The International Telecommunications Union (ITU) provided a snapshot of ICT development in Kenya in 2008 – 42.1 percent of the population had mobile phones, 6.3 percent of households had computers, and 2.5 percent of households had internet access. With mobile phone penetration rates exceeding 100 percent in South Africa, Kenya’s over 20 million people without mobile phones is a draw card for businesses. And this doesn’t even speak to the opportunities in the low computer ownership or internet access figures. The overall Kenyan mobile market size is about 20 percent smaller than South Africa’s since Kenya’s population is close to 40 million while South Africa’s is close to 50 million, according to the CIA World Factbook.
Kenya’s population differs from South Africa’s in urbanisation and purchasing power. Kenya’s level of urbanisation is 22 percent compared to South Africa’s 61 percent in 2008. And Kenya’s GDP per capita is estimated at $1 600 annually compared to $10 300 in South Africa for 2009.
Also, Kenyans’ expenditure on mobile services per month is also less than that of South Africans, $10.41 and $15.88 respectively, according to the ICT Access and Usage in Africa report released in 2008 by ResearchICTAfrica. However, Kenyans’ disposable income per month was $18.22 compared to $70.31 in South Africa in 2008, suggesting that Kenyans spent a larger percentage of their disposable income on mobile phone usage.
The overall revenue of the mobile market in 2008-2009 was 72.625 million KShs, with growth exceeding 25 percent, according to the Kenya ICT Sector Performance Review 2010 by ResearchICTAfrica.
The market has been particularly good to the financial services and mobile operator sectors, with the introduction of M-PESA and M-Kesho, mobile payment and mobile banking solutions respectively, tapping into unbanked populations. The rollouts have been so significant that even banks like Barclays Bank are partnering with Safaricom, the mobile operator that deployed M-PESA and M-Kesho, to offer their banking clients mobile payment services.
Sea change
David Owino, founder of Business to Business Solutions, says there are three key changes over the past few years that will make a significant difference in the growth of the ICT sector.
First, the undersea cable systems like EASSY, Teams, and Seacom went live, bringing significantly more international broadband capacity. Second, Kenya’s government developed fibre backhaul networks within the country and connected it with neighbours like Uganda. And thirdly, the freedom outlook has improved with the newly passed Constitution.
The overall international bandwidth availability grew over 80 percent in capacity in the first half of 2009, reaching 2,746.5Mbps, according to the Communications Statistics report by the Communications Commission of Kenya (CCK).
This resulted in a reduction in cost from $3,700 per month for 1Mpbs guaranteed bandwidth in September 2009 to $600 per month in 2010, according to the ResearchICTAfrica report.
The regulatory environment supports a competitive market, with four major mobile operators currently – Safaricom, Zain, Orange Kenya and Yu. The telecom regulator is CCK. Key legislation that pertains to the ICT sector includes the Kenya Communications Act of 1998, which was amended in 2008, the Science and Technology Act, Cap. 250 of 1977, and the Kenya Broadcasting Corporation Act of 1988. Another key piece of legislation under consideration is the Freedom of Information Bill. A national ICT policy was gazetted in 2006.
One particular aspect of the legislation, the unified licensing framework (ULF), allows licensed operators to use any form of communications infrastructure to provide various communication services.
This opened the door for the mobile operators to enter the ISP market. According to the ResearchICTAfrica report, mobile operators have become the largest internet service providers (ISPs), overtaking the traditional ISPs like Kenya Data Networks, UUNET and Wanachi Online. Safaricom had sold about 3.5 million broadband and about 4.0 million data modems by January 2010, which does not necessarily take into account Safaricom’s mobile phone internet users.
And this growing mobile, along with broadband, market means there is growing need for mobile applications and services. Juniper research indicates that mobile application revenues will exceed $30 billion globally by 2015. The Kenyan development community has already received some recognition from successful apps like Ushahidi and M-PESA, but others are coming. For example, Virtual City recently received $1 million as winner of the Nokia Growth Economy Venture Challenge. Virtual City is developing the Mobile Distributor Solution to help small and micro enterprises improve distribution for fast-moving consumer goods.
However, overall the Kenyan software development community is nascent. It has the innovation, talent and technical expertise but lacks the ability to bring things to market, says Owino. Another key issue for the community is financing.
There is increasing support from companies like Google. IHub, an ICT incubation hub started by Ushahidi, is serving as a key catalyst and facilitator for the community.
There are also more competitions matching app developers with mentors and funding, as well as providing global exposure. The Apps4Africa competition for East Africa just awarded grants to mobile developers to create applications like Mamakiba, which helps pregnant women save and prepay for prenatal and birthing services. This was sponsored by the US State Department and managed by IHub.
Another recent competition was IPO48, which pits developers against each other to create the best mobile app in 48 hours. It was organised by HumanIPO.org, which has its roots in a European start-up community. Others like Savannah East Africa are showing ICT start-ups how to get funding from different sources, in this case from the US, while seeking acquisition opportunities.
So with all this interest, is it possible that the Kenyan ICT industry will be the next Silicon Valley globally or, at least, of Africa? It’s hard to say. Cape Town is another software development hub with potential, but it also struggles. While these hubs will develop their own DNA, they need to develop strong ecosystems like Silicon Valley and the Massachusetts Institute of Technology (MIT), which successfully commercialise research and products over and over.
But the indicators seem to point to something good coming out of Kenya’s mobile industry not just reaching Kenya, but extending regionally and globally.
This piece commissioned by Brainstorm Magazine of South Africa. Permission to re-publish granted to Afribiz.
