Analyzing the role of ICT requires us to differentiate between two types of ICT markets: the “resale market” and the “innovation market.” The former characterizes how Western global ICT companies see Africa; that is, as an emerging market for the sale of their existing ICT products: hardware, software and services. Primary sales targets are large local companies and the growing number of multinational corporations (MNCs) who themselves target Africa for business development. Since many MNCs and sizable local enterprises have IT needs similar to their counterparts (or company offices) in developed countries, IT vendors can sell their existing products which they import in Africa with no or little adaptation to the African environment and needs, sometimes leading them to sell inadequate solutions. Take the example of private cloud computing, addressed in a preceding posting in this blog. The majority of sales is in hardware, which requires little if any adaptation. A recent 2012 IDC survey of Kenya shows that 78% of the ICT spending in Kenya is in hardware and only 9% in software and 13% in services. Moreover, when the hardware is developed and built outside of Africa, most of the revenue contributes to the profit of those companies abroad without reaching the local economy.
That said, I'd like to focus on the latter ICT market for the remainder of this posting. In contrast to the resale market, the “innovation market” addresses the need for new ICT solutions that are adapted to Africa's environment to support the millions of small and medium-size enterprises (SMEs). In Africa, most SMEs have not yet leveraged the power of ICT to automate their processes and manage their businesses. The major challenge in this market is the lack of awareness of IT and the inadequate IT model used by SMEs in the developed world as I explained in another posting.
For such an ICT industry to emerge in Africa there must be a favorable environment; namely, an ICT regulatory framework, skilled workforce, good business environment, incentives for private sector development, and good IT infrastructure. As this is often not the case in many African countries, the role of African governments as regulator and capacity builder is critical for producing such an environment.
Once a suitable environment is in place, government should retreat and leave it to private sector entrepreneurship to develop the innovation market as the ability for innovation to blossom is usually not compatible with government bureaucracy. Innovation requires an expert ICT skilled workforce that is currently scarce in Africa and mostly employed by large enterprises offering better salaries. For innovations to flourish, a critical mass of creative engineers, entrepreneurs and investors are needed for a dynamic ecosystem to develop. Silicon Valley offers a blueprint; it is where ICT innovators resided in close proximity in an environment that eased encounters and interactions, and ultimately facilitated idea sharing and innovation.
The question then becomes: Where is the best place or country for such an ICT ecosystem to develop and succeed in Africa? Where is the ideal place or country to support grassroots technology entrepreneurship?
Where will the first African "Silicon Valley" be located?
Here are the metrics and indicators I selected:
4) Government ICT Drive: government prioritization of ICT and importance of ICT to government vision of the future.
Below is a table comparing Kenya and Rwanda’s rankings in each metric outlined above. You will find the details of the comparison in this posting. Green indicates the country with the advantage (WR = World Ranking)
Kenya is leading in the important education sector. 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, and 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. CMU world ranking is 19th in the same webometrics.
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.
Here again 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.
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.
Kenya's ICT strategy
While Kenya’s ICT strategy has future potential, it is already enabling ICT development and innovation. This effort is undertaken by multiple actors who have started a multitude of activities: the public sector development efforts in ICT infrastructure, data liberation campaigns, dissemination of ICT knowledge from urban to rural areas; and private sector activity such as technology development in mobile money, creation of tech hubs.
Buttressing urban ICT development is the Digital Villages project entitled Pasha, meaning “transmit” in Kiswahili. Its purpose is to diffuse ICT know-how from exclusively urban enclaves to rural and marginalized areas.
The private sector has played an indispensable role in Kenya’s ICT development strategy. Mobile money is probably the most visible example of African ICT innovation today. It has been a tremendous driving force in the spread of IT throughout the continent, and its first iteration- mPesa- was born in Kenya. Credit is due to the ordinary Kenyans who began cellphone banking using airtime to send money to their friends and family. By disrupting convention, they gave traditional banks and money-transfer companies like Western Union a run for their wired money. Eventually it was Vodaphone that capitalized on the opportunity to add sophistication and scale to this new practice by developing the technology, albeit outside of Kenya. Now the company owns the patent, but ultimately it was ordinary Kenyans, not Vodaphone, who innovated and started a phenomenon that attracted the attention of the continent’s leading telecommunications companies, including Safaricom, MTN and others, while capturing the attention of ICT innovators globally.
