6 Month Status Update (6/24)

GitLab Foundation launched our Kenya strategy in December 2023 with a focus on three opportunities to increase wages for low income Kenyans: distributing income impacts of the technology industry, improving market access and income generation for farmers, and increasing local employment in infrastructure-related construction trades.

What we’re learning

  1. Challenges in investing in trade employment: There is a large volume of active organizations in the first two sub-strategies (tech training and agriculture), and a much smaller number helping Kenyans to take advantage of employment arising from large-scale investments in housing and infrastructure.
  2. Oversubscription on training, employment still lacking: We have heard from many partners that technology-related training programs are in overabundance, with many attendees participating in multiple trainings at a time; yet, pathways to stable employment are lacking. Employment trends (i.e. layoffs and slower hiring) in the technology labor market and problematic labor practices have been challenging in the short term.
  3. Young workers have an opportunity to revitalize farming: Like many sectors in Kenya, the agricultural sector needs modernization and new approaches to stay competitive. Yet, even in one of the youngest countries in the world, the average age of Kenyan farmers is now 62 years old. This demographic challenge hampers productivity gains in the sector responsible for 33 percent of Kenya’s GDP, employing one third of the total population and nearly 70 percent of the rural population.
  4. Disaster impacts everyone: Kenya is reeling from historic flooding that has destabilized the lives of hundreds of thousands throughout the country, closing more than 1,000 schools and destroying thousands of homes. In Nairobi, the poorest communities have been hit hardest, which has impacted our grantees Generation, CFK, CAP-YEI, and BuildHer. These types of disasters may impact our grantmaking strategy as they create unstable conditions for training and employment, i.e., reducing ROI and increasing cost.
  5. DIL vs NSROI: The use of a relative income change metric has been valuable in reviewing grant opportunities in low-income settings such as Kenya. We are currently actively evaluating all grants using both the DIL and the NSROI metrics and will be making a determination on the best path forward for evaluation standards later this year. To date, less than half of Kenyan grantees surpass the NSROI 100x threshold, whereas 100% pass the $1,000 cost per DIL threshold.

Activity to date

  1. 9 Active Grants
    1. Generation Kenya - Technology training: short term / gig employment focus
      1. Renewed in 2024
    2. Kibo School - Technology training (longer term credential, FT focus)
      1. Note that in June 2024 we learned that Kibo school was shuttering. More details to come shortly; a grant close-out call is scheduled for June 11.
    3. 10 Academy - Technology training: longer-term credential, full-time focus
    4. CFK - Technology training: short term / gig employment focus
    5. Digital Green - Agriculture: AI-enabled farm chat bot
    6. BuildHer - Construction trades: enabling women to reach full-time employment
    7. CAP-YEI - Agriculture: increasing income through modern ag practices
    8. Tana - Paid work based training programs in partnership with international employers.
    9. Raising the Village - Wraparound supports for rural communities (Uganda focus currently) to help increase income.

Next Steps

  1. Explore Developing an Operating Plan with Local Partners to help increase the pipeline of organizations addressing skilled trades training and modern agricultural practices. This may mean more formal grantee pipeline collaboration, sharing local staffing for due diligence and grantee outreach or developing larger scale multi-funder projects,
  2. Continue to build networks in country: GitLab Foundation staff are actively building networks in Kenya to expand our pipeline and build collaborative funding or pipeline sharing partnerships with locally active funders including Ezrah Charitable Trust, Livelihood Impact Fund, Conrad Hilton Foundation, and Segal Family Foundation.
  3. Two trips planned for 2024
    1. July 2024: E. Africa Philanthropy Network Summit & outreach meetings
    2. Fall / Winter 2024: Focused funder convening, potentially in partnership with Aga Khan Development Network (AKDN), Ezrah Charitable Trust, Livelihood Impact Fund, Conrad Hilton Foundation, Segal Family Foundation, and others.
  4. Targeted NGO network outreach: Specific focus and outreach in agriculture, vocational trades and potentially small and medium enterprise (SME) or livelihood programs that link to the creating income growth for Kenyans. We have begun this by establishing routine pipeline sharing meetings with active funders in the market, but are working to deepen these networks to get past the routinely funded organizations to less traditional grantees.

Monitor risks and impacts from local natural disasters

such as recent flooding and assess any implications for strategy in our grants into Kenyan organizations.

Initial Strategy - December 2023

GitLab Foundation is proposing a labor demand-side strategy focused on building better linkages between Kenyan workers and growing relevant global industries and markets. We will initially begin with a segmented portfolio working across three main industries with significant positive employment and foreign direct investment trends: technology, infrastructure, and agriculture.

Context and Overview

Kenya’s growth and demographic trends, high income inequality, relatively stable government, and history of philanthropic and NGO activity elevated the country as a priority region to advance our North Star ROI outcomes. In-depth research, a targeted landscape analysis, stakeholder interviews, and site visits have been formative to our strategy.

While growth of the economy and population are strong, there is a persistent gap between industries where higher-income jobs are created and the existing training and employment pathways available to most Kenyans. To put that in a demographic context, the International Labor Organization estimates:

Nearly one half of young Kenyans are in transition between school and satisfactory employment. This is a fairly high share even for Africa, which has a higher prevalence of young people ‘in transition’ than other regions.

