ICT IN KENYA #140Friday Sector Policy Paper

ICT INDUSTRY DEVELOPMENT & GOVERNMENT INCLUSION

Nairobi 3rd April 2012

ICT IN KENYA

CONTEXT
CREATING A SUSTAINABLE ICT INDUSTRY WITHIN KENYA

ICT IN KENYA
The Kenyan ICT industry is immature and suffers from significant international competition Vision 2030 for Kenya provides a high-level vision for economic development The Kenyan governmental legislation lacks a clear ICT vision to support development Planned ICT developments within the Kenyan government offers a large internal market The scattered ICT landscape lacks sufficient structure and organization to attend the market Kenyan ICT education lacks focus to attend to specific needs for all types of industry players ICT development lacks vision and support to attract investors International players see ample opportunity, endangering the local competitive position

SITUATION

COMPLICATION

CHALLENGE

How do we develop a strong ICT industry in Kenya making optimal re-use of existing means? How do we ensure sustainable development fitting within Vision 2030 for Kenya How can we align all local/international stakeholders creating a win-win situation for all

INTENTION

WE PROPOSE THE FOLLOWING PLAN FOR SYNERGY WITH GOVERNMENT

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INDUSTRY ANALYSIS
Strengths

ICT IN KENYA
Weaknesses
Sub-optimal procurement process for local players Lack of tailored (tax) legislation Technical education and industry needs misaligned Limited availability of investments Lack of governmental ICT representation Lack of Public Private Partnerships in ICT (PPPs) Diplomatic services lack focus on ICT opportunities

THE KENYAN INDUSTRY ASSESSMENT SHOWS CLEAR AREAS FOR ATTENTION

Private sector recognises need for better engagement with Government

Large internal Kenyan market

ICT inclusion in Vision 2030 Ambitious Workforce

Recent technological advancement (Fiber) Acknowledged innovations/technologies (MPESA)

W T

Opportunities

Significant government Investment in ICT Labor costs provides labor arbitrage potential Growth of average size of Kenyan companies Recognized ICT hub developments (incubators) Intended creation of Konza as ICT ecosystem Entry of international ICT players (Nokia, IBM) Creation of EAC provides larger market

Threats

Growing Kenyan market attracts international ICT players threatening local ICT companies

Globalization of the ICT industry simplifies international service delivery to Kenyan companies
African economic development creates significant near-shore competition Established human capital flows to MNCs
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INDUSTRY DEVELOPMENT NEEDS

A PROVEN ICT INDUSTRY DEVELOPMENT STRUCTURE

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Source: Australian Business Foundation

INDUSTRY COOPERATION

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Companies

INDUSTRY DEVELOPMENT MUST BRING TOGETHER ALL INDUSTRY STAKEHOLDERS

End Users

PRIVATE MARKETPLACE
- Projects - Expertise - Marketplace

Incubators Producers

Banks Insurance

ICT INDUSTRY PLAYERS

Industry representatives

- Products & Services - Skilled workforce - Experience - Industry standards - Representation - Projects - Legislation - Education - Tax regulation

- Funding - Expertise - Infrastructure - Confidence

Investment funds VCs

FINANCIAL MARKETS

Universities

Unions E-G-ovt

KICTB

GOVERNMENT
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KEY SUCCESS FACTORS

RESPONSIBILITY

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KEY SUCCESS FACTORS
Public Private Partnerships (PPP) Governmental incentive structure Stable entrepreneurial environment Virtual marketplace environment Protection of IP Rights

ENSURING COOPERATION FROM ALL STAKEHOLDERS REQUIRES BENEFITS FOR ALL

PRIVATE MARKETPLACE

CREATE A SOLID STREAM OF ICT WORK

ICT INDUSTRY PLAYERS

DELIVER HIGH QUALITY PRODUCTS AND SERVICE

Predictable quality Solid service delivery methodology Focused educational curriculum Strong coach/mentor network Strong business services support

THROUGHOUT THE ENTIRE LIFE CYCLE

SUPPORT FROM INFANCY TO MATURITY

FINANCIAL MARKETS

PROVIDE SUSTAINABLE AND PREDICTABLE FUNDING

Shared financial risk profile Aligned exit strategies Strong partnerships Public/private investment funding Governmental taxation stimulus

GOVERNMENT

SUPPORT AND FACILITATE

Long term sustainable vision Sufficient budget and focus

KENYA ICT DEVELOPMENT

MATURITY LIFE CYCLE

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SME MNC
Global Marketplace
Konza City Kenya Continent Global

FRAMEWORK TO SUPPORT THE KENYAN ICT INDUSTRY PLAYERS ACROsS THE LIFECYCLE
ENTREPRENEURS
Kenyan Marketplace
Nairobi.. - SME - MNC - Govt + rest of Kenya

Virtual Marketplace Africa

- Kenya - Rest of Africa - Incidental offshore

PRIVATE MARKETPLACE

Incubation

Business Support
Support on business advisory and development Certification of technical skills and delivery maturity (Prince II) Education on industry standards & methodologies (Lean/SixSigma)

Continuous improvement
Support by providing a (virtual) networking environment, an ICT market place, and Diplomatic support to create international demand for Kenyan ICT products, services and skills

ICT INDUSTRY PLAYERS

Support on product, skill and business development Facilities providing workplace, internet and meeting place Education on business processes, -methodologies and -behavior

