Klas Tikkanen, chief operating officer at Nordic Capital Advisors.

Kenya's capital city of Nairobi is one of the global centres where leading deep tech companies are developing, according to the Deep Tech Index.

The European Centre for Entrepreneurship and Policy Reform, with backing from Nordic Capital, produced the Index to map the leading deep technology centres, with an emphasis on crucial, future-shaping technologies.

The index also examines what distinguishes those countries with a greater share of globally leading deep tech companies per million adults.

It observes that countries with a high proportion of world-leading deep tech companies per million adults tend to have robust protection of private property.

According to the Index, protecting both physical and intellectual property is critical in encouraging investment in advanced technologies.

According to the report, there is a good trend in Kenya, in that property rights relating to physical ownership have improved over time.

"In fact, also intellectual property rights, which relates to patents, trademarks and other immaterial values, have improved," according to the Index.

Furthermore, it states that Kenya's strength in deep technology includes communications and electronics.

The development of these critical technologies is centered in Nairobi, according to the Index.

The Index observes that throughout the last century, communication and electronics have changed much of human work and social activities.

"Having strength in these key sectors can boost the technological progress of the national economy as a whole, since many additional companies are part of the value chains created through electronic and communication deep tech activity," according to the report.

According to the study, Kenya has attracted foreign direct investments worth approximately 0.5 percent of total national economic output during the last five years.

In comparison, the Index says foreign direct investments averaged more than 1.2 percent of the nation's yearly economic output in the previous five years.

However, it acknowledges that further strengthening of private property rights, when paired with other business and trade-friendly policies, can improve investment flows.

The Index says: “The share of high technology products in goods exports is 3.8 percent for the past five years, nearly same as 3.9 percent for the previous five years period. This is a relatively high rate, but it has not increased.”

Dr. Nima Sanandaji, author of the study, comments: “The challenge for Kenya is to increase high technology exports shares, reducing corporate taxation to attract investments is an option. 

"An encouraging sign is that Kenya is strengthening property rights including for intellectual properties. Another positive sign is that the country is joining the PISA program to better monitor and improve school results.”

Furthermore, the index suggests that countries that succeed in deep tech have lower unemployment rates.

“Promoting deep tech development is important as it drives human progress and generates economic opportunities for the leading regions. Countries successful in advancing deep tech also tend to experience favourable labour market outcomes. For every additional globally leading deep-tech company per million adults corresponds to a 1.26 percentage point decrease in unemployment,” says Klas Tikkanen, chief operating officer at Nordic Capital Advisors.