Written By | Torch Media Africa
In the first half of 2026 Kenyan startups raised about US$126 million, and Kenya lost its position as Africa's top funding destination.
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Technological Transformation
Kenya's technology story is usually told through its startups. The more useful lens in 2026 is to ask where the value actually accrues. The latest evidence suggests it sits with one incumbent platform, Safaricom and its M-Pesa network, and not with the venture-backed company ecosystem that Nairobi built its reputation on. In the first half of 2026 Kenyan startups raised about US$126 million, and Kenya lost its position as Africa's top funding destination. In the financial year ended 31 March 2026, Safaricom reported a net profit of about KSh99.7 billion. The two numbers describe the same country and very different kinds of success.
The platform: a record year for Safaricom
Safaricom's results for the financial year to 31 March 2026, published in early May, showed net profit of roughly KSh100 billion, up 67.3 percent, on revenue of about KSh414 billion and service revenue of around KSh400 billion, up 10 percent. Chief executive Peter Ndegwa credited strong performance in Kenya and a valuable contribution from Ethiopia. The growth drivers were M-Pesa, mobile data and the Ethiopian operation.
M-Pesa remains the core of the franchise. Company materials describe about 35 million monthly active users in the Kenyan network and a system that has scaled from 100 to 6,000 transactions per second, with a 'Fintech 2.0' cloud-native upgrade launched in September 2025. At the company's Decode 4.0 summit in Nairobi on 1 April 2026, executives framed the product as an open platform: Daraja 3.0, the third generation of its developer API portal, was announced in November 2025, and sources cite either more than 100,000 developers or more than 66,000 integrations depending on the metric, a reminder that company claims should be read carefully. New consumer products include Ziidi Trader, launched in February 2026 to allow investing from a single share, a money-market fund with a KSh100 minimum, and recurring-payment and shared-wallet features. Safaricom also says AI is built into customer service and fraud detection.
The bet in Ethiopia
The most unusual part of Safaricom's report is its Ethiopian subsidiary, which is still deep in the investment phase. In FY2026 Safaricom Ethiopia's total revenue rose 119.5 percent to KSh17.36 billion and service revenue rose 86.6 percent to KSh14.08 billion. The EBITDA loss fell 54.4 percent to KSh15.35 billion, while the operating (EBIT) loss was KSh37.71 billion, down 30.4 percent. Management guided to an FY2027 EBIT loss of KSh12 billion to KSh15 billion.
Operationally, the company reports 13.63 million 90-day active customers, up 54.2 percent, and 5.2 million M-Pesa 90-day users, more than double the previous year. It operated 3,504 sites, up 18.3 percent. Mobile data made up about 70 percent of Ethiopian revenue, with average usage of 6.9GB a month. The Global Partnership for Ethiopia consortium committed US$2.65 billion in total, of which Safaricom's equity contribution is US$1.22 billion, while the birr fell 23.7 percent against the dollar over the year.
The significance for Kenya is strategic. Safaricom's expansion makes the Kenyan technology sector's most profitable firm a cross-border investor whose future earnings depend on Ethiopian macroeconomics, currency convertibility and regulation. That is a bet on the African digital market as a whole, and it also means Kenyan domestic cash flows are funding a multi-year loss elsewhere.
The pipeline: venture funding slips
The startup picture is less comfortable. Reporting by Nation Media Group on 4 August 2026, drawing on H1 2026 funding data, put Kenyan startup funding at US$126 million (KSh16.3 billion), compared with US$327 million for Egypt and US$254 million for Nigeria. Kenya now ranks third. A separate report recorded Kenya's 2025 venture funding as US$984 million, a figure I could verify only through secondary press coverage, which implies that Kenya's 2026 pace is sharply below last year's if it holds for the second half.
Headlines about rankings can exaggerate short-term swings, since African venture totals are lumpy and a few large rounds can move a half-year. The more structural concern, raised in local coverage, is that domestic capital remains low, so Kenyan founders depend on foreign funds whose appetite has been cooling. Safaricom's own startup programmes show the other side. Its Spark Accelerator, with iHub, Sumitomo and AWS, selected 10 startups from more than 200 applicants in September 2025, with up to US$25,000 in AWS credits each. That is useful, but small next to a KSh100 billion profit.
Compute: the next layer
Kenya's bid to be East Africa's compute hub is the third pillar. Safaricom and iXAfrica opened a 22.5 MW AI-ready facility, NBOX1 in Nairobi, in May 2025. iXAfrica has announced a second hyperscale site of 53 MW. Microsoft and the UAE's G42 announced a US$1 billion package that includes a green data centre for an Azure East Africa region and the development of Swahili and English language models. Announcements are not capacity, and I could not independently confirm delivery dates for the Microsoft and G42 project from the sources reviewed. But the direction is clear: Nairobi is positioned as the regional landing point for cloud and AI workloads, helped by geothermal power and the existing financial and telecom ecosystem.
Reading the divergence
What should a reader conclude? First, Kenya's digital economy is real and profitable, but its profits are concentrated. A single platform generates most of the value and is increasingly an infrastructure provider to other firms through APIs. That can be positive, because Daraja lets startups build on trusted rails. It also means that the success of independent firms depends on terms set by the incumbent.
Second, the ranking slip does not mean Kenya has lost its edge. It reflects Egypt's and Nigeria's larger domestic markets and big fintech rounds. But it does expose a gap: Kenya has deep payment infrastructure and a developer base, yet thin pools of local growth capital and few exits. Without those, the best Kenyan founders will keep selling to foreign acquirers or relocating.
Third, Ethiopia is both opportunity and risk. If Safaricom reaches break-even there, it will create a second M-Pesa-scale franchise and validate Kenya's model. If macro conditions and the birr remain unfavourable, the losses will test investor patience in Nairobi. For policymakers the lesson is to widen the base of value capture: encourage domestic institutional investment in venture funds, sustain open-API rules and make sure the compute build-out serves Kenyan firms and not only foreign cloud customers.
