House of Cards

Hey, Sheriff here 👋 

Three weeks ago, one of Kenya’s biggest climate startups, which had raised over $300 million and served 1.5 million families, shut down in a day.

And it all happened because of a letter.

This week, we’ll be telling you the story of what happened, why it happened, and what it means for Africa’s climate tech space.

Let’s get into it.

On January 31, 2026, 1.5 million Kenyan families woke up to a text message that started with one word: Samahani. 

Swahili for sorry.

KOKO Networks, Kenya’s biggest clean cooking startup, which had served all those families with clean cookstoves, was shutting down. 

All 700 employees were told not to come to work. Over 3,000 bioethanol fuel dispensers serving homes across Kenya were shut down.

The company went into administration.

And investors who had put in over $300 million could see their investment go to zero. 

Startup shutdowns aren’t unusual, but KOKO's collapse is more than just a story. 

It's a window into the tension at the heart of climate innovation in Africa. To unpack it, we need to tell you about…

The gospel of collective punishment

Africa is the least responsible for climate change. The continent produces roughly 4% of the world’s carbon emissions. 

But it pays the highest price for climate change.

About 90% of carbon emissions worldwide come from burning fossil fuels, and the biggest contributors are industrialized countries in the West.

The effects: droughts, erratic rainfall, floods, and desertification, hits Africa harder than almost anywhere else. 

Africa has been warming up at a faster rate than the rest of the world since 1993.

In 2018, cyclones destroyed the homes and farmlands of 3 million people in Mozambique, Malawi, and Zimbabwe.

The African Development Bank estimates climate change could cut Africa’s GDP by up to 15% by 2100 if the trajectory doesn't change.

Here's where it gets political. Africa has development goals, most of which are tied to getting abundant energy.

Historically, the easiest paths to energy have been to burn coal and oil, both of which Africa has in abundance.

But due to climate change, countries that built their wealth on coal and oil are now asking African nations not to follow the same playbook. 

From a planetary survival standpoint, that’s not an unreasonable ask. 

But it lands very differently when you consider that 600 million people in Africa still lack access to reliable electricity.

And no country ever develops without a rapid increase in its energy consumption. 

To build out clean energy, Africa would need to spend so much more than it can afford.

This led to the creation of a tool designed to foot that bill: carbon credits.

Who’s paying for the gas (reductions)? 

A carbon credit is a “token” that is issued when one tonne of carbon dioxide is removed from the atmosphere or prevented from entering it. 

It’s a way of making positive climate action tradable across the world.

See, countries globally have made pledges to reduce carbon emissions. And in some countries, companies are mandated to do the same, like airlines. 

But shutting down power plants, building out clean energy, or overhauling operations are all costly.

Instead of doing these, companies and countries can buy carbon credits to fund projects reducing emissions elsewhere.

The core principle behind them is additionality. 

It’s the idea that a project should only generate credits for reductions that wouldn’t have happened without the funding from selling those credits.

Think of it as a circular subsidy for climate programs.

This way, industrialized countries don’t have to disrupt their operations to hit climate targets, and other countries and businesses can raise money to fund decarbonization programs.

Like KOKO Networks.

KOKO Networks started out in 2014 with a clear problem in mind: charcoal and kerosene are the default cooking fuels for low-income households across Kenya, and they're deadly. 

Indoor air pollution from these fuels kills more than 600,000 people in Africa every year. 

But cleaner alternatives, like bioethanol, were always too expensive for the people who needed them most.

KOKO had a clever fix.

They made a double-burner stove that uses bioethanol as fuel. 

Then, they built a network of smart bioethanol dispensing machines, over 3,000 of them, installed inside neighbourhood shops across Nairobi and Mombasa. 

Customers used a reusable canister and a mobile app to order a refill.

The fuel came from sugarcane waste, burned clean, and was dirt cheap.

A double-burner stove costs 1,500 Ksh, about $11.50, versus a market price of 15,000 KSh, which is about $116. 

A litre of bioethanol sold for 100 Ksh (~$0.77), roughly half the going rate of 200 Ksh (~$1.54). 

Those weren't modest discounts. They were the kind of prices that made the switch genuinely possible for families who'd never had another option.

What paid for the discounts? Carbon credits. 

Every household switching from charcoal represented real, measurable emission reductions that wouldn’t have happened otherwise. 

KOKO’s plan was simple. It would:

• Offer its product at these steep discounts

• Rack up a lot of carbon credits

• And sell those credits internationally. 

To get there, it raised over $300 million from investors over 10 years to build out its network, manufacture its stoves, and acquire customers.

Half of this went directly into subsidies.

By 2023, KOKO had over a million customers and was reportedly generating roughly 6 million credits annually.

