Moody’s, a leading credit rating agency, has downgraded Kenya’s sovereign rating to be substantially “credit risky”, citing the government’s decision to withdraw a controversial tax bill that would have raised much-needed revenue. 

The downgrade from B1 to Caa1 reflects Kenya’s diminished capacity to manage its increasing debt and fund critical development programs.

What happened? The scrapped 2024 Finance Bill contained measures to raise an additional $2.5 billion in consumer taxes, but widespread protests forced President William Ruto to backtrack on the proposed tax hikes. 

Moody’s warned that the government’s shift away from revenue-based fiscal consolidation and reliance on expenditure cuts will slow the pace of deficit reduction, leading to weaker debt affordability for the East African nation.

This credit rating downgrade comes as Kenya struggles to meet its tax collection targets, missing the mark by $2 billion in the last fiscal year. Kenn Abuya reported for TechCabal that, “High operational costs including energy prices and the weakening of the Kenyan shilling against the dollar were some of the factors behind the economic slowdown.”

The country’s fiscal woes are exacerbated by the government’s inability to implement unpopular but necessary revenue-raising measures.The Kenyan government’s decision to prioritise political stability over fiscal prudence in the face of public backlash shows the delicate balance that leaders must strike between appeasing citizens and ensuring the long-term financial health of their countries. 

The way ahead for Kenya: Speaking after his 3-hour X (Twitter) space last Friday, Kenya’s President, William Ruto says its administration will aim to listen to Kenyans more and lead with more empathy.

As the East African economic powerhouse navigates this turbulent period, it will need to find innovative ways to boost revenue and restore investor confidence without further burdening its citizens.

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Zimbabwe achieved an important feat this year. After 15 years of purse-biting inflation and 5 different currencies, it now has a currency, the gold-backed ZiG, that has held its value since it was released in April. 

Some critics say the new currency is stable because it’s backed by a fiat resource, but others, say the ZiG is only stable because it, like Davido, is unavailable. Regardless, the currency is stable and shiny. 

Nigerian lawmakers are now looking to do something with gold too. The lawmakers are pushing a bill that would give the central bank more muscle to buy up gold and stash it as reserves.

Gold presently accounts for 4% of Nigeria’s reserves, and the bill, if passed, would push this number up to 30% by making the central bank the exclusive buyer of all domestically produced gold. Right now, Nigeria’s gold mining scene is a bit wild, dominated by informal operations. The bill aims to bring this industry into the fold, potentially boosting its contribution to the national coffers.

A crude telling: Nigeria has been battling crippling inflation since fuel subsidies were removed last year. Food inflation surged to 40.66% in May, while headline inflation is at 33.95%. Nigeria’s dependence on oil and gas for foreign exchange is a double-edged sword. Vandalism and dwindling investment have choked production, pushing the government towards economic diversification. 

With mining, a sector boasting a 6.3% growth rate, analysts predict gold is a potential game-changer. This proposal faces an uncertain future as President Tinubu, who’s keen on revamping Nigeria’s mining sector, has plans to revamp the country’s mining sector, but with a focus on lithium as opposed to gold. 

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Tech hubs in Lagos, Nairobi, and Cape Town have flourished through collaborative efforts. These hubs have significantly contributed to Africa’s “Silicon Valley” dream. Kenya’s iHub, for example, has contributed to over 450+ startups that raised $40 million in funding.

It’s a modern hunter-gatherer system: With tech hubs that were absent over two decades ago now proliferating in Africa, it’s just a different kind of hunter-gatherer system. Mentors coach, and builders collaborate to build solutions addressing Africa’s pressing issues—all to survive. Now, they’re getting more support. 

The United Nations Development Programme (UNDP), in collaboration with African governments and the private sector, plans to raise $1 billion to open a string of tech hubs (called Project “Timbuktoo”) across major nascent cities in Africa, starting with an innovation centre in Lagos, Nigeria this year. 

The initiative will also build a healthtech hub in Kigali, Rwanda, an agritech hub in Accra, Ghana, and a minetech hub in Lusaka, Zambia that will support more than 10,000 youth-led founders.

Catching them young: University Innovation Pods (UniPods), another UNDP project, commenced in universities like Malawi and Kenya to provide young tech entrepreneurs with infrastructure to build businesses that not only survive the future of tech but also thrive. Perhaps, Africa’s “Silicon Valley” dream isn’t dead yet.

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Exactly a week ago, we wrote about home-grown cloud providers in Nigeria who want the government to make them their default cloud services provider. Given that the Nigerian government spends about half a million dollars per agency on foreign cloud service providers, homegrown initiatives might be the way to go. 

One of these local cloud providers is now fintech Okra. Yesterday, the startup which is known for its open banking APIs, announced that it’s building a cloud infrastructure for businesses to host their data and run workloads. 

This move comes as Nigerian startups grapple with rising inflation and interest rates, pushing them to seek cost-effective alternatives to established cloud giants like AWS and Azure. Okra believes it can fill this gap with a reliable and cheaper domestic solution.

An Okra insider, speaking anonymously, confirmed the company’s “cloud adventure,” highlighting their search for new revenue streams. 

Is open banking season closed? Okra’s expansion into cloud services coincides with a downturn in its core open banking business. Three months ago, it shut down “Balance,” “Income,” and “Transaction” products—tools used by digital lenders to assess creditworthiness. The open finance space in Africa, where Okra previously operated, faces challenges. The market is relatively small and dominated by a few well-funded players like Mono and Stitch, who have significantly outpaced Okra in fundraising. An anonymous early-stage investor believes consolidation is inevitable, with only one leader emerging eventually.

Okra’s cloud play is a bold move. Whether they can disrupt the cloud market and leave their open banking struggles behind remains to be seen.

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TechCabal – Features Writer, Junior Client Account Manager, Features Director – Africa
Norebase – Product Marketing Manager – Africa
EarlyNode –  Operations Associate, Technical Writer – Nigeria (Remote)
Acadium– Digital Marketing Interns – Remote
Reliance Health – Content Strategist, Telesales Officer – Lagos, Nigeria
Carry1st – Growth Manager – Lagos, Nigeria
Paystack – Enterprise Risk Lead, Expansion Marketer (Kenya) – Africa
Bumpa  – Senior Mobile Engineer, Senior Backend Engineer – Nigeria (Remote)

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Written by: Emmanuel Nwosu

Edited by: Timi Odueso

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