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NAIROBI: Africa's new HQ for multinational firms

169K views 827 replies 101 participants last post by  lianat 
#1 ·
Nairobi, Africa’s new HQ for multinational firms​

Global firms are looking to make the city the fulcrum of their continent-wide operations as they race to be part of Africa’s growth story.

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.

Another factor that is acting in the region’s favour is the massive investment that EAC governments have put in to build fibre-optic cables, which has boosted Internet speeds and connection levels.

Unlike in manufacturing – where cheap power, water and raw materials are key – the global services industry thrives on extensive and reliable airline connections, a comfortable but affordable location, fast Internet connections and a deep pool of skilled talent.

Operational centre

This is why international firms are looking to make Nairobi the fulcrum of their continent-wide operations as they race to be part of Africa’s growth story. One of the biggest pluses for Nairobi is its central location on the continent. This hugely favours the national carrier, Kenya Airways.

South African Airways, a key competitor, is disadvantaged by the longer distances it must fly to cover the rest of Africa. Indeed, KQ has a bold, if not overly ambitious, target of flying to every African capital city by 2013. If it hits this target, business executives will find it much easier to reach any part of the continent from Nairobi.

This will mean better revenues for KQ because Africa remains its most lucrative market, where it enjoys healthy margins and little competition. It generated about half of its $953 million revenues in Africa in the financial year ended March 2011.

It also means that the majority of business executives traversing the continent will find their way back to Nairobi, the airline’s main hub. The airline’s expansion has already created a demand for scarce hotel rooms, which according to a report released by Mercer, a human-resource consulting firm, is among the highest in the world. The growing demand for accommodation and conference facilities has encouraged global hotel chains to set up in Nairobi to plug the supply deficit. Rezidor Hotel Group, owners of the Radission brand, are putting up a hotel in Nairobi, joining about 10 other local hotels coming up.

Investigations by The EastAfrican show at least 2,500 new bed capacity will be created in the next year in Nairobi alone.

Kenya is also stepping up its efforts to improve infrastructure, with the ongoing road works, which will make it easier to travel within the capital city. Other infrastructure projects supporting the business environment in Nairobi include the laying of infra-red cables allowing for faster Internet connectivity.

The services industry needs fast Internet connectivity because it allows for Internet banking and easier communication such as web conferencing with the Western world.

Multinational firms like Google are also finding it easier to recruit in Nairobi where many say there is a deep and broad pool of talent from banking to technology.

It seemed to be the easiest place to get the talent that we needed,” said Joe Mucheru, Google “lead” for sub-Saharan Africa on why the technology company first set up in Kenya before spreading to other Sub-Saharan countries.

Talent is a big concern for the multinationals and the existence of a strong mobile technology applications innovation hub that has produced products like M-Pesa and the various Google map based apps is working in Kenya’s favour.

We are still way ahead — relative to the rest of sub-Saharan Africa — in terms of graduates being produced every year,” said Gitau Githongo, a Nairobi based economist. “This means that you will find good quality staff if you are setting up here.

However, not every Kenyan graduate is lucky enough to get a nice job immediately after graduating, and there is evidence that a good number of these potential employees are not well qualified and employers have to spend a lot of money retraining. The level of unemployment for mass unskilled labour remains as high as in other East African nations.

TheEastAfrican
 
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#152 ·
That's actually a very good point. I can't speak for DES, but I can explain the situation in Ethiopia a bit. Intra-Ethiopia business is conducted in Amharic, however everyone in the business world (i.e. the people multinationals would be interested in) learns English. Admittedly the quality of instruction is quite bad right now, and more needs to be done for sure.

There are 5 things right now that Nairobi has as major advantages over Addis: a largely English-speaking population, a better educated workforce, a much more capitalist environment including foreign banks, private cellphone and internet providers, better overall infrastructure, better image. However there are other things that are advantages for Addis currently: center of a much larger potential market, much more investment in electricity generation, lower costs of production. So as of right now, Nairobi is a better prospect for investment in services, and Addis is better for manufacturing.