While this happened, KOKO was prepping to sell these credits abroad and get a payday.

It certified the credits under the Gold Standard methodology, a global system for verifying the validity of carbon credits. 

Then it moved to sell them. 

But to do that, it needed the government’s consent, in the form of a letter.

That letter never came 

See, KOKO Networks had racked up a specific kind of carbon credits called Compliance credits. 

These were often higher priced and tied to a country’s climate targets.

KOKO was generating 6 million credits a year and had racked up 15 million credits in total, and could sell them for up to $20 each.

To sell them abroad, though, it needed a Letter of Authorization (LOA) from the Kenyan government. 

This LOA is a formal sign-off that Kenya endorses its credits for international sale, and that those emission reductions won't be double-counted.

Kenya had, in principle, been on board with granting this. 

For instance, in 2023, President Williams Ruto had called carbon credits an "unparalleled economic gold mine".

He also said Kenya was generating 20% of all carbon credits issued in Africa.

By June 2024, the government signed an investment agreement with KOKO that would allow it sell its credits abroad.

KOKO Networks also took out an insurance policy worth $179.6 million, payable if the government breached its contract.

But getting the LOA was still the final deciding factor.

In January 2026, the government denied KOKO’s bid for an LOA, citing KOKO’s market dominance.

And it had good reason.

See, every country sets a target for how much carbon emissions it will cut.

If it meets that target, it’s doing its part to fight climate change.

Carbon credits change this. When carbon credits are sold, the country can’t count those emissions cuts toward its own target anymore.

KOKO Networks had racked up 15 million credits and was generating 6 million credits a year. It could’ve sold them for $20 each on compliance markets.

If the government had authorized KOKO’s entire volume for sale abroad, two things would’ve happened.

1. It would consume most, if not all, of Kenya’s carbon allocation for the year.

2. And given Kenya’s effort towards climate change, it wouldn’t be able to count KOKO’s emissions impact towards its own targets.

The Kenyan trade secretary, Lee Kinyanjui, backed this up by saying KOKO’s business model “did not align” with Kenya’s plans.

Lastly, Kenya’s Climate Change Amendment Act is clear on the need for an LOA, but fuzzy on the details. 

Things like the sequencing of approvals and how internationally certified credits should be handled remain works in progress.

For the government, this math worked out to a denial.

For KOKO, it was binary. An LOA meant survival. And no LOA meant that their subsidy regime would remain unsustainable, and the business would ultimately fail.

Three weeks ago, after days of emergency board meetings, KOKO Networks went into administration. 

Its assets are now under the control of PwC, which will try to liquidate KOKO’s assets and steer it back to safety.

It’s a house of cards that took 12 years to build, and only a few weeks to crash.

But the real loser isn’t KOKO

Since KOKO went into administration, there’s been a lot of cautionary tales.

“Carbon credits are bad for Africa”

“You can’t uberize physics”

The biggest losers, however, are the 1.5 million households that KOKO Networks can no longer serve.

KOKO gave them a 90% discount on cooking inputs. Now, they’ll go back to paying in full for unhealthy cooking methods.

Sure, there are valid concerns around the distortion of markets with subsidies.

And studies have found that cookstove credits are often overstated by as much as 9x.

But the core issue isn’t a fickle market.

It's a fundamental mismatch between what climate startups need and what governments are incentivized to do.

For KOKO Networks, carbon credits were the bridge between what customers could pay and what it costs to build real infrastructure.

For the Kenyan government, the math looked completely different. Selling credits abroad directly hurts its targets.

Both sides had legitimate interests. Neither was being irrational. 

And yet, that misalignment killed one of the most promising climate businesses Kenya had ever seen.

This tension, between the incentives of policymakers and innovators, is what this is all about.

Kenya has goals to become a green hub for Africa. 

But when its regulations hurt one of the biggest foreign players, it loses that attractiveness.

Across Africa, there’s a documented history of startups killed by regulation. KOKO Networks is another name on that list.

The alignment problem is real, and it can’t be wished away.

When there’s alignment, though, beautiful things can happen.

In Nigeria, a company called Socketworks grew from being a small software shop to being an international player, by first scoring success with public-private partnerships. 

It helped the Nigerian government build its National Immigration Management System (NIMS) and helped make 19 colleges fully digital. Today, it serves countries globally.

Another company, Touch and Pay Technologies, found success in Nigeria with micropayments by partnering with Lagos State’s public transit systems.

When there’s no alignment, even the best laid plans can fail. And that seems to have been the case with KOKO Networks.

How do you think climate startups in Africa can fix the alignment problem? 

Let us know here.

That’s it for this week. See you on Sunday for a breakdown on This Week in African Tech.

Cheers,

The Tech Safari Team

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