Analyzing indicators of two countries seriously tackling the ICT market: Kenya and Rwanda

For the last ten years, African leaders made many declarations about the importance of ICT for their development without much result so far.  Here is a non-exhaustive list of some of those declarations:

Blantyre, Malawi – 2001
Southern African Development Community needs a coherent regional policy and strategy on Information and Communications Technology, signed by 13 heads of governments
Geneva, 12 December 2003
The World Summit on the Information Society: 44 Heads of State, Prime Ministers, Presidents, Vice-Presidents approve plan of Action which sets forth a road map to build on that vision and to bring the benefits of ICT to underserved economies.
Khartoum,  Sudan - 2006
African Regional Action Plan on the Knowledge Economy (ARAPKE) adopted by the Executive Council of the African Union
Sharm El-Sheikh, Egypt  - 2008
13th Ordinary Session of the Executive Council in calling on the AU Commission to take the necessary measures to speed up the implementation of the Reference Framework for Harmonization for Telecommunication ICT Policy and Regulation
Addis Ababa, Ethiopia - in 2009
African Heads of State and Government Declaration on supporting the Program for Infrastructure Development in Africa (PIDA)
Johannesburg - November 2009
Oliver Tambo Declaration adopted by the African Union Ministers in charge of Communication and Information Technologies
Addis Ababa, Ethiopia  - 2 February 2010
14th Assembly of Heads of State and Government Declaration on Information and Communication Technologies in Africa
Abuja, Nigeria - 7 August 2010
Africa’s Information Communications Ministers Resolve to Push ICT Sector at Continental Level
Brazzaville, Congo - 3 May 2011
African health ministers have called for the use of information and communication technologies 
Cape Town, South Africa - 4 June 2012
The Ministers responsible for Information Communication Technologies (ICTs) declare common desire and commitment to eradicate the barriers of poverty through the promotion and use of enabling ICTs

In this posting we analyze two countries that have "walked the talk" and started implementing real ICT strategies: Kenya and Rwanda.

The following comparative analysis begins by applying political, social, economic and technical metrics to both countries. Then we will compare global competitiveness and networked readiness indices of both countries.

This analysis utilizes publicly available data from recognized world organization and that is no older than two years (see links to data sources in Appendix).

Here are the metrics and indicators I selected:

1) Education

- Literacy rate:  % of people aged 15 and above who can, with understanding, read and write a short, simple statement on their everyday life.
- Quality of higher education (HE)

While one can find many publications about methods of evaluation of higher education quality, there are very few rankings of HE quality by country, and when they exist they don't cover Africa. Therefore I used the world ranking of the best university in the country (www.webometrics.info) as an estimate for the quality of tertiary education in that country. 

2) Business environment

- Ease of doing business: starting a business, dealing with construction permit, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contract, and resolving insolvency.

- Corruption perception index: capturing perceptions of the extent of corruption in the public sector, from the perspective of business people and country experts.

- Total tax rate: sum of profit tax, labor tax and social contributions, property taxes, turnover taxes, and other taxes, as a share (%) of commercial profits.

- Quality of infrastructure: transport, telephony and energy.

3) Political, economic and social environment

- Democracy: electoral process and pluralism; functioning of government; political participation; political culture; civil liberties.

- Good governance: voice and accountability; political stability and absence of violence; government effectiveness; regulatory quality; rule of law; control of corruption.

- GDP/Capita: gross domestic product divided by midyear population.

- GDP growth rate: annual percentage growth rate of GDP at market prices based on constant local currency.

- Quality of life: based on economy, environment, freedom, health infrastructure, risk & safety, and climate.

In Africa the relationship between  economic development and democracy is less clear than between economic development and good governance as explained in an article recently published in African Business (French edition), Dec 2012-Jan 2013 by Ch. d'Alayer.