Another important element of Kenya's ICT landscape that was born from the private sector is the iHub. Founded in 2010 by Eric Hersman, one of the co-founders of Ushahidi, iHub is a tech incubator that fosters innovation and collaboration among its tech start-up membership base. Hersman’s visionary concept came at a time when less than 5% of people in Africa had access to internet. Yet iHub sets a precedent and the idea has replicated- there are now more than 70 similar tech centers across the continent. iHub is fast becoming the nerve center for Nairobi's tech community; expatriates are even migrating to Nairobi to start their business at iHub. Several successful startups have already been created there.
I have seen no explicit effort made to improve the quality of higher education. We saw that Kenya's higher education quality is better than Rwanda but it still requires significant improvement if it wants to deliver the level of skills required in the innovation market. Diverting even one percent of the Konza investment for higher education could make a significant difference. Instead public and private partnerships are pursued to deepen the professionalization of Kenya’s human capital and improve linkages between ICT labor supply and demand. Kenya recently engaged with Carnegie Mellon University to create a professional certification for software developers. The certification will be based on a credentialing examination that will help employers identify software developers with the skills necessary to step into jobs immediately. Developed in partnership with Kenya, this certification will be available worldwide.
Collectively, public and private efforts seem to justify the National ICT Plan’s claim that "by 2018 Kenya will become the leading ICT hub in Africa, attracting leading global players and generating globally respected local entrepreneurship and innovation."
Rwanda's ICT strategy
In the introduction of the NICI plan, Rwanda's President Paul Kagame proclaims: “By spreading access to knowledge via modern communication technologies I am determined that we in Rwanda will work smarter. I am personally committed to an ICT-led future for Rwanda and I know that with good planning and sufficient resources, Rwanda can ‘leapfrog’ into the digital-era global economy. ”
The plan is defined in four phases of 5 years each, as seen in the graph below.
As scheduled, 2005 marked the start of the second phase (NICI II), when the GoR deployed a critical world-class infrastructure. The high capacity fiber sea cable laid in Kenya was extended from Nairobi to Kigali, making Rwanda one of the only landlocked countries in Africa with high-capacity fiber access to sea cables. A second connection was established through Tanzania to provide higher availability and capacity. An extensive optical fiber network (3,000 + km of fiber in a country only 250 km wide) was also installed across the country covering all 30 districts. Simultaneously, the construction of a tier 3 national data center was completed. That is the second highest ranking of data center requiring dual power source for highest availability, an important attribute in a region with frequent power outages. There are not many tier-3 data centers in Africa.
The third phase (NICI III) to develop a service sector, as visualized below, started in 2010.
In October 2007, the Connect Africa Summit recommended the establishment of five Centers of Excellence (CoE) in each sub-region of Africa in order to support the development of a critical mass of science and technology skills required for the development of Africa. Rwanda decided to lead the initiative for the East Africa Community (EAC) by opening an ICT CoE in Kigali. In order to fulfill this ambitious goal, the GoR strategically targeted CMU, a world-class university to establish and operate an engineering master's degree-granting program in Rwanda because of CMU's strong culture of research and innovation. The CMU-Rwanda branch opened in September 2011 in Kigali, making it the first time that a world-class university is investing in Africa with on-site presence and CMU faculty in residency in Rwanda. The first class of Master of Science in IT graduate students started in August 2012.
NICI III is also addressing four other areas: private sector development, community development, e-government and cyber-security.
Today, “the ICT private sector lacks sufficient capital to start, expand and develop businesses” and the GoR needs to “support the development of a competitive ICT sector”. The objective is to “foster private sector growth through ICT” and to “increase ICT sector contribution to GDP”
Community development is critical to achieving socio-economic development goals. The objectives are to “promote ICT awareness in communities, establish and institutionalize ICT-enhanced systems to increase citizen participation and improve access to services and information, and improve healthcare delivery through ICT”.
To improve government operational efficiency and service delivery, the goals are “to improve communication and reduce barriers to government transactions, streamline government business processes using ICT, increase transparency and accountability in government processes through ICT, and foster a conducive legal and regulatory environment to allow easy adaptation to emerging technologies”.
Similarly to Kenya, Rwanda is developing the Smart Village project to deliver ICT benefits in rural and disadvantaged areas.
Finally kLab the first innovation center in Rwanda opened in Kigali in March 2012 in the same building occupied by CMU-Rwanda. This open innovation center has seen its membership growing rapidly even before its official inauguration and is becoming a central location for ICT events and meetings between the industry sectors and young entrepreneurs.
Comparing Kenya and Rwanda's ICT strategies
The Kenyan economy is largely driven by the private sector with a significant presence of multinational entities. The value of its estimated exports for 2011 was $5.77 billion, mainly from agriculture (tea), manufacturing and financial services. The recent discovery of major petroleum resources in the country raises the hope that Kenya could become a petroleum producer and exporter which will increase that figure.
