ICT AS A DEVELOPMENT TOOL, BENEFITS, OPPORTUNITIES AND CHALLENGES TO

DEVELOPING COUNTRIES: KENYA’S EXPERIENCE

A PRESENTATION BY GIDEON MWANGI, DURING THE SYMPOSIUM ON THE 20TH ANNIVERSARY OF THE INFORMATION TECHNOLOGY

AGREEMENT

27TH -28TH JUNE 2017

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PRESENTATION OUTLINE Introduction

ICT Sector in Kenya

Benefits of ICT in Kenya

Opportunities in the ICT Sector

Challenges facing ICT Sector in Kenya

Conclusion and Way Forward 2

Introduction Kenya’s development is guided by a long-term blueprint by the

name Kenya Vision 2030 The Plan aims to transform the country into a newly industrializing

middle income country providing a high quality life to all citizens by the year 2030.

The Vision is based on three pillars; economic, social and political which aims at growing the GDP growth rate at 10% per annum, building a just and cohesive society with social equity in a clean and secure environment and realizing a democratic system which focuses on people's issues and is accountable and result-oriented respectively.

The three pillars are anchored on foundations namely infrastructure; science, technology and innovation; land reform; human resource development; security and public service reforms

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Introduction Cont’ The ICT Sector was therefore identified as a key enabler

in the achievement of Vision 2030 goals and aspirations Its also a critical sector of the economic pillar of the

Vision under the Business Process Outsourcing/ Off-shoring

Over the period the Kenya has been focusing on transforming herself into a knowledge –based economy

Main areas of focus has been ICT infrastructure development, skills and knowledge enhancement and policy and legal regulations

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ICT Sector in Kenya Impressive performance of the Kenya’s ICT sector started in

1997, when the Government initiated the liberalization, by restructuring the then Kenya Post and Telecommunication Corporation by splitting it into three entities namely; The Postal Corporation of Kenya dealing with courier and postal services, Telkom Kenya Ltd -the national operator and Communication Commission of Kenya, the industry regulator.

This restructuring coincided with the formation of the Information Technology Agreement which have made the ICT sector remaining strong and robust mainly supported by continued expansion of the scope of the ICT enhanced efficiency in connectivity

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ICT Sector in Kenya Cont’ The liberalization of the telecommunication sector

continued until the government separated the mobile services which were to be offered by Safaricom.

Safaricom was incorporated on 3rd April 1997 as a private limited liability company and become a public company with limited liability in 2002. Vodafone Group Plc of the United Kingdom acquired 40% while government had 60% since then the mobile company has grown to be one of the largest telecommunication companies in Kenya generating over US$ 1 billion in revenue per annum.

Safaricom developed the M-pesa services in 2007 revolutionalizing the mobile money transfer in Kenya

To date Kenya has the following Mobile services companies Safaricom, Airtel Kenya, Telkom Kenya, Finserve Africa Ltd and Sema Mobile Services 6

ICT Sector in Kenya Cont’ Services offered by telecommunication companies include

broadband communication, mobile money transfer, internet and mobile commerce transactions

ICT sector has become a crucial enabler of socio-economic development mainly through reduced transaction costs and enhanced connectivity. Has also been increasingly being applied across all economic activities mainly health, education and public administration

Government has enhanced broadband availability and connectivity through implementation of National Infrastructure. Laying of fiber optic infrastructure has resulted to faster communication and online services.

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Performance of the ICT Sector Trade in ICT Products for the period 2007-2016

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-

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

200.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Imports in US$ (million) 64.70 73.07 95.10 117.09 148.39 189.46 137.89 91.95 104.24 174.54Exports in US$ (million) 3.82 4.44 7.89 19.72 20.69 32.63 13.30 5.47 3.87 4.67

Val

ue in

US$

(mil

lion

)

TRADE IN ICT PRODUCTS

Performance of the ICT Sector Cont’ Imports increased steadily from 2007 to 2012 when

liberalization of the ICT sector was being undertaken. Imports of ICT products started slowing down from

2012 until 2014 when the trend started having an upward trajectory.

