Innovation sparks ICT growth

Kenya looks to be on the verge of becoming the Silicon Valley of Africa. The growth of internet and mobile technology use here, as well as innovative – and accessible – new products and a massive new technology park in the offing, are just some of the elements shaping East Africa’s new ICT hub.

Internet usage in Kenya has grown significantly and is the highest in the region, rising steadily from an estimated 1.65 million users in 2004 to 6.78 million last year. Sophia Bekele, founder and executive director of DotConnectAfrica, a public-private partnership coordinating an initiative to unite Africa’s internet presence through the .africa domain, says, “At the moment the internet naming is mainly .com,.org or similar. The Internet Corporation for Assigned Names and Numbers (ICANN) plans to expand this to cover a much wider range of domains allowing more specific identification.

“.africa  is about bringing Africans together under one identity. This really resonates with Africans because they feel a deep connection to the continent.”

The rise in internet users has been particularly spurred by the introduction of data-enabled smartphones with internet access and Kenya has been the launch pad for pioneering mobile software that brings a raft of new possibilities, such as Craft Silicon’s recently developed Elma platform. Pitched as a lifestyle product, Elma enables users to carry out financial and non-financial transactions using their mobile phones more economically than other products currently available on the market.

Craft Silicon is one of the clearest examples of Kenyan technological innovation. Based in Nairobi and celebrating its tenth anniversary this year, the Kenyan company is a trailblazer in internet banking software, providing solutions for core banking, microfinance and electronic and mobile payments in almost 40 countries across four continents. It is also one of the largest software providers on the African continent. More than 80 per cent of software exported from Kenya comes from Craft Silicon. It currently generates between $5 million and $7 million annually. CEO Kamal Budhabhatti says that the company has grown alongside Kenya’s ICT sector and although it may have grown faster in a more developed economy, emerging markets offer a unique opportunity that he hopes will see the financial solution provider generating up to $700 million in annual revenues and employing 1,800 people by 2020.

Mr Budhabhatti feels their Elma product is set to play a significant role in Craft Silicon’s future growth. Kenya now has the largest mobile money platform in the world. An estimated 15 million mobile phone users were using mobile money by the end of 2010 – the equivalent of three out of every four adult Kenyans.

“Innovation is the backbone of this business. If we are not innovative, we will be out of business. For a company that has established itself in an emerging market, it is very difficult to compete with the big boys in developed economies. The only advantage is that we have a unique set of challenges in emerging markets and we must find ways of solving them. Solutions to problems in emerging economies should emanate from the emerging markets as there is a better understanding of the challenges,” comments Mr Budhabhatti. 

‘INNOVATION IS THE BACKBONE OF THIS BUSINESS. SOLUTIONS IN EMERGING ECONOMIES SHOULD EMANATE FROM THE EMERGING MARKETS AS THERE IS A BETTER UNDERSTANDING OF THE CHALLENGES’ KAMAL BUDHABHATTI CEO of Craft Silicon

Kenya’s eagerness to deploy cutting-edge IT comes from the drive to expand access to technology and spur socio-economic growth. “Those that actually need the internet the most are the very poor people," says Dr Bitange Ndemo, Permanent Secretary at the Ministry of Information and Communication. He says that the Government should step in and make ICT infrastructure an open-access platform, similar to the road network, adding, “This is the only way prices will come down.”

Last year the Communications Commission of Kenya (CCK), the independent telecom regulatory authority, reduced