Having already benefited from initiatives such as mobile banking service M-pesa, Kenya’s commitment to further develop the information and communications technology (ICT) industry is expected to create opportunities for private sector investors. There is likely to be a particular emphasis on improving infrastructure roll-out, although differing policies at the county level may slow efforts.
Investments in infrastructure
In the decade since the Ministry of Information, Communication and Technology (MoICT) was established, the ICT sector has grown from virtually non-existent into an important component of the economy. According to the latest government statistics, for the quarter ended September 2013, mobile and internet penetration rates have reached 76.9% and 47.1%, respectively.
Insufficient infrastructure has been the biggest constraint to continued expansion. To this end, in July 2013 the government launched the National Broadband Strategy (NBS), a joint product of the MoICT and the Communications Commission of Kenya, the sector’s regulator, with an overall objective of providing broadband access to 100% of the population. More than half of its $2.8bn budget is allocated to building infrastructure, with the balance directed towards capacity building and content development.
The proposed funding sources include a broadband infrastructure bond and venture capital fund, in addition to an increasing ICT’s share of the government budget from 0.5% to 5%.
Fred Matiang’i, the cabinet secretary for the MoICT, told OBG the support of the private sector will be necessary to realise the goals of the NBS. “We need to come up with a framework that will facilitate the role of the private sector in the development of digital infrastructure. Given the demand on our labour and financial sources, we will not be able to do this alone,” he said.
A robust ICT sector supports development
The launch of the NBS followed the early 2013 release of the National ICT Master Plan, which set out three pillars: enhanced public value, development of ICT businesses and strengthening ICT as a driver of industry.
As part of the first pillar, the government is aiming to make public services more accessible, with the development of e-government initiatives such as online business licensing, tax return submissions and applications. The goal is for 90% of Kenyans to access at least some public services via the internet by 2017.
In August the government merged three e-government entities into one to streamline costs. The new Information and Communications Technology Authority (ICT Authority), which is part of the MoICT, is expected to eliminate duplication across government entities and standardise e-government communication services. It will also be responsible for marketing Kenya as a centre for ICT investment.
Private sector opportunities
The private sector, including major multinationals, is already active in the Kenya ICT market. Both Nokia and IBM, for example, have established regional research and development centres in Nairobi. One factor that may attract more multinational tech companies is Konza Techno City, a $14.5bn project. Dubbed Silicon Savannah, the 20-sq-km mixed-use development located 70 km south-east of the capital will house science and technology parks, along with educational facilities, hotels and residences. The first of four phases will close in 2017 and is expected to create 20,000 jobs, according to the government.
There has also been a push to increase hardware procurement in the education sector. In February, officials announced that a tender to supply laptops to primary schools had been awarded to India’s Olive Telecommunication, at a price of Ksh24.6bn ($280.5m). The winning bidder is expected to provide more than 1.2m laptops, in addition to around 20,000 printers and projectors. US-based HP and Haier Electrical Appliances Corporation of China were among those who had submitted proposals.
Impact of devolution
The implementation of devolution – a policy required by the new constitution, by which certain powers have been transferred from the national to county governments – is expected to have an impact on the ICT market.
Counties have been urged both by the national government and the private sector to encourage ICT investment. Last September, the CEO of telco Safaricom, Bob Collymore, said county governments should “resist temptations to levy new fees on telecommunication infrastructure as no broadband provider will invest in such areas where levy fees are charged exorbitantly”. Some counties, such as Laikipia and Kiambu, are charging up to KSh600 ($6.85) per metre for right-of-way access.
According to Matiang’i, the landscape is changing rapidly, with improvements expected in the medium-term. “Much of last year was spent establishing the county-level governments. This year there will be an opportunity to focus on policies. We are currently working with the counties to help them understand the importance of ICT. There have been some initial problems but I am convinced the story will be different 12 months down the road,” he told OBG.
Follow Oxford Business Group on Facebook, Google+ and Twitter for all the latest Economic News Updates. Or register to receive updates via email.