The trend in exports of ICT products have also been behaving in the same way. In comparison with the imports the exports are very insignificant.

Kenya ‘s major importers of the ICT products include China, United Arab Emirates, United States of America, United Kingdom and Netherlands

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Performance of the ICT Sector Cont’ ICT Sector growth vis-à-vis GDP growth

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016GDP growth 7 1.5 2.7 8.4 6.1 4.5 5.9 5.4 5.7 5.8ICT Sector growth 30.3 7.8 10 17.4 22.1 2.6 12.5 14.5 7.4 9.7

0

5

10

15

20

25

30

35

Gro

wth

in %

ICT SECTOR GROWTH VERSUS GDP GROWTH

Performance of the ICT Sector Cont’ ICT sector growth has remained strong and robust over the

10 year period. However the trend has been fluctuating during the period

The GDP growth has also remained strong and resilient with fluctuating performance.

The trend in both GDP growth and ICT sector growth exhibits same characteristics which indicates that when the GDP growth is on an upward trajectory the ICT sector is also on an upward trend. This implies that the ICT sector is a very important sector to the Kenyan economy. The value of the sector is about US$3.11 billion.

In 2016, the ICT sector grew by 9.7% which was mainly contributed by telecommunications sub-sector and evidenced by growth in the no. of minutes of domestic calls made from 39.2b to 42.2b in 2015 and 2016 respectively and also by mobile money transfer and mobile commerce transactions that expanded by about US$ 15 b and US$ 18b respectively in 2016.

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Performance of the ICT Sector Cont’ Value of the ICT Sector

Value of the ICT Sector has grown steadily over the years.

In the period 2010 to 2016 the value of the sector has increased by an average of about 11% per year

From 2010 to 2016 the value increased by 84% from US$ 1.69 billion to US$ 3.11b respectively.

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-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

2010 2011 2012 2013 2014 2015 2016Value of the ICT Sector in US$ 1.69 1.86 2.04 2.28 2.59 2.80 3.11

Am

ount

in U

S$(B

illi

on)

Value of the ICT Sector

Performance of the ICT Sector Cont’ Mobile Telephone Services

Mobile telephone services has been the major source of expansion of the ICT sector

Over the period the no. of fixed line connections has been decreasing while mobile connection/ wireless increasing which implies the mobile telephone services have been embraced by the population

In the period 2010 to 2016, the fixed line capacity and wire line connection decreased by 58% and 69% respectively as indicated in the graph.

In the same period, mobile connections and mobile telephone capacity increased by 56% and 93% respectively.

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Performance of the ICT Sector Cont’

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Mobile Telephone Services Cont’

-

10'000'000

20'000'000

30'000'000

40'000'000

50'000'000

60'000'000

70'000'000

80'000'000

2010 2011 2012 2013 2014 2015 2016Fixed line capacity 422'000 401'000 380'000 408'000 340'000 75'000 179'000Wireline connection 235'000 188'000 75'000 57'000 48'000 85'000 72'400Wireless connection 226'000 192'000 188'000 149'000 132'000 - 374Mobile telephone Capacity 46'629'000 47'677'000 49'977'000 55'077'000 65'077'000 62'800'000 71'600'000Mobile Connections 24'969'000 26'981'000 30'433'000 31'309'000 33'633'000 37'716'000 38'982'000

Num

ber

Fixed and Mobile Network Services

Performance of the ICT Sector Cont’ Mobile Money Transfer No. of Mobile money subscribers has increased steadily over

the years. The subscribers increased by 201% from 10.62 m to 31.997million between 2010 and 2016.

