Economics

Corruption, high unemployment and low infrastructure investment have hampered Kenya’s economy, according to the CIA World World FactBook. Labelled a low income country by the World Bank, Kenya recorded a Gross National Income (GNI) per capita of $820 for 2011: a fraction of South Africa’s GNI per capita of $6,960 in the same year.

But Kenya’s government has ambitions of making the nation a wealthier one with the implementation of its ‘Vision 2030’ plan. This national long-term development blueprint is aimed at transforming Kenya into a newly industrialising, middle-income country.

Three key pillars characterise the plan: economic, social and political. The economic pillar, in particular, highlights a stated goal of achieving an average economic growth rate of 10% per annum and sustaining this trajectory until 2030.

Kenya, though, is not achieving this goal at this stage, even though the country recorded a healthy Gross Domestic Product (GDP) growth rate last year of 4.7%, according to the Kenya National Bureau of Statistics (KNBS).

A key to the country achieving faster growth rates could rely on it diversifying its economy away from its dominant agriculture sector. A KNBS 2012 report on the country’s economy said that agriculture and forestry contributed 24% to GDP in 2011.

In a bid to break Kenya’s dependence on agriculture, Kenya’s government wants its Information and Communications Technology (ICT) sector to contribute more towards growth. Government has this year outlined a five-year master plan, aligned to Vision 2030, to help see the country grow its ICT sector to a $2 billion industry by 2017, contributing 25% to its GDP.

Kenya’s plan to boost ICT’s role in the economy is also hinging on a project called Konza technology city, situated outside the capital city Nairobi. The 5,000 acre Konza project, which is also dubbed ‘Silicon Savannah’ and is a public private partnership, is forecast to be completed in 2030 at a cost of $10 billion and house top global tech firms such as Samsung.

Political

Analyst for Informa Telecoms & Media in East Africa, Danson Njue, tells ITWeb Africa that Konza city is an a symbol of the Kenyan government’s commitment to ICT sector.

Njue goes on to describe the Kenyan ICT regulatory environment as being “progressive with the aim of promoting growth in the sector”. He explains that Kenya’s government has encouraged market liberalisation.

In 2008, government divested its 25% stake in Safaricom while a fourth mobile licence became operational in the same year. But Kenya’s government has also attempted to strike a balance between privatisation and selective state intervention, says Njue.

“For instance, the mobile money segment, which the government fully supports has had very positive effects in the country as a way of alleviating poverty and also as a source of employment,” explains Njue.

“The sector also provides the government with revenue through taxes. It is worth noting that Safaricom (an ICT firm) was named the highest tax payer in 2011/2012 financial year,” Njue says.

Kenya also has an independent regulator for ICT: the Communications Commission of Kenya (CCK). Simon Lee, a researcher for Africa Analysis in Kenya, says,“The CCK is certainly trying to control the communications setup in Kenya with SIM registration, setting network quality targets.”

Culture and demographics

Kenya is Africa’s seventh largest country with 43.18 million people, according to 2012 World Bank figures.

Meanwhile, United Nations Children's Fund (Unicef) data says that the country’s total adult literacy rate (2007-2011) stood at 87%. According to economic data website Indexmundi.com, Kenya’s urban population has jumped from 7.36% of the population in 1960 to 23.98% as of 2011.

And according to online language publication Ethnologue, there are a total of 69 languages spoken in Kenya. However, Swahili and English are the most widely spoken in the country.

Market maturity

Strong demand for mobile and internet services has characterised Kenya’s technology market. Mobile subscriber numbers in Kenya reached 29.8 million between January and March this year, according to CCK quarterly statistics released in July this year.

As a result the country has a mobile penetration rate of 75.8% with close to 99% of all mobile connections being prepaid SIM cards.

Meanwhile, the CCK says the number of mobile money subscriptions stands at 23.2 million. Regarding the country’s internet and data market, this segment numbered 9.6 million subscriptions by end of March 2013, according to the regulator.

As a result of Kenya’s growing adoption of mobile broadband services, makers of mid-range smartphones are targeting the country. Devices priced around the $150 mark, such as Intel’s Yolo smartphone and the Huawei 4Afrika Windows Phone, have been introduced to the Kenyan market this year.

Amid the high demand for mobile services; though, fixed line penetration in the country is low.

Stiff competition from mobile operators, vandalism of copper networks and high infrastructure costs have resulted in Kenya’s fixed line market shrinking, according to the CCK. In the CCK’s October 2012 to January 2013 statistics report it said the number of total fixed line subscriptions fell 5.5% during the period from 262,711 to 248,300.

Local ICT market

Owing to the high take-up of mobile services in Kenya, telecommunications firms dominate Kenya’s ICT landscape. Mobile operator Safaricom, which is owned by the United Kingdom’s Vodafone group, is the country’s largest telecoms provider with over 70% market share, according to the CCK. India’s Airtel ranks as Kenya’s second largest mobile operator while France’s Orange also has a presence in the market in the form of Telkom Kenya.

In an ICT ecosystem where demand for mobile data is surging, local internet service provider AccessKenya has also performed well in the country’s market as the firm reported a profit after tax of Ksh151,4m in 2012, up from Ksh109,1m in 2011. Until last month AccessKenya and Safaricom were also the only two ICT firms listed on the Nairobi Securities Exchange (NSE).

But South African headquartered technology firm Dimension Data has successfully acquired AccessKenya, resulting in AccessKenya being delisted from the bourse. Meanwhile, Liquid Telecom, Africa’s largest terrestrial fibre firm owned by African telco group Econet Wireless, also has a growing presence in Kenya as it has launched what it is claiming to be East Africa’s largest data centre in Nairobi. System integrators in Kenya most notably include the likes of software integrators Pinnacle Systems while distributors with operations in Kenya include Mitsumi, Nexans East Africa and Comztek.