The measurement of good governance is controversial and difficult, as explained in a report by Marie Besancon from the World Peace Foundation at Harvard University. In her report she mentions that "the most comprehensive set of global governance indicators has been compiled by the World Bank and combines subjective and objective attributes" which I'm using here. I have extracted the following graphics from that World Bank report. I calculated the average of the 6 indicators' percentile for each country as a total estimate for good governance.

Graphic color coding:

 

 

 4) Government ICT Drive

As discussed earlier, governments need to play a key role in establishing a favorable environment for the development of an ICT industry. I have selected two indicators about the government ICT drive:

- Government prioritization of ICT: How much priority does the government places on information and communication technologies?

- Importance of ICT to government vision of the future: To what extent does the government have a clear implementation plan for utilizing information and communication technologies to improve the country’s overall competitiveness?

Comparing Kenya’s and Rwanda’s rankings

Below is a table comparing Kenya and Rwanda’s rankings in each metric outlined above. Green indicates the country with the advantage (WR = World Ranking)

Kenya is leading in:

- Education: Kenya has a better literacy rate and their top university is ranked significantly higher. Kenya's best university is the University of Nairobi ranked 1435th in the world, Rwanda's best university is the National University of Rwanda ranked 4157th. This better quality of tertiary education is informally confirmed by feedback I receive from business people hiring in both countries. While Kenya has a clear advantage, it is only relative. Indeed, when looking at successful "Silicon Valley" types of development, they have been driven by world-class universities ranked in the top 100, like Stanford University in the Bay area, MIT in the Boston area, the National University of Singapore in Singapore, or the Technion-Israel Institute of Technology in Haifa. Clearly one of the major challenges for the development of a Silicon Valley in Africa will be the quality of higher education to deliver the talent to work on the development of high-tech ICT innovation.  The hope for Rwanda is that the recent opening of a Carnegie Mellon University (CMU) branch in Kigali will impact the quality of higher education in the country.

- Democracy: Kenya's advantage is mainly based on the electoral process, pluralism and the political participation.
- GDP/capita: Kenya is the region's leading economy
- Quality of life: Kenya's advantage is built on leisure and culture, freedom and climate.

Rwanda is leading in all other indicators.

- Ease of doing business: Rwanda’s advantages are particularly in starting a business, getting electricity and registering property, protecting investors, paying taxes, and enforcing contracts. It is still lagging in construction permit, getting credit and resolving insolvency.

- Corruption perception index: Rwanda has a significant advantage here, being ranked 4th in Africa after Botswana, Cape Verde and Mauritius. Compared to Kenya, its advantage is based on performance and institutional assessment, executive opinion survey, and bank governance rating.

- Total tax rate: This criterion is more difficult to assess as there is often a difference between official tax rates and actual tax rates due to different loopholes in tax legislation. In particular for IT, one can expect governments to offer tax free zones for the development of IT businesses. For instance in Rwanda, all IT equipment can be imported tax free.

- Quality of infrastructure: Available data does not provide detail about the countries' scores for the indicators used (transport, telephony and energy). Based on my personal experience, traffic jams in Nairobi represent a very serious problem when it comes to move from one location to another; it can easily take hours to cover only a few miles. This can have a significant impact on the dynamic of the development of an ICT ecosystem as discussed later in this posting.

- Good governance: Here again Rwanda' score is significantly better mainly due to political stability/absence of violence, rule of law and control of corruption (see graphics above).

- GDP growth rate: Rwanda’s economy has enjoyed high growth rates (6-8%) for the last decade. Last year its GDP growth rate was the 14th in the world. As a result Rwanda has lifted more than one million people out of poverty.

- Priority of ICT and importance of ICT for the government: Rwanda is ranked significantly higher than Kenya, being ranked third in the world for those criteria behind Singapore and Sweden. But is the drive of the government of Rwanda (GoR) enough? We will discuss it in the second part of the analysis.

Global Competitiveness

Based on the World Economic Forum’s Global Competitiveness Report 2012-2013, the following table compares the Global Competitiveness Index (CGI) of Kenya and Rwanda for the last three years.

