Is Kenya Africa’s Silicon Valley?

Monday February 28 2011

By CHRISTINE MUNGAI

Kenya is on the brink of becoming Africa’s ICT hub due to the continued growth in Internet and mobile technology use in East Africa’s biggest economy with investors flooding the country.

The recent Kenya Economic Update report by the World Bank states that over the last decade, ICT has outperformed all others sectors in Kenya, growing at an average of 20 per cent annually.

“The benefits of ICT are starting to be felt in other sectors, and have contributed to the conditions for the country to reach an economic tipping point,” the report says.

The report reveals that Kenya has opened 2011 with renewed and stronger than expected growth on the back of a new constitution, strong macro-economic policies, and a favourable regional environment.

Over the past three decades, Kenya has experienced only two short periods of economic growth that exceeded five per cent and was sustained for at least three consecutive years: 1986-88 and 2004-2007.

This has raised the question: Is Kenya on the verge of experiencing another growth spurt? Will it last longer and go deeper than the previous two episodes?

The World Bank researchers envision that this could indeed be the case, as the uptake of ICT throughout the economy could provide the impetus required for high and sustained growth.

Today, Kenya has the largest mobile money platform in the world. An estimated 15 million mobile phone users were using mobile money by the end of 2010, the equivalent of three out of every four adult Kenyans.

In East Africa, Internet access in recent years has recorded a significant growth.

The World Bank estimates that in 2004, there were 1.65 million active Internet users in the region.

By 2007, the number had increased to 4.78 million, and by 2010 the number of regular users had jumped to 6.78 million, a penetration rate of about 5.1 per cent of the population.

The introduction of data enabled smartphones, which allow internet access through mobile phones has boosted this area hugely.

Kenya’s active Internet usage stands at 8.7 per cent of the population, the highest in the region, compared with Uganda (7.9 per cent), Rwanda (3.1 per cent), Tanzania (1.2 per cent) and Burundi (0.8 per cent).

Paul Odhiambo, CEO of a Nairobi-based ICT consultancy firm, says that creating demand for locally developed software will provide a much needed stimulus for growth of the sector.

“If the government passed similar policy as was passed regarding local content on television—that a certain percentage of ICT solutions in government institutions must be home grown—this will go a long way in developing our local ICT talent.”

Mr Odhiambo says the region needs to develop confidence in its own human sources.

“What we need is to believe in our ability to make this sector really take off, and deliberately create demand for local solutions. We must invest in our own,” he says.

Those that actually need the Internet the most are the very poor people,” says Dr Bitange Ndemo, Permanent Secretary in the Kenya Ministry of Information and Communication.

He believes that the government should step in and make ICT infrastructure an open access platform, just like the road network. “This is the only way prices will come down.”

Last June, Kenya’s telecommunications regulator slashed the licence fee for third-generation (3G) mobile Internet services by 60 percent to $10 million to raise penetration, and announced that it would not charge for an upgrade to 4G.

The wider applications of ICT are starting to reshape the structure of the economy, especially in the financial sector.

In 2010, this sector benefited from a number of innovations, including Equity Bank and Safaricom’s M-Kesho, a joint venture allowing mobile phone users to earn interest on their mobile phone-based savings accounts.

In agriculture, for instance, an SMS platform is used to disseminate information on commodity prices allowing farmers to make better decisions regarding their produce.

The platform also allows disease tracking and consultation to enable communities isolated from healthcare infrastructure to diagnose and treat diseases.

Civil society organisations have also effectively used mobile technology to monitor social unrest and human-rights violations, mobilise voters and disseminate election results, and even track the management of local budgets.

All this is not without challenges. Last December, for instance, a number of fibre optic cables that run around Nairobi were dug up in the middle of the night and severed, causing communication blackouts.

The attacks were blamed by many on digital turf wars between rival firms, keen to seize any advantage in the emerging broadband market.

Others blamed disgruntled employees.