Wednesday, February 1, 2017

Is Rwanda transforming its Technopole project into a large prairie?

In the late 1990s the government of Rwanda (GoR) recognized that ICTs could play an important role in accelerating the socio-economic development of the country and the creation of an information and knowledge economy.

In 2000, GOR established Vision 2020 a government development program in Rwanda, launched by president Paul Kagame in which it is said that the "government is actively trying to attract multinational corporations through investment-friendly policies to develop a Technopole".

In the National Industry Policy document published in April 2001 by the Ministry of Trade and Industry of GOR, one of the policy actions describes the need to "allocate land for industries, develop industrial parks and Special Economic Zones (SEZs)– leveraging Public-Private-Partnerships (PPPs) for development and management of SEZ such as ...Technopole (park for ICT, nanotechnology, etc)".

In january 2013, the government through Rwanda Development Board (RDB) announced plans to set up an ICT park that will host a collection of technological investments including training, industries, research and development.

According to Patrick Nyirishema, the Head of IT at RDB at the time, the plans to set up Kigali Technopole are on the right track. The Technopole will be built on the grounds of the Kigali SEZ, located 10 km east of Kigali City’s business district. The project plans reveal that the Innovation City will comprise all elements of a typical urban centre including corporate buildings, retail, leisure, sports, accommodation, health care center and other amenities with the regional ICT Center of Excellence (CoE) hosting Carnegie Mellon University (CMU) as its first anchor tenant. 

In September 2013, the masterplan for the development of a Technopole in Kigali is published together with a viability and business plan. The Technopole will provide much needed infrastructural improvements, including guaranteed electricity and ICT infrastructure for companies that will be located in the park. Therefore the Technopole is Rwanda’s best bet in fast-tracking the country’s ICT transformation as it has the potential to diversify jobs beyond agriculture, provide new middle-income jobs, drive the development of SMEs, and increase product and service innovation.

                                                             Technopole Master Plan

In May 2016, the government of Rwanda launched Kigali Innovation City (KIC replacing the name of Technopole), a flagship project to drive digital transformation through its dynamic ecosystem of technology clusters in which domestic and international companies will innovate and deliver products and services for global markets and with Carnegie Mellon University as its anchor tenant.

"Kigali Innovation City is the natural home where indigenous Rwandan technology companies can innovate and serve the whole market of the African continent. It is also the best home in Africa for multinational technology companies to domicile their subsidiaries, bring their technologies and skills, and conduct the innovation necessary to create optimized products and services for the African market. "

The concept of KIC is similar to Silicon Valley that was developed around the world class anchor Stanford University which became  the epicenter of technological innovation over the past half-century. Stanford's role as an incubator of technology is clear. In the last 50 years, university faculty, staff and graduates have launched some 1,200 companies. Today, more than 50 percent of Silicon Valley's product comes from companies of Stanford alumni.

While comparisons with Silicon Valley are always difficult, the KIC concept presents the same dynamic of close proximity between a world class university (CMU), entrepreneurs and IT businesses.

So far Rwanda's KIC plan made a lot of sense and was strategically better positioned than other projects in the region as I explained in this post. But while the vision was clear, besides many declarations of intention reported above and the development of its master plan, its execution has not delivered to its expectations. In the National Information and Communication Technology (ICT) Strategic Plan for the period 2011 – 2015 the target was 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. None of that happened.

The only real development has been the start of the construction of the ICT CoE, financed by the African Development Bank that will host Carnegie Mellon University to be completed by the end of 2017.
                                 The construction site of the Regional ICT CoE to host CMU

That the development of KIC did not follow the aggressive plan of the government is not surprising or unique for such an ambitious project and the vision is still strong. It is even getting stronger as I will explain later.

However, recently I was surprised by a presentation of a new plan for KIC presented by the KIC chief strategist to representatives of the President's Advisory Council visiting the ICT COE construction site. But before I get to this new plan, let me first cover some important and recent developments that took place in Rwanda.

Key to the success of the Technopole is the investment of private sector in the development and also the attraction of high level skills that would be needed for the development of the industry sector in the country.

Since the government of Rwanda signed an agreement for the development of the ICT CoE with CMU in 2011, the government has been very active and successful in attracting other major tertiary education and research institutions to Rwanda.

In 2014  Rwanda announced that it was set to host the region’s International Centre for Theoretical Physics (ICTP), a science hub that seeks to advance scientific education in the developing world. The Italy-based ICTP founded in 1964 by the late Nobel Laureate Abdus Salam, announced the opening of its branch campus in Rwanda, to operate as the East African regional base. 

In early 2016, at the Ministry of Education a partnership agreement was signed between the Government of Rwanda and the African Institute for Mathematical Sciences (AIMS) – Next Einstein Initiative (NEI). AIMS was established in 2003 in South Africa but at the invitation of President Paul Kagame, AIMS will join the science and innovation ecosystem that the government is building with the goal of being a continental hub in technology and will move their headquarters to Kigali.