FINANCIAL MARKETS

Banks Seed Capital Private Companies Government

VC A

Bank A

Bank B & C

Govt

National International Private Public

Kenya ICT Investment Fund

Targeted Funding
Tax and procurement incentives and legislation

Market Funding
IP rights and diplomatic commercial exposure 9

GOVERNMENT

Entrepreneurial funding and educational support

REQUEST FOR HELP

THE KENYAN ICT REPRESENTATION ASKS ITS GOVERNMENT FOR HELP
SHORT-TERM
Favorable government procurement procedures Double Taxation Treaties

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MEDIUM-TERM LONG-TERM
R&D legislation development Contract legislation development ICT focused tax incentives IP legislation development

LEGISLATION

EDUCATION

Substantive government subsidies for HR capability building Acknowledgement of incubator institutes

Development of Kenyan ICT standards and certification Development of ICT focused education at all levels

Development of technology clusters that link Academia and Industry for R&D Development of technology clusters that link Security & Industry

COOPERATION

Support in media exposure Alignment ICT development with Vision 2030 Acknowledgement of ICT industry representative body
ICT industry investment fund Government projects

Joint Public/Private economic missions for ICT

Acknowledgement of ICT industry Advisory Board ICT sector representation in government Individual/CorporateTax incentives for investments 10

FUNDING

Public Private Partnerships

NEXT STEPS AND TIMELINES

CONTINOUSLY MOVING FORWARD WITH PRECISION AND CARE
ACTION

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TIMELINES

Validate ICT requests from government Align ICT industry ambition with Vision 2030 AND Kenya ICT Board
PROPOSED NEXT STEPS

APRIL 2012

APRIL MAY 2012

Partner with stakeholders on ICT industry vision & approach

MAY JULY 2012

Create detailed joint roadmap, activities, roles & responsibilities

Act on detailed roadmap with focus on quick wins

JULY OCTOBER 2012

OCTOBER 2012 ONWARDS

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Industry Regulation and way forward

Which Significant Trade Bodies exist currently? KAM TESPOK KEPSA KIF Way Forward To work with KITOS or create another body Marketing Kenya for IT privately and through public sector Set Standards in the sector Document the industry

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CURRENT KENYAN ICT LANDSCAPE

KENYA ICT WORKFORCE ANALYSIS * (in FTE)
Industry Segmentation
10,000

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ANALYSIS
Industry

THE KENYAN ICT INDUSTRY LARGELY DEPENDS ON ENTREPRENEURS AND FOREIGN MNCs

50,000
10.000

Employer Segmentation
30,000

REMARKS

30,000

10.000

5,000
5.000

The largest ICT market is .. Most of the foreign players are in and they are rapidly growing Outsourcing is a relative . Market segment, although . The technology industry segment is by far the .. most revenue generating, and the . Is relatively small

Technology

Consulting Outsourcing

Total Entrepreneurs Workforce

SME

MNC

Government

Employer
Over xx% of all ICT professionals work for .., where as only xx% in . With over jobs, the government provides a solid base for the industry

KENYA ICT REVENUE ANALYSIS (in KES mio)

Industry Segmentation

120,000
30.000

35,000
15.000

Employer Segmentation

Workforce/Revenue comparison
40,000

40,000

50,000
30.000 Technology Consulting Outsourcing

Total Entrepreneurs Revenue

SME

MNC

Government

The relative large workforce of entrepreneurs in comparison to the annual revenue implies low salaries The MNC revenue share is relatively high considering its workforce and since many of its players are foreign implies a capital drain for the Kenya ICT industry

* See appendix for more details

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POTENTIAL ICT INDUSTRY IMPACT

KENYAN ICT POTENTIAL (in KES bln)
140 130 120 110 100

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REMARKS
Assumptions
Kenyan avg. annual GDP growth 4% ICT spend growth with 6% from 2012 ICT spend comparison (% of GDP):

ICT DEVELOPMENT IN COMPARABLE LEADERS SHOW SIGNIFICANT GROWTH POTENTIAL

Total GDP Kenya

- South Africa - Singapore - xxxxxxx Comparable peer National ICT spend (12% of GDP)

15% 20% 10%

10
0 2008

Current Kenyan ICT Spend

2009 2010 2011 2012 2013 2014 2015

Taking the peer comparison average, the potential Kenyan ICT industry should be ~12% of GDP, increasing the market with KES 700 mio annually

Impact

INDUSTRY POTENTIAL GDP INCREASE: JOB CREATION:

KES 700 mio

70.000 FTE

Disregarding efficiency and effectiveness effects and assuming equal division of increased revenue over national & international players the Kenya GDP could grow with an extra 7% Assuming an average daily ICT income of KES 5.000, the ICT industry can provide for 70.000 extra jobs 14

KENYAN ICT LANDSCAPE

INDUSTRY ANALYSIS DETAILS
Entrepren. SME MNC Total
-

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COMPANIES
Type
Soft-/hardware producers System Integrators Service providers Website development -

THE KENYAN ICT LANDSCAPE ANALYSIS ON WORKFORCE AND REVENUE

Examples
SevenSeas Microsoft IBM Safaricom ..

TECHNOLOGY

Workforce Revenue

Entrepren.

SME

MNC

Total

Type
- Technology consultant

Examples
- Accenture - - ..

CONSULTING

Workforce Revenue

Entrepren.

SME

MNC

Total

Type
- Infrastructure - Application maintenance/ development - Business Process Outs. -

Examples
Microsoft IBM Safaricom ..

OUTSOURCING

Workforce Revenue

Workforce in 1.000 FTE)

Revenue in mio KES

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ICT IN KENYA THANK YOU!