Business Opportunity Study within the IT and Telecommunication Industry in Kenya
Business Opportunity Study within the IT and Telecommunication Industry in Kenya
A sector study prepared for Danida by Håndværksrådet (the Danish Federation of Small and Medium-Sized Enterprises) in collaboration with Growth Africa, Kenya; November 2006
Below is an extract of the Executive Summary
Click here to download the full report.
The Kenyan ICT industry
The Kenyan ICT sector is still in its infant stage, though opportunities are arising. The government and the private sector are working quite harmoniously towards securing that Kenya has the necessary infrastructure, human resources, legal framework and access to finance in order to achieve the goal for the sector to contribute one fifth of the country’s export. Large investments in a country wide fibre network as well as fast developments in the mobile information technology sector underlines this trend.
Opportunities in Kenya are mainly based on the softer ICT skills that the country possesses and the failure of current ICT providers in identifying and focusing on special needs of local companies. Kenya is well positioned as an exporter, since the country has much experience with exports from being the world’s largest exporter of flowers and tea. Finally, the literacy rate in Kenya is among Africa’s finest and there is access to qualified, trainable and IT-exposed employees.
Most companies in the Kenyan ICT industry are quite optimistic about the future of the industry and the country’s utilisation of ICTs. Looking at statistics for the development of the industry over the past years and projections based on this, this optimism is understandable: The number of mobile subscribers have more than doubled the past two years, the use of SMS has almost trebled, and PC and Internet usage is growing steadily. The arrival of the submarine cables will further spur the fast development of the sector.
Even with conservative projections Kenya will by the end of the decade have 12.5 million mobile phone subscribers sending 10 billion SMSs annually and 2.5 million PCs catering for 5 million Internet users.
Key activities
The mobile phone sub-sector is the most vibrant of all ICT activities in Kenya. Of the industry’s contribution of USD 1.56 billion to Kenya’s GNI, mobile phone activities constitute USD 1,090 million, which equals 70 per cent. Besides the mobile phone subsector the other contributing sub-sectors in the ICT industry are:
- Fixed line telephony
- Broadcasting sub-sector (radio and TV)
- IT hardware (reselling and servicing) and software (configuration and development)
- Internet (infrastructure and services)
- IT training
In Kenya, 4,000 companies are dealing primarily with ICT. Moreover, many shops and kiosks also resell ICT related services; especially services and products relating to the mobile phone sub-sector, some even rely primarily on revenues from this source; similarly any smaller shop/office with a computer and an Internet connection offers web-café and other IT related services. One telecommunication company is said to have a dealer net work of 3,000 companies and individuals alone, which has not been included in the estimated number of ICT companies.
There is currently no significant export of ICT products and services. However there are several start-ups who have successfully tapped into the outsourcing industry, primarily call centres, business process and data entry, and this area seems to have great potential for growth in the medium and long term.
The ICT industry in Kenya has over the past 3-4 years been liberalised, and for many areas licensing is now a mere registration procedure, though, one significant regulation still exist – namely, that the licensee must have at least 30 per cent local ownership.
Labour force
It is estimated that 10-15 per cent of the population has operated a computer in the recent past – equal to 4-5 million persons. The challenge in the training industry is the apparent lack of certification of the courses and schools, which makes it difficult for the industry to measure the level of the students and to validate whatever proof of education or training is presented. The availability of trainable employees for most ICT disciplines is relatively good, though companies must expect to invest a fair deal in introductory, on the-job training. On average companies should calculate 3-6 months of training for a graduate to reach a level where he/she is a net contributor to the company.
The number of graduates from tertiary institutions majoring in IT and ICT related disciplines have increased significantly over the past 10 years. From less than 2,000 in 1995 to almost 10,000 in 2005. Nevertheless, this only account for 10 per cent of the 100,000 graduating from Kenya’s public and private universities, and polytechnics and technical institutions. The number is expected to double by the end of the decade. The cost of labour in Kenya is, as in most of Africa, higher than Asian countries. Comparatively, the wage difference between Kenya and e.g. India or China is narrowing, mainly due to increases in salaries in these countries and introduction of improved employee conditions with its associated cost.
Infrastructure
In a traditional sense, the ICT infrastructure in Kenya is not that good, as only few parts of the country is catered for in terms of copper lines. In a more modern sense, Kenya has a very well developed ICT infrastructure: 94 per cent of the population has access to mobile telephones (coverage), 90 per cent has access to FM/AM radio, 60 per cent to television and 40 per cent lives close to community or trading centres offering Internet connection (Internet Cafés). Both the Kenyan Government and private businessmen have invested heavily in the ICT infrastructure over the past 3 years. The two current mobile phone network operators and the country’s premier public data network operator has respectively put up more than 1,000 base stations and laid 3,000 km of fibre optic cables in Kenya.
Most of the major hardware manufacturers are present in Kenya, either through own offices or appointed representatives. Hence, most IT equipment is readily available in the country, though one should not expect the latest developments to be present in the market until 2-3 months after being released internationally.
Key competencies
Currently, Kenya is strongest on the softer side of the skills scale, i.e. call centre, business process outsourcing, data entry; as compared to the high-end technical skills, i.e. hardcore programming, electronics manufacturing.
English is formally regarded as the main language introduced already in primary school – second grade. Hence, most Kenyans speak flawless and often unaccented English, which puts them at a global advantage in respect to call centres.
Among some of Kenyan’s key competences not yet used in an ICT context are their artistic and creative skills. Universities and colleges churn out a significant number of graduates with majors or minors in fine art, and many of these graduates could, with little training, become valuable assets for graphics development for computer games, animated movies or 3D modelling for architects and engineers.
Concrete opportunities for investors and partners
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Posted: March 29th, 2009 under Business News, Commentary.
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