Kenya’s Digital Economy Outpaces Banks and Factories in FDI Growth
Tech companies are outpacing banks and factories as foreign investors pour billions into Kenya’s digital market
Kenya’s technology companies are drawing a growing share of international investment, leaving traditional sectors such as banking, manufacturing, and retail behind.
In 2023, foreign direct investment (FDI) into the country’s ICT sector reached Sh64.7 billion, reflecting a sustained interest in the digital economy.
The 2024 Foreign Investment Survey (FIS), conducted by the Kenya National Bureau of Statistics, the Central Bank of Kenya, and the Kenya Investment Authority, shows that ICT companies now account for more than a quarter of Kenya’s total FDI, up sharply from under 10 percent just a few years ago.
Manufacturing and finance continued to attract capital, but their growth did not match the pace of technology investments. Manufacturing drew Sh32.46 billion, while finance and insurance brought in Sh45.32 billion. The wholesale and retail sector, previously the largest recipient of foreign investment, recorded a modest decline to Sh48.31 billion.
Policy changes have played a major role in supporting the ICT sector’s rise. In March 2023, the government removed the requirement for foreign tech firms to cede a portion of their equity to local partners, opening the door for global companies such as Amazon Web Services to expand operations in Nairobi. Other multinational players, including Microsoft, Google, Oracle, IBM, and SAP SE, have also strengthened their presence, reinforcing Kenya’s reputation as a regional technology hub.
Local start-ups, especially in fintech, are thriving alongside these multinationals. Companies like Wasoko, Lori Systems, Flocash, and Africa’s Talking are attracting venture capital and scaling quickly. Many are focusing on previously underserved markets, providing digital services that reach communities with limited access to traditional banking or logistics solutions.
The government has adjusted taxation to match the growing digital footprint. In December 2024, the 1.5 percent digital services tax was replaced with a 3 percent significant economic presence (SEP) tax for foreign digital firms, ensuring that revenue reflects the sector’s expanding role in Kenya’s economy.
ICT companies now represent 26.66 percent of total FDI inflows, and out of 603 firms surveyed, total foreign investment in 2023 reached Sh242.61 billion. These figures highlight a clear shift in investor focus, showing that Kenya’s digital economy is increasingly central to its overall growth.
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