15

-

5'000'000

10'000'000

15'000'000

20'000'000

25'000'000

30'000'000

35'000'000

2010 2011 2012 2013 2014 2015 2016Mobile Money Transfer Service

Subscribers 10'615'000 17'396'000 19'319'000 26'016'000 26'023'000 26'753'000 31'997'000

No.

of S

ubsc

ribe

rs

Mobile Money Transfer Service Subscribers

Performance of the ICT Sector Cont’ Mobile money innovation-M-pesa has radically changed the

financial sector since its development in 2007. It has also increased the no. of unbanked population in the country and the amount of funds transacted has been increased steadily to reach US$ 15.26b.

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-

2'000'000

4'000'000

6'000'000

8'000'000

10'000'000

12'000'000

14'000'000

16'000'000

2010 2011 2012 2013 2014 2015 2016Amount of mobile money transactions - - 5'774'000 7'326'000 9'113'000 11'142'000 15'262'000

Am

ount

in U

S$ (M

illi

on)

Amount of mobile money transactions

Performance of the ICT Sector Cont’ Total amount of money transferred from 2010 to 2016

increased by 358% from US$ 7.32b to US$ 33.56b respectively. This implies that Mobile money transfer has become a major money transfer innovation supporting the financial sector in Kenya.

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-

5'000

10'000

15'000

20'000

25'000

30'000

35'000

2010 2011 2012 2013 2014 2015 2016Total amount transferred in US$ Million 7'320 11'690 15'440 19'020 23'720 28'160 33'560

Am

ount

in U

S$ M

illi

on

Total amount of transferred in US$ Million

Performance of the ICT Sector Cont’ Broadband Services

In the period 2010 to 2016, the total available bandwidth, total utilized bandwidth, total fixed (wired)broadband and total active mobile broadband increased by 900%, 4,158%, 1,992% and 8,006% respectively as indicated in the graph below. This is tremendous increase in utilization of bandwidth which implies that the population is increasing the utilization of the internet services.

Mobile bandwidth has increased exceptionally due to embracing of mobile technology not only for communication purposes but also for other services including money transfer

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Performance of the ICT Sector Cont’ Broadband Services

19

-

2'000'000

4'000'000

6'000'000

8'000'000

10'000'000

12'000'000

14'000'000

2010 2011 2012 2013 2014 2015 2016Total Available Bandwidth Capacity 202'720 435'520 574'704 862'474 847'523 1'550'768 2'028'743Total Utilized Bandwidth 20'210 32'271 264'584 365'413 498'121 854'551 860'570Total Fixed (Wired) Broadband 6'114 42'323 52'730 69'140 84'631 111'129 127'877Total Active Mobile Broadband 154'786 204'868 1'838'844 2'395'836 4'141'498 7'112'991 12'546'559

Mbp

s

Broadband Services

Performance of the ICT Sector Cont’ Internet Services

The no. of wireless internet subscriptions, fixed (wired) internet subscriptions and estimated internet users has increased by 761%, 793% and 725% respectively in the period 2010 to 2016 as shown in the graph below. This implies that the rate of internet utilization has increased over the years. However ,the increase in the no. of wireless internet subscriptions is very high compared to the fixed or wired subscriptions thus exhibiting the expansion of the mobile technology by the population.

This also indicates that the population is utilizing more services apart from communication

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Performance of the ICT Sector Cont’ Internet Services

21

-

5'000'000

10'000'000

15'000'000

20'000'000

25'000'000

30'000'000

35'000'000

40'000'000

2010 2011 2012 2013 2014 2015 2016Total Wireless Internet Subscriptions 3'082'993 6'104'019 8'458'818 13'107'459 16'357'239 23'814'546 26559184Total Fixed (Wired) Internet Subscriptions 13'959 48'961 48'351 79'509 95'780 115'111 124'637Estimated Internet Users 4'772'446 11'335'000 13'542'000 21'274'000 26'164'000 35'550'000 39'351'000

Num

bers

Internet Services

Performance of the ICT Sector Cont’ 47 Counties in Kenya have been connected with National Optic

Fibre Backbone Infrastructure (NOFBI). This will lead to enhanced service delivery to the public, enhanced national security, reduced cost of doing business , accelerated ICT development in rural areas and therefore bridge the digital divide

Implemented the Digital Literacy Programme (DLP) which plans to instill digital skills among young children by availing digital content through tablets to primary schools around the country.