Not sure about Kampala and DES.
I fully agree with all the Addis advantages. By the way, I thought we were talking about multinationals setting up their African headquarters in Nairobi than let's say Addis, Lagos or Johannesburg,no?If so, these headquarters are mostly service-based as they already produce their products elsewhere. This therefore means that the lower costs of production, electricity generation e.t.c is irrelevant to the discussion,no?The larger potential market at home is a bit useful but again their focus is continent-wide or Sub-Saharan Africa-wide.

It's just clear that Nairobi is unmatched by other cities in the region, we should now continue with the comparison of Lagos and Johannesburg!
 
#153 ·
Eddeux Virgin Nigeria became Nigerian Airways after being sold, its the one with the Eagle feather Livery (airplane lingo :lol:) and Arik has had a couple of problems with workers, though they have Agbani as their spokeswoman :?
 
#155 ·
I didn't say you have to know her :| Arik has to convince Nigerians first before moving on to the rest, KLM Delta still rule flights to Nigeria.

And you should be familar with her, she is the first and only Black African Ms World.
 
#156 ·
I fully agree with all the Addis advantages. By the way, I thought we were talking about multinationals setting up their African headquarters in Nairobi than let's say Addis, Lagos or Johannesburg,no?If so, these headquarters are mostly service-based as they already produce their products elsewhere.

(snip)

It's just clear that Nairobi is unmatched by other cities in the region, we should now continue with the comparison of Lagos and Johannesburg!
That's why I said "as of right now." So my point still stands: there is no natural advantage that Nairobi has that the other cities cannot match through policies. IOW, liberalizing banking and telecoms is all Addis really needs to do to become a major competition to Nairobi in the short-term; improving educational standards in the long-term. Even then, language is not that big of a restriction; look at the Asian and European hubs outside of London.
Population-wise, the cities are close, GDP/city is very close. That's my point. That's not the case in WA or SA. What's so hard to understand about that?
 
#158 ·
That's why I said "as of right now." So my point still stands: there is no natural advantage that Nairobi has that the other cities cannot match through policies. IOW, liberalizing banking and telecoms is all Addis really needs to do to become a major competition to Nairobi in the short-term; improving educational standards in the long-term. Even then, language is not that big of a restriction; look at the Asian and European hubs outside of London.
Population-wise, the cities are close, GDP/city is very close. That's my point. That's not the case in WA or SA. What's so hard to understand about that?
Could you please repeat the "natural advantage" point of Lagos and Johannesburg that other cities in those regions cannot attain through changes in policies?
 
#162 ·
You can go back and look for my posts.
That's true, and that's what is its advantage right now. My point is that there is no "natural" advantage as opposed to Lagos, for instance, that enjoys an advantage through sheer size alone. By contrast, becoming investor-friendly is something that's just a matter of policy change for the competitors.
^^
Looks like having a sheer size?

Then are we also going to talk about Kinshasa because it's population is more than Jo'burg's?I think size really doesnt matter a lot than other factors like education,foreign-friendly, business policies, peace, transportation hub et.c.
 
#163 ·
Could you please repeat the "natural advantage" point of Lagos and Johannesburg that other cities in those regions cannot attain through changes in policies?
South Africa and Nigeria account for more than 70% of regional GDP, most firms often treat them as a separate market altogether. Their natural advantage is in their disproportionate size. The JSE for example has a market cap of over $800billion for example and firms would choose that destination as a source of financing as opposed to any city within the region.
 
#164 ·
South Africa and Nigeria account for more than 70% of regional GDP, most firms often treat them as a separate market altogether. Their natural advantage is in their disproportionate size. The JSE for example has a market cap of over $800billion for example and firms would choose that destination as a source of financing as opposed to any city within the region.
So it's not only size but also a combination of economic activity and policies,right?

Thanks for your clarification.:eek:kay:

abesha did not mention that which means going by size, we can also talk about Kinshasa, the second largest city in Sub-Saharan Africa!
 
#167 ·
I also mentioned the economics of them - I specifically said Joburg is light-years ahead. You're just trying to be difficult.
No,you focused on size and I gave you an example of Kinshasa which has a gigantic population but is one of the most useless city for foreign investors!If it's economics then Nairobi is still light ahead of it's peers in the region, largest in every economic indicator.
 