Key Macroeconomic Trends

These are five macroeconomic trends we see as framing the future of Kenya’s employment and wage growth for the coming decades.

  1. Nairobi’s Emergence as a Global Technology Hub: Kenya, sometimes called the Silicon Savannah, is one of the most technology-advanced countries in Africa, and now also one of the most globally connected, with six undersea fiber optic cables, nearly 60% of Kenyans owning a smartphone, and 96% of households using a mobile money account. These trends of connectivity to global markets have helped to drive growth in startup activity and global technology investment, and are rapidly changing the landscape of education and employment. ****Connectivity has also helped to spur foreign direct investment in Kenya. Global VC investment in Africa continued to increase in 2022 despite a downturn in every other major market, with Kenya taking fourth in the list of the top VC African markets after Nigeria, South Africa and Egypt. The four markets account for over 70% of the total VC funding in Africa.

Source: April 2023 Venture Capital in Africa Report - AVCA

Source: April 2023 Venture Capital in Africa Report - AVCA

  1. Jua Kali - Kenya’s Informal Economy: Meaning ‘hot sun’ in Swahili, Jua Kali is used to refer to the informal sector of traders and small business owners. The sector provides employment to a stunning 83 percent of the working population, but only provides 32% of the national GDP. These positions earn less, have fewer worker protections, and do not garner safety net benefits.
  2. Youth and Demographic Transition: By 2050, one out of every four people on the earth will be African. Like nearly all African nations, Kenya is facing a “youth bulge” with 75% of the Kenyan population below 35 years old. This large and growing population bubble will significantly impact Kenya's economy for decades. Only 38% of Kenyans between the ages of 15 and 24 years participate in the labor force due to many factors, including lacking in-demand skills for the jobs available, lack of education, and location and transit challenges.
  3. Agriculture and the Rural / Urban Divide: The agricultural sector makes up 33 percent of Kenya’s GDP and employs one third of workers (and nearly 70 percent of rural workers). However, agricultural productivity has stagnated, with smallholder farmers and agricultural industries struggling to remain profitable. This challenge impacts millions of Kenyans across the country and drives rural to urban migration, further exacerbating poverty and joblessness in urban centers. Initiatives focusing on increasing farm yield, connectivity to markets, and value creation (e.g., the World Bank’s National Agriculture Value Chain Development Project) may have outsized returns.
  4. Infrastructure and Construction: As Kenya’s population has grown, the demand for infrastructure investments has increased in every part of the nation, driving construction industry growth up nearly 7% YoY for the last two years. From roads, ports, rail lines and bridges, and energy grid modernization to affordable housing, airport expansions, and internet connectivity – Kenya has thousands of projects large and small in development or in demand. Kenya also continues to lead in investing in green energy infrastructure, targeting 100% renewable energy generation by 2030, up from an already impressive 90%, primarily due to large geothermal, hydro and wind generation. This shift to renewable energy continues to attract large scale global investors seeking to meet the growing demand.

Strategic Considerations and Investments

Given these macroeconomic conditions, we have narrowed to three specific strategic focus areas that we believe will maximize increases in total lifetime earnings in Kenya. Below are specific hypotheses that will drive our early grantmaking in this market:

  1. Distributing Income Impacts of the Technology Industry
    1. Guiding Questions
      1. What sub-industries will have highest employment demand, and what related technical skills will be in highest demand over the coming years?
      2. How might GitLab Foundation or our partners better link employers’ hiring needs to training programs in Kenya?
    2. Active Investments
      1. Generation Kenya
      2. Kibo School
      3. 10 Academy
      4. CFK
  2. Improving Market Access and Income for Farmers
    1. Guiding Questions
      1. Where might we be additive to existing investments in agricultural value addition and market linkages with agribusiness off-takers? (e.g., NAVCDP)
      2. How might our funding best accelerate the development and adoption of innovations that positively impact large numbers of farmers?
    2. Active Investments
      1. Digital Green
      2. CAP-YEI
  3. Increasing Local Employment in Infrastructure-Related Construction Trades
    1. Guiding Questions
      1. What are the staffing needs of construction industries subcontracting on major infrastructure and construction projects?
      2. How might we better connect training and certification programs to those large scale employment opportunities?
    2. Active Investments
      1. BuildHer

Next Steps (as of Dec 2023):

  1. Clarify grantmaking strategy with learning and experimentation framework:
    1. Specifically, explore and pilot supporting our growing portfolio of grantees with linkages to employers (e.g., UpWork + Generation)
    2. Deep dive on existing agricultural interventions and active NGOs
  2. Gather additional feedback on strategy summary from existing active funders, relevant agencies working in Kenya and trusted NGOs:
    1. Additional research into active global funders
    2. Specific focus on exploring if there is a critical mass of NGOs working in increasing local employment in the construction and infrastructure space
  3. Plan additional travel to Kenya in 2024 for in-person portfolio check in and funder collaboration event(s)

June 2024 Updates