Established the Ajira Digital Program which aims to introduce Kenyans to online work and provide them with the necessary tools, training and mentorship to enable them to work and earn a decent income.

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Benefits of ICT Sector In the overall, the following are some of the major benefits of the ICT Sector:

Faster and efficient means of communication across the country

Financial inclusion-Increase in the no. of unbanked population and efficiency in financial transaction. Has also led to provision of financial services to customers by banks by development of financial applications e.g. M-kopa by KCB, Equitel by Equity Bank, M-Akiba purchase of government bond

Contribution to the Kenya economy about US$3.11b

Creation of direct and indirect employment in Kenya

Increased efficiency in government services-about 109 government services are offered online through e-citizen which includes among

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Benefits of ICT Sector others issuance of visa, driving license, passport, registration of companies and land registration and Huduma centre-one stop-shop of offering government services

Efficiency in retail trade i.e. m-commerce e.g. Lipa na M-pesa services by Safaricom Ltd

Increased innovations in telecommunication, infrastructure and mobile money-Kenya ranked top five African countries with the fastest growth in innovation in these areas

Huge benefits to health sector-used for improving distribution of medicine and medical supplies and monitor ante-natal and post-natal clinics, agriculture sector-distribution of fertilizers and dissemination of information to farmers on increasing their yield and accessing markets and education sector-online education among others

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Opportunities in the ICT sector Growth in m-commerce is expected to increase demand for

solutions e.g. cloud computing and also retail trade applications

Development of mobile applications to utilize the mobile technology in transport, security, agriculture, health, education sectors among others

Development of ICT infrastructure to cover the whole country particular in the rural areas

ICT products for internet services, security services and health services, personal computers and hardware among others

Demand for cheaper 3G enabled handsets to tap into the currently unutilized 3G networks

Mobile enabled high-definition video, gaming services and internet based television 25

Challenges of the ICT Sector Inadequate skills and human capacity for undertaking ICT

functions and research and development in ICT

Inadequate legislation for better exploitation of ICT particularly in commerce

Digital divide between rural and urban areas which limits utilization of ICT

Slow adoption of ICT services

Internet security particularly the cyber security

Inadequate supply of affordable and uninterrupted power supply

Limited penetration of telecommunication infrastructure in rural areas

Inadequate data to carry out ICT policy research and analysis

High costs of ICT services

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Conclusion and Way Forward Over the 20yrs period, the ICT sector has expanded

exceptionally and is one of the major sector supporting the Kenyan economy

Kenya’s mobile technology has increased tremendously and is a leader in mobile money transfer. The rate of mobile penetration, internet and mobile money utilization is 85.9%, 58.8% and 70.5% respectively. Mobile commerce is still in its nascent times and need to be given more attention

The population capable of owning and utilizing ICT equipment has increased tremendously over the years

Kenya is a net importer of ICT equipment

New and emerging areas in the ICT sector are upcoming and need to be given attention. 27

Conclusion and Way Forward Cont’ The ICT manufacturing sector and other digital sectors has not

fully developed and needs urgent attention and support of WTO members

The Information Technology Agreement has played an important role in the development of the ICT sector in Kenya

The reduction of tariffs on 201 products as adopted in the Nairobi declaration will go along way in supporting this important sector to Kenya

Kenya is still facing a myriad of challenges which need to be addressed just like other developing countries in Africa

Therefore Kenya needs policy space in ICT sector in order to address these challenges and support this important sector

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Thank you

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