Harnessing Kenya’s ICT Potential

By Kenneth Dachi – Business Development Director – Farwell Consultants Limited

Introduction/Statistics

The economic statistics are staggering. Kenya has been recording positive economic growth, recovering relatively fast, and against all odds, defying the obvious effects of the 2007 post-election violence. The country was estimated to average a GDP growth of 5% ending 2010 and the ICT sector alone contributing to an impressive 23% of this growth ¹. In fact, this growth by the ICT sector has been constant since the turn of the new millennium. The CCK indicates that by the end of 2010 there were 22 million mobile phone subscribers, equivalent to just over 50% of the country’s total population. 39% of this subscriber base is connected to the internet. The internet market share has been swept by the mobile platform whose subscribers translate to 98% of the total connections. This persistent, if not resilient growth in one sector alone justifies closer scrutiny. What are the chief contributors to this trend? Can Kenya’s ICT revolution be the catalyst of cross-sector growth in Eastern Africa’s economic powerhouse? These are critical questions to answer, as Kenya seeks to further consolidate its place as a significant player in sub-Saharan Africa. To full achieve this goal, Kenya would need to bolster the performance of its key sectors especially Agriculture and Tourism, as these have been the country’s top performers and the economic backbone for many years. It would be fair to say though, that regionally, Kenya has not fully maximized its competitive advantage in these two areas, leaving the neighbouring states to make quick gains on the same. Going by the statistics trickling in, as documented, it goes without saying then that Kenya must pay attention to its ICT muscle and potential. If appropriate strategies are taken, can the country emerge as the continent’s ‘silicon valley’ ²?

The Key Challenges

‘Silicon Valley’ is a term used to refer the area around San Francisco, California in the US where a drove of technology firms are based. The term is thus synonymous with a location churning out volumes of innovative ICT technologies, products and services. Indeed going by the numbers, it would soundly be argued that Kenya is headed to becoming Africa’s ICT hub. To get to this point though, certain obstacles must be overcome and be fully resolved if the country is to achieve this momentous feat.

Cost of Doing Business

The World Bank generated Doing Business Report (2011), shows Kenya to be one of the most difficult places to set up and run a business. Going by the data recorded from 2006, it appears that Kenya has increasingly become a very costly location to do business. What’s surprising is that an immediate neighbour, Tanzania, has fared much better and another East African Community Member, Rwanda, is the most attractive location for doing business followed by Mauritius and Botswana with only Namibia faring worse than Kenya. This is evidently a serious bottleneck from the perspective of Kenya’s potential in being an ICT center. The government needs to step in and regulate tax requirements, cost of permits, trading across borders and impose statutes to enable easy access to credit facilities. Investment in ICT can be both externally and internally driven, and these two fronts need to be ably facilitated. Of special concern though, remains the cost of energy. This was widely acknowledged in Kenya’s budget for the 2009/2010 financial year. KSh 7B ³ was allocated for the development of alternate sources of energy including an improvement of electricity transmission. There needs to be quick action with tangible results documented as regards the successful implementation of energy improvement programs from generation to distribution. ICT and energy availability are synonymous.

Skill Shortages

Kenya’s Ministry of Finance allocated KSh 1.3 billion in its 2009/2010 budget for the putting up of computer labs in every constituency. While this is commendable an effort with respect to the spiraling growth of ICT, such funds need to be channeled through the Education Ministry instead. According to the McKinsey Report (2008), only 5,000 graduates are suitable for injection into the sector from an annual recorded pool of 280,000 students from both high schools and universities. The argument here is that there should be allocation of funds for ICT curriculum development. In addition, there should be an implemented policy of ensuring all schools in the country at least have computer facilities. ICT should thereafter be made a mandatory course examinable in the students’ final year. This way, Kenya will be producing IT savvy students ready to be injected into the thriving sector. In addition, this will remedy the deficient pool of ICT talent that is the differentiator between Kenya’s potential and that of a country like India. ⁴

Infrastructure

Poor roads have continued to be the prevalent Achilles’ heel to Kenya’s drive for growth. It has been postulated that if Kenya matched Mauritius in its standard of infrastructure, growth rates would be 3.3% higher ⁵. In addition, poor productivity by Kenyan firms has been attributed to poor road networks, with an impact of approximately 30% on output (AICD, 2010). The setting up of IT complexes and BPOs can only be possible with good road networks, well distributed and uninterrupted power supply, access to affordable rents and regularized land legislation to facilitate the purchase of land and construction of buildings. Kenya’s main international airport’s capacity is also in dire need for improvement to target higher passenger numbers. 9 million ⁶ passengers annually is the competitive figure, alongside adjustment of security standards to enable direct flights e.g. to the US. The country requires key partnerships to enable frequent skill exchanges in the ICT sector. This can only be enhanced with a better air travel sector, and infrastructure overall, to ease movement of people and goods.

Conclusion and Recommendations

The challenges are clear. Is Kenya willing and ready to do what it takes to change the tide and position herself strategically as regards its ICT potential? What remains to be seen is the angle the budget for 2011/2012 financial year will take. What budgetary allocations and policy objectives will be applied to ICT is what many sector observers would want to hear and see. Kenya must learn to seize and retain its competitive advantage in sub-Saharan Africa.

References

1. AICD Kenya’s Infrastructure: A Continental Perspective March 2010
2. CCK Quarterly Sector Statistics Report www.cck.go.ke
3. Ergen, Mustafa Entrepreneurship Models of the Countries that Leverage Silicon Valley University of California, Berkeley, 2004
4. Kenya Budget Speech 2009/2010
5. Kenya Economic Update Kenya at the Tipping Point? (With a special focus on the ICT Revolution and Mobile Money) December 2010 | Edition No. 3 www.worldbank.org/kenya/ke
6. The International Bank for Reconstruction and Development / The World Bank Doing Business 2011: Making a Difference for Entrepreneurs

Footnotes