The African Leadership University (ALU), a private learning institution was launched in Rwanda in September 2016. Students in ALU will have similar courses with those in Cambridge of Massachusetts in United States. It will start with the school of business and will soon house undergraduate offerings set to launch in 2017.

In addition, Rwanda was selected to host the Smart Africa Alliance secretariat having demonstrated commitment as a leader in information and communications technology promotion. Smart Africa headquarters opened in Kigali early 2016. Dr Toure, the former secretary-general of the International Telecommunications Union, was appointed as executive director. 

Rwanda can be proud of these accomplishments, creating an education and research hub with world class institutions in Kigali that should deliver the skills and expertise required for its Vision 2020 strategic plan to become a knowledge based economy. These new world class partners will at least triple the number of highly skilled students that will graduate each year in Rwanda. Adding to that the extraordinary effort by the GOR in Higher Education that has seen the number of students increased from 3,261 in 1994 to 87,013 in 2015, this is making the KIC strategy and project even stronger than it was at his inception, providing probably the best high level skills available in the region for future investors in KIC.

Let me now get back to the new plan presented by the chief strategist of KIC. The base idea of the plan is to install all the new education partners AIMS, ALU and ITCP in KIC where CMU was the first anchor tenant planned. That idea makes a lot of sense to create a critical mass of expertise and skills and to foster interaction and collaboration between those institutions in the spirit of a dynamic ecosystem that can nurture innovation and new businesses. 

So far so good, but the problem is in the execution plan.

KIC is a 61 ha (150 acres) site. A quarter of it (25% or 15 ha) has been dedicated to CMU and the ICT CoE as shown in the master plan. The rest of it (75% or 46 ha) was dedicated for the city including business offices, government buildings, shopping center, financial district, support services, green space, etc.

In the new plan presented by the chief strategist which I reproduce here as accurately as possible since we did not get a copy of it, the city has been reduced to less than 20% of the space while CMU, AIMS, ALU and ITCP would take 80%! So 80% of the space will be dedicated for higher education institution campuses where we can imagine their buildings being built in the middle of large green landscaping typical of university campuses, like a large prairie.

                                          New KIC plan presented in December 2016

It is difficult to understand the logic beyond that change if only to provide each institutions with similar space. The CMU academic building (shown above) covers less than 1 ha in a zone of 15 ha. The building is only representing Phase 1 of the project. Phase 2 will see the construction of a conference center, a student activity center with cafeteria and sports facilities, students lodging and visiting professor guest house. Even when Phase 2 will be completed, there will be lots of space left in the 15 ha zone. CMU presented RDB with the idea to offer that space left to the new institutions like AIMS and ALU. There is enough space for that. 

There a several advantages to that approach. First those institutions can share common facilities described in CMU Phase 2 above, i.e. activity center, students lodging, etc., thereby reducing the total cost. Second and probably more important is that this sharing will facilitate and encourage contacts and synergy between their students. It is this cohort of world class engineering, business school, mathematics and physics students that will be the new generation of innovators and leaders that will transform Africa. Third by concentrating all the universities in the space proposed for universities in the master plan, it leaves the original 75% of KIC available for the real objective of it, i.e. the development of an ICT industry and hub as originally planned.

I mentioned earlier that the KIC project did not achieve its goals yet, but I also said that there was nothing really abnormal about it. Indeed, I can imagine how difficult it has been for the RDB investment promotion services to convince businesses to come to KIC which has been a large maize field since the beginning of the project. 

But now that the anchor and flagship regional ICT CoE building is almost completed and that the base road infrastructure is being built, and that Rwanda was successful in attracting AIMS, ALU and ICTP in addition to CMU, the value proposition is much more attractive for those potential investors. 

I guess that what is left is the legal framework. The business plan issued with the master plan gives an overview of some of the incentives that could be offered at KIC: 
  • Corporate income of 20% after tax holiday of 10 years
  • Capital Gains Tax-Exempt to the SEZ enterprise 
  • Tax on Dividend- Exempt within SEZ  
  • ICT-Research, Innovation & Development (Including software development)
    • Allowable Expense– Double Tax Deduction. 
    • Effective 15% subsidy of actual expense taken off SEZ enterprise tax liability 
To my knowledge, I don't think that those have been approved yet by the GOR cabinet. If so, now is the time to get it done to complete the fantastic opportunity that KIC will offer to Rwandan, African and International IT investors. They understand that Africa is the next frontier and that ICT will be a key driver for its development. Unfortunately, often Rwanda was not on their radar map as a potential investment place for IT in Africa. KIC is changing that perspective now and it becomes probably one of the best opportunity for those who want to develop the African innovation market where new ICT solutions that are adapted to Africa's environment and needs will be developed by Africans for Africa.

Seeya later alligator....