Kenya: Nairobi, Africa’s New Headquarters for Multinationals
Nairobi — Nairobi is fast becoming the African home of choice for multinational companies, especially those in the services sector, looking to grow their presence on the continent.
Pfizer, the US-based pharmaceutical company, PricewaterhouseCoopers, and Posterscope, an outdoor advertising firm, have in the past seven days unveiled plans to establish a regional hub, recruit staff and set up shop respectively in Kenya’s capital city last week.
In the past one year, global heavyweights in the service industry such as IBM, Google, PwC, advertising agency WPP, Bharti Airtel, Nokia/Siemens, Huawei, Procter & Gamble, Biersdoff, Barclays and Stanchart have announced plans to either set up regional hubs or transform their local operations to serve sub-Sahara Africa.
Several factors work to the benefit of Kenya and the other East African states too. First, the formation of a Common Market is helping create a strong internal market with a population of 130 million and a middle class estimated at 30 million consumers. With South Sudan, which has a population of 8.4 million, expressing interest in joining the EAC, and Kenya opening up its northern frontier through the Lamu Corridor to serve Ethiopia, which has a population of 84 million, the region now boasts a potentially connected internal market of 240 million people. This is way above the 150 million mark that experts say a country or a bloc needs to be a major world power.
The second factor is the peace dividend that has come with the ending of most of the civil wars in the Great Lakes. This is making the region a safe bet to invest in. The peace dividend has seen homegrown African multinationals such as Ecobank, Stanbic, UBA, MTN, KCB and Equity pursuing a more aggressive expansion strategy in these markets, which are similar to their home markets. Global multinationals too, like Pfizer and IBM, are smelling opportunity in the region.
Pfizer sells mostly antibiotics, cough syrups and anti-fungals. The drugs are finding a ready market as the East African population grows — at an estimated 3.5 per cent in 2011.
“The hub will serve as a legitimate supply system of products, bringing us closer to the market and reducing the total accumulated cost per product,” said country director for Nigeria and the East Africa region Enrico Liggeri when launching Pfizer’s hub last week. Kenya’s healthcare industry has attracted private equity investments that have helped some of the insurance service providers and hospitals expand.
In 2009, IBM opened an office in Nairobi to meet the increased demand from clients in both the private and public sector in East Africa and across the region.
The clincher for IBM, which previously had little interest in sub-Saharan Africa, was winning a multimillion-dollar contract to manage Airtel’s IT infrastructure across 16 African markets. IBM is expected to hire 2,000 workers to serve its continental business. Airtel too wants to have the hub of its African operations in Kenya and is currently planning to put up a headquarters in the city.