Private sector development in Rwanda lags behind Kenya, leaving the government as the main driver of ICT investments. In comparison to Kenya, Rwanda's exports are valued at $293 million (2011 est.). The fact that the country is landlocked, lacks port access, struggles with inflated airfreight rates, and is embroiled in the political instability of its neighbors, provokes the GoR to invest in a knowledge-based economy with ICT as its cornerstone. Thus the government aims to unlock the country by targeting virtual services such as internet-based services or business process outsourcing (BPO).
Achieving strategic targets hinges on the ability to plan and implement realistic targets within a realistic timeline of activities leading to the ultimate goal. Rwanda began executing their National ICT plan in 2000, twelve years ago, together with the Vision 2020 National Plan. The first NICI plan was fully and extensively documented for the next 20 years and revisions of the plan were scheduled every five years. Rwanda is now in its 13th year of the plan execution and so far it is pretty much on target; a truly remarkable feat for a public project.
In comparison, Kenya's strategic plan was charted only four years ago (in 2008) and, like Rwanda, they will plan new phases every 5 years. The first “new phase” due last year has been delayed, creating some concerns with investors. Kenya ICT Board’s CEO Paul Kukubo rightfully explained that "the deadline set had been crazy and too aggressive." In fact, the draft version of the second phase to be announced pushes for Kenya’s ICT industry to contribute an estimated $2 billion (25 percent of Kenya’s GDP) by 2017, in addition to the creation of a projected 500 ICT companies and 50,000 jobs. In other words, the ICT industry is expected to create about 1 company every two working days and 45 jobs every working day for the next 5 years: very aggressive numbers, indeed! Compare that with the more realistic targets (albeit for a smaller economy) of the third Rwandan plan after 10 years of preparation: 50 ICT companies operating in the Technopole by 2015, 50 ICT intellectual property registered annually by 2015, and the ICT sector contributing to 15% of the economy by 2015. That represents the creation of 10 companies per year over five years.
Looking at the structure of the plans, the Rwandan plan is structured in phases that are building upon each other, like the building of a house. First the foundation is laid by creating an enabling environment. Then building the infrastructure, and providing the framework on top of which services will be built. Formation of a knowledge economy will be the finishing of the project. The Kenyan ICT plan does not have a similarly progressive structure. Instead, it focuses mainly on economic pillars that are prioritized based on their ability to reduce cost, improve outcomes, add value to society and enhance citizen experience. One of the focus areas is the creation of local digital content for Africa. The Kenyan plan seems much more oriented towards practical applications of ICT and how ICT can be used to develop different sectors rather than oriented towards how the components must be built in order to be functional.
Comparing the content of the publicly available ICT plans, one must recognize that the Rwandan plan is more thoughtful and detailed. That country’s plan was developed by a task force of 22 representatives across different ministries who were supported by ten international consultants. The product appears much more professional and thoughtful than its Kenyan counterpart. For example, For example, the Kenyan plan scratches the surface of the ICT sector in two pages while the Rwandan plan delivers an in depth analysis of the sector, covered in 22 pages. Another example is the topic of security. In the Kenyan plan, the subject of security is mentioned somewhat superficially in only one paragraph not addressing solutions in detail. In comparison, the Rwandan plan provides more details about their plan to address security using proven processes outlined in a 4-page security section.
If you compare Kenya's approach to Rwanda's it seems to me that the latter is better positioned to reproduce the Silicon Valley phenomenon by addressing the priorities in the right order: ICT skills development first, buildings later. Instead of planning for a $10B city, Rwanda recruited Carnegie Mellon University to deliver graduate programs in Information Technology and Electrical and Computer Engineering in Kigali. Then Rwanda plans to construct an ICT Center of Excellence that integrates a new campus for CMU-Rwanda, an innovation incubator and a mobile technology research center. Their plan is to deliver the park infrastructure (not to build a city) and let investors and innovators decide when and what they want to build in that space.
Patiently producing the conditions and environment necessary for Kigali’s homegrown Silicon Valley, the capital’s ICT Park “phase-one” is developing in the Telecom House building in Kigali where CMU-Rwanda is located 3 floors below kLab, with 12 IT companies strewn amidst its 7 floors; some of these companies include Korean Telecom; BSC, which is managing the fiber optic network of Rwanda; and the National Data Center, located in the basement of the building. While you cannot compare this with Silicon Valley, it presents the same dynamic of close proximity between a world-class university, entrepreneurs and IT businesses. In comparison, the University of Nairobi is located at more than a one hour drive from the iHub and all the IT companies are dispersed throughout a city renowned for its terrible traffic jams. This is not a very conducive environment for people to meet and discuss ideas. That is probably why the plan is to build Konza Tech City 60 km outside of Nairobi. But that in turn creates other problems.