Global competitiveness is based on indicators grouped in three categories with different weights:
1) Basic requirements (60%): institutions, infrastructure, macroeconomic environment, health and primary education
2) Efficiency enhancers (35%): higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size
3) Innovation and sophistication factors (5%): business sophistication, innovation

It is interesting to observe how Rwanda's global competitiveness as measured by the GCI is better than Kenya's. In fact, Rwanda’s GCI is improving as Kenya's GCI is stagnating over the last three years. Let’s look at the details.
The following graphic provides the details of the indicators entering the composition of the CGI. Indicators derived from the survey are expressed as scores on a 1-7 scale, with 7 being the most desirable outcome. I integrated the scores for both Rwanda and Kenya in the same graphic for easier comparison.

Rwanda and Kenya score 5 and 4, respectively, tying for three indicators. Kenya has the advantage for the following indicators: higher education, confirming previous data; financial market development, pushed by the presence of multinational corporations; technological readiness; and market size, mainly due to the size of its economy as Kenya's GDP is more than five times the size of Rwanda's GDP. Rwanda leads in institutions, macroeconomic environment, health & primary education, good market efficiency, and labor efficiency, confirming its advantage in ease of doing business and good governance from previous data.

Networked Readiness Index 

 

One of the most authoritative exercises to measure and benchmark ICT developments is the Networked Readiness Index (NRI) available in the World Bank and INSEAD’s Global Information Technology Report 2012, which has been adopted by several governments as a valuable tool for assessing and leveraging technology for competitiveness and development.
The NRI comprises four sub-indices that measure the environment for ICT; the readiness of a society to use ICT; the actual usage of all main stakeholders; and, finally, the impacts that ICT generates in the economy and society. These four sub-indexes are divided into 10 pillars: 1. Political and regulatory environment; 2. Business and innovation environment; 3. Infrastructure and digital content; 4. Affordability; 5. Skills; 6. Individual usage; 7. Business usage; 8. Government usage; 9. Economic impacts; 10. Social impacts.

The following graphic provides the details of the NRI indicators for both countries integrated in the same graphic.

In contrast to the GCI, both countries score 3 each while they tie in three criteria. Kenya's advantages are in affordability; skills, confirming again the better quality of its education; and individual usage, due probably to higher penetration of technology in the country. Mobile phone penetration is 65% in Kenya versus 41% in Rwanda (it is projected to increase to 60% this year after the arrival of Airtel in Rwanda) and Kenya’s internet penetration rate is quadruple that of Rwanda at 28% versus 7%, respectively. It should come as no surprise that Rwanda is leading or equal in all other indicators- mostly relating to public sector interventions- including in political & regulatory environment, business and innovation environment, and government usage.

You will fnd a more detailed analysis and comparison in my next posting.

Seeya later alligator...

APPENDIX

The following links have been used to collect the data used in this posting:
- Literacy rate (2010): World Bank Literacy rate (% of people ages 15 and above)
- World ranking of best university (2012): Webometrics
- Ease of doing business (2012): Doing Business.org/World Bank
- Corruption perception index (2012): Transparency International 
- Inflation rate (2012): SID: The State of East Africa 2012 page 65
- Total tax rate (2012): The World Economic forum: The Global IT Report 2012 page 336
- Quality of overall infrastructure (2012): INSEAD/The World Economic Forum: The Global Competitiveness Report 2012 page 412
- Democracy (2011): Economist Intelligence Unit: Democracy Index 2011 (requires free registration for access)  
- Good Governance (2011): World Bank: Worldwide Governance Indicators
- GDP per Capita (2011): The World Bank
- GDP growth rate (2011): The World Bank
- Quality of life (2010): International Living
- Government prioritization of ICT (2012): The World Economic forum: The Global IT Report 2012 page 374
- Importance of ICT to government vision of the future (2012): The World Economic forum: The Global IT Report 2012 page 375