New research from ANDE reveals the many billions of dollars of economic opportunity for investors and entrepreneurs aiming to green key sectors of the Kenyan economy and help to meet the country’s contributions to the Sustainable Development Goals (SDGs).
The new report, “Building the Green Economy: Trends and Opportunities for Green Entrepreneurship in Kenya,” which is intended for small and growing businesses (SGBs), sector intermediaries, investors, and policy makers, includes research undertaken with support from the IKEA Foundation. It showcases the current state of green entrepreneurship in Kenya and highlights market potential across 11 sectors, such as renewable energy, sustainable agriculture, waste management and circular economy, and water. The report also includes deep dives into key sector business models, case studies of successful ventures, examples of entrepreneurship service provider support, and an overview of key challenges and opportunities for stakeholders in the Kenyan ecosystem.
Some of the key findings include the following. Green entrepreneurship in Kenya offers a US $123 billion market opportunity for SGB-active business segments. The most significant market opportunity is found in the waste management and circular economy sector (US $54 billion), followed by sustainable agriculture and aquaculture (US $33 billion) and water management (US $22 billion). The sustainable transportation sector offers less than US $1 billion in market opportunities for SGBs due to limited government targets and the country’s dependence on the implementation of large-scale infrastructure projects that would solve the supply of electricity and charging stations.
Accompanying the main report, ANDE has also released an Entrepreneurial Ecosystem Snapshot, providing more in-depth analysis of the services available to green entrepreneurs and a filterable directory of over 170 support organizations. The directory includes information on topics such as the types of ventures each organization supports, the types of financial and non-financial support offered, their efforts in achieving the SDGs, and their approaches to measuring impact.
Additional findings from these studies include:
- Sustainable agriculture and renewable energy stand out as sectors with both significant traction and sizable opportunity in the Kenyan market. The market opportunity for the sustainable agriculture and aquaculture sector is estimated to be about US $33 billion between 2022–2030. The government has formulated a range of policies to promote sustainable agriculture, and the adoption of renewable energy is critical for the achievement of Kenya’s Nationally Determined Contribution (NDC) target of a 100% transition to clean energy by 2030. Investors of all kinds are already supporting these sectors. For example, in 2022 both Apollo Agriculture, which uses satellite data to assess crop health and offers mobile technology for credit assessments, and Powergen Renewable Energy Ltd, which installs solar microgrids and commercial and industrial solar, have raised US $20–40 million each in Series B funding rounds. There are also many opportunities for earlier-stage green enterprises to find support and scale.
- Sectors where small businesses need more support include waste management and circular economy and water management. The market opportunity is estimated to be about US $54 billion for the waste management and circular economy sector and US $22 billion for the water management sector. While enterprises are active in both sectors, they need additional guidance and support from policymakers and investors. For example, policymakers can simplify licensing processes and regulate informal waste management services. Investors can provide needed patient catalytic capital to showcase scalable models while demonstrating quantifiable impact and financial returns.
- Nearly 90% of surveyed stakeholders reported that limited access to finance is the primary challenge facing green entrepreneurs in Kenya. This is driven by a number of factors, including low investor confidence in and familiarity with green business models, predominantly international funding sources, and limited climate financing directed to adaptation and resilience efforts. Stakeholders also pointed to a limited number of investment-ready business models due to underdeveloped financial and accounting practices among small businesses. Ecosystem actors need to work together to improve investment readiness and develop case studies to help investors navigate green sectors which may be new to them. While all startups, regardless of their sector, struggle with raising capital, green entrepreneurs in capital-intensive sectors (such as sustainable transportation and renewable energy) and tech-heavy sectors (such as energy storage) face particular challenges with obtaining the required high levels of initial investment. Other sector challenges explored in the report include insufficient SME-specific policy support, the need for convergence on best practices, a lack of dedicated support for women entrepreneurs and locally owned green enterprises, and access to talent.
- Kenya’s entrepreneurial ecosystem relies heavily on international players, with about half of support organizations headquartered outside the country. Notably, around 70% of investors are based internationally. This highlights the need to support local ecosystem players and signifies potential for more organic ecosystem growth without substantial external intervention. Local organizations are likely to have more relevant contextual knowledge and be better equipped to develop and implement climate solutions tailored to the local economy.
- Stakeholders also identified several ecosystem improvements, including increased awareness of the need to transition to a green economy. This progress likely reflects the many policy shifts within the Kenyan government. There is an opportunity to build on this positive momentum through awareness campaigns to sensitize consumers and increase the uptake of environmentally friendly products. Increasing consumer demand for green products and services is essential for expanding market opportunities for green enterprises. For example, despite significant progress in the sustainable agriculture sector, small businesses still struggle to convey to consumers the value of using green products such as organic fertilizers and food items. This calls for government, entrepreneurs, and support organizations to run awareness campaigns since most consumers tend to not understand the positive effects of green products and prefer the cheaper and/or familiar products that they have relied on over the years.
- About a quarter of support organizations align their aims with the SDGs, particularly SDG 13 on climate action. However, stakeholders face challenges around impact measurement, including limited capacity and knowledge of best practices for collecting and analyzing impact data. To address this, the ecosystem would benefit from improved information sharing and joint learning opportunities on best practices in impact measurement, which are still evolving in key sectors like climate adaptation.
- Success is happening. Despite the remaining challenges, ANDE’s new report showcases emerging success stories of five green ventures in Kenya: Safi Organics, Acacia Innovations Limited, Kiri EV, the Waste Electrical and Electronic Equipment Centre, and Kwangu Kwako. These entrepreneurs attribute their growth to diverse funding sources, investing in networking, meaningful technical support, and strategic partnerships.
With increased attention to those areas where policy and financing are not yet meeting the needs of Kenyan green enterprises, the many billions of dollars of market opportunity showcased in these 11 sectors in Kenya promise a bright future for greening the Kenyan economy.