The squeaky wheel always gets the grease, an American saying goes. In other words, the louder you speak the more attention you’ll receive, regardless of whether you deserve it most. Recall the history of Microsoft and IBM: when the new entrants competed for PC operating system market share, IBM’s OS/2 was generally recognized as technically superior to Windows, yet it was Windows that won in the market. As IBM invested millions in the further development of OS/2, Microsoft invested in marketing Windows to PC vendors- and won.
So too is the case of Kenya and Rwanda. The latter offers an advantageous investment environment and is strategically better positioned than the former for the “innovation market.” Rwanda has an eight year lead in the execution of its ICT plan, while Kenya plays catch-up by unleashing aggressive media campaigns to brand the country as Africa’s ICT hub – and it works. But despite Rwanda’s attractiveness, the world simply doesn’t know about it. I cannot count the many investors I have met who were astonished by my description of Rwanda’s ICT situation, confessing that the country was not even on their short list of countries to investigate.
Thus it is Kenya – not Rwanda – that attracts international ICT investors through bold media campaigns. The identification of Kenya as the Silicon Savannah by many commentators comparing it to Silicon Valley is often based on their impression from visiting the iHub. While there is no question that innovative applications are coming out of these innovation centers, this is not to compare with what happened in Silicon Valley. Most of these apps are built with "a social impact in mind, but with little commercial potential", and as a consequence usually not sustainable. Calling one app companies real businesses is a bit of a stretch to say the least. Silicon Valley was built from enterprises with a real business plan, and a strategic vision for the industry. These companies like Intel, HP, and Apple were built by visionaries supported by teams of highly skilled engineers developing complex high tech solutions and building sustainable companies that have stand the test of time. This model is far from what can be found at iHub or other similar innovation centers. So it was a remarkable event that IBM recently opened its first African research lab in Nairobi. This is a clear shift from Kenya’s well-developed “resale market,” composed of ICT products developed outside of Africa, and into the “innovation market,” where appropriate products and services are developed from within to address challenges unique to Africa. Attracted by Kenya’s robust economy, it is unlikely that major ICT vendors like IBM, Google, Microsoft, Intel and others will invest in establishing sales offices in Rwanda’s comparatively constrained economy when it is more efficient to serve the country from Nairobi.
The question becomes: can an ICT ecosystem grow independently of the existing large IT companies from the world over? Doubtfully, if only because growth of these intricate, sophisticated systems requires access to global talent who are prepared to work on cutting-edge, high-tech innovations.
One of GoR’s first steps to address this problem is its partnership with CMU. However, GoR must better leverage CMU’s presence in the country (which is unique in Africa) to attract more ICT expert skills. What is needed for Rwanda is to clearly position itself in the “innovation market” rather than the resale market. Practically speaking, what Rwanda needs are not huge financial investments at this stage, but instead Rwanda must gain an influx of world class researchers, engineers and entrepreneurs who, together with CMU, will lift local skills to a competitive level and create a sustainable ICT ecosystem. And if these experts and entrepreneurs fail to come to Rwanda, then Rwanda must go to them and make its case.
The case of India highlights another- perhaps even more critical- issue that Rwanda must address: a stagnant private sector. The World Bank’s latest “ICT for Greater Development” report acknowledges that “the success of India‘s IT-based services industry is widely believed to have taken off in the absence of heavy government intervention, other than effective telecommunications and education policies and marketing for major Indian cities as investment destinations.” There is no question in my mind that the GoR has done its part to create a favorable environment. It is now time for the government to leave the space and encourage private initiative.
In the end, there should be only one winner, and that should be Africa. My sincere hope is for both Kenya and Rwanda to succeed. In the IT industry one speaks about “coopetition,” that is, a mindset that combines competition and cooperation. Before competing in a market, vendors need to cooperate to create that market. For Kenya and Rwanda the time is ripe for cooperation; their strategies are clearly complementary and together they can create a unique market for ICT sales and innovation development in East Africa, a region booming with technology opportunities.
Seeya later alligator...
I realize this a long posting. For those of you who would rather read it in print, send me an email at blogbezy at gmail dot com and I'll be glad to send you a PDF copy.
Thank you to Patrick Kabagema, Andrew Kinai, Bruce Krogh, Nic Pottier, and Ashlee Tuttleman for their constructive comments.
PS: Ghana just entered the race with a similar strategy than Kenya based on mega real estate projects probably financed by their new oil revenue.
APPENDIX AThe 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