Going public as a route to funding Kenya tech firms

Going public as a route to funding Kenya tech firms

The technology ecosystem in Kenya is one of the most thriving sectors globally. Driven by significant investments in broadband infrastructure capabilities, a supportive policy and regulatory framework, groundbreaking innovations as well as the successful adoption of technology, it has recorded double-digit growth expanding by an average of 23 percent annually over the past decade.

Its contribution to economic growth is equally remarkable. The sector is estimated to contribute up to eight percent of the country’s GDP through IT-enabled services while creating more than 250,000 direct and indirect employment opportunities as at the end of the year 2020.

The sector, however, faces significant challenges that pose a great threat to sustainable growth. A persistent funding gap that discriminates against locally driven approaches, failure to transition from start-ups to growth, lack of global visibility and exposure as well as ownership and control challenges occasioned by private capital arrangements have challenged the ability of Silicon Savannah to achieve its potential and impact Kenya.

As the sector appreciates the urgent need for new approaches in funding and investments, listing on public markets remains one of the key catalysts to accelerate growth of technology companies in Kenya.

Similarly, the Nairobi Securities Exchange (NSE) plans to introduce a technology board to mobilise more domestic and international capital and increase incentives for investments in the sector in Kenya. Going public might be the next best move for tech companies seeking to bolster growth.

But why should companies in the fastest growing sector able to attract other forms of financing consider going public?

GROWTH-ENABLING CAPITAL AT COMPETITIVE RATES

Going public enables companies to tap into and have unparalleled access to a diverse domestic and international investor base. This enables a company to access long-term growth-enabling financing at competitive rates. Technology companies can raise initial or on-going equity capital to fund operations as well as strategic initiatives such as acquisitions that are critical to growth.

Patient capital raised through listing can allow technology companies execute growth strategies, thus consistently enhance shareholder value in the long-term. Listing can also support technology companies to build their capacity to raise capital in the future by increasing their investor base.

ACCESS TO REGIONAL AND INTERNATIONAL MARKETS

For technology investments to achieve higher than average returns, the need to access larger and more integrated regional and global markets is key. Listing can provide technology companies the prospects to scale across regional and international markets through exploring cross or dual […]

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