#168 ·
how is the information and communications sector progressing in ethiopia?

i think i read somewhere last year that meles will start liberalizing the ICT sector
Nope, no plans to liberalize so far. The state-owned ETC's management was handed over to France Telecom and has been renamed Ethio Telecom. That's basically all that's changed. The population and business community's patience has run out; people want privatization so bad but the monopoly is a cash cow so it's unlikely Meles will relent.
If the sector was opened up for private investors, it would boom like nothing else.

Jamax, arguing with you is a waste of time. Your deductive abilities should kick in at some point. You can't function on others' brains.
 
#169 ·
I doesn't matter how much money is officially being channelled into Kenya from outside, what matters is how much investment is being put in overall and to measure that, you can look at how much construction is going on. In that aspect, Kenya is far ahead of the other EA countries. Infrastructure wise it's building modern, elevated highways in and around Nairobi, a new railway system with modern rail stations and trains etc, an international airport is just opening up, highways all over the country are getting built/expanded etc. Kenyan businesses and tax payers are upping them all by investing more than both the foreigners and the tax payers of Tanzania and Uganda combined, your argument is invalid...
:cheers:

Kenyan ingenuity is unmatched in the region.Its amazing what has been accomplished in the last seven yrs bearing on mind Kenya was fucked up in last years of the former regime,and its only the begonning.This reason why we dont care much FDI knowing its ills and ties to natural resources which we dont even have.
 
#170 ·
No dude,next time bring substance to the debate and you wont be run over.:)
Mwana,

I guess i brought lota of substance in this one give me lil bit of credit:cheers: Remember before i step in it was just you, xjamaax, Kenguy, and I. M Boring cruising in the thread just like that famous 10K marathon team of yours...:lol:
 
#171 ·
Mwana,

I guess i brought lota of substance in this one give me lil bit of credit:cheers: Remember before i step in it was just you, xjamaax, Kenguy, and I. M Boring cruising in the thread just like that famous 10K marathon team of yours...:lol:
Okay,just a little bit.:)

Just for the record,nowadays we win almost all events from 800m and above,ofcourse an Ethiopian or two may still the limelight once in a while but thats only because they dope.
 
#172 ·
Nope, no plans to liberalize so far. The state-owned ETC's management was handed over to France Telecom and has been renamed Ethio Telecom. That's basically all that's changed. The population and business community's patience has run out; people want privatization so bad but the monopoly is a cash cow so it's unlikely Meles will relent.
If the sector was opened up for private investors, it would boom like nothing else.
yeah it was the france telecom deal that i had read.

thats sad, with the population size of the country i think ICT would the one sector where a boom is guaranteed if the govt loosened its grip in the sector.
 
#173 ·
Okay,just a little bit.:)

Just for the record,nowadays we win almost all events from 800m and above,ofcourse an Ethiopian or two may still the limelight once in a while but thats only because they dope.
LOL What bullshit :lol:

If I'm not mistaken, Kenya holds the world record for 800m and 3000m.

Ethiopia holds the world records for 5000m, 10,000m, 20,000m, and the Marathon.

And this is all while having significantly less runners than Kenya.


Please tell me you're joking about the doping part lol
 
#174 ·
LOL What bullshit :lol:

If I'm not mistaken, Kenya holds the world record for 800m and 3000m.

Ethiopia holds the world records for 5000m, 10,000m, 20,000m, and the Marathon.

And this is all while having significantly less runners than Kenya.


Please tell me you're joking about the doping part lol
geez man, do you ever get a joke? this is the second time i have seen you react like this to a joke.

learn how to take a chill pill sometimes
 
#175 ·
geez man, do you ever get a joke? this is the second time i have seen you react like this to a joke.

learn how to take a chill pill sometimes
If an "LOL", a ":lol:" and the following don't give you enough assurance as the comedic genius that you are, then I'm really sorry.
...
Please tell me you're joking about the doping part lol
Easy answer to this: Yes, I was.

But if you feel that I didn't give you enough credit for being so dang funny, here it goes:

:rofl::rofl:


good grief
 
#176 ·
LOL What bullshit :lol:

If I'm not mistaken, Kenya holds the world record for 800m and 3000m.

Ethiopia holds the world records for 5000m, 10,000m, 20,000m, and the Marathon.

And this is all while having significantly less runners than Kenya.
Please tell me you're joking about the doping part lol

Definitely so, but suprisingly for a country twice the population of Kenya.
 
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