South Africa appears to be losing its status as the preferred investment destination on the continent for international technology companies. That honour, increasingly, is going to Kenya, which may be on the cusp of a technology-fuelled era of economic growth.

When apartheid ended in 1994, there was a flood of investment into South Africa by international technology companies. Microsoft, IBM, Intel, Motorola, Xerox, Hewlett-Packard: they all poured millions into establishing local offices to serve not only South Africa but often markets across Southern Africa and even sub-Saharan Africa. The view was that South Africa was the gateway to the continent.

Twenty years later, and perceptions are shifting.

In South Africa, economic growth has flat-lined. In the technology space, a weak policy making and regulatory environment where fast and smart decision making just doesn’t happen, coupled with a disastrous education system that appears incapable of giving youngsters a solid grounding in foundational subjects such as mathematics and science, are undermining prospects.

Last year, when IBM decided to set up its first research laboratory in Africa, it chose Kenya, not South Africa, as the location for the facility. The Kenyan lab joined existing IBM facilities in the US, Switzerland, Israel, Japan, Ireland, India, China, Brazil and Australia.

Over the years, the labs have been credited with inventing many of the foundations of the IT industry, including the relational database, computer disk storage and dynamic random-access memory.

The Kenyan lab, which includes pre- and post-doctoral scientists and researchers from academia, government and industry, will conduct basic and applied research focused on solving problems relevant to Africa and contribute to the building of a science and technology base for the continent, IBM said.

When Google chairman Eric Schmidt visited Africa in January, he didn’t travel to South Africa, spending time instead in East Africa and West Africa. In Kenya, he said Nairobi had emerged as a “serious tech hub” and could become the continent’s technology leader. He praised the country’s relative political stability (election violence in 2007 and 2008 notwithstanding), its use of the British legal system and its benign climate, saying these factors all contributed to its attractiveness as an investment destination.

Google rival Microsoft chose Kenya as the site of its first “white-spaces” spectrum trial to test the feasibility of using television broadcasting spectrum for broadband. The list goes on.

And it’s not only international companies investing in Kenya that have attracted attention. A number of technology innovations have been developed in Kenya itself in recent years that have garnered international attention.

The most celebrated of these is M-Pesa, the mobile banking and commerce platform pioneered by mobile operator Safaricom. M-Pesa has made Kenya an international case study in m-commerce. Aided by a poorly developed formal banking sector, M-Pesa is now used daily by millions of Kenyans to buy goods and receive money. It’s since been exported to other markets, although the only other country where it’s enjoyed huge success is Tanzania, which also has a poorly developed banking system.

Another Kenyan tech pioneer is Ushahidi, a nonprofit software company created in the wake of violence following the disputed 2007 election. Ushahidi developed open-source software that could be used to collect and visualise information on interactive maps. The software was used to show where outbreaks of violence were happening in Kenya, based on reports submitted by people on the ground, usually using their mobile phones. This year, Ushahidi is again attracting attention, thanks to its BRCK “backup generator for the Internet”, a communications device for markets with unreliable electricity supply. It’s raised more than $172 000 on crowd-sourcing website Kickstarter.

Kenya’s government is now spearheading efforts to transform the country into Africa’s tech capital. Work has begun on an ambitious technology centre called Konza City that could eventually cost as much as $14,5bn. The government wants to attract international technology companies to invest in Konza, which will consist of a convention centre, a science park, hotels and shopping centres spread across a 5 000-acre site 60km south of Nairobi.

If South Africa doesn’t think its position as the continent’s technology leader is threatened, it better think again.