. To truly make a long-distance run for economic gold, though, will require more than just Western dollars or Chinese know-how. It will require hundreds of thousands of entrepreneurial Kenyans, tapping away on their tiny mobile screens, to drive the next major advances in mobile banking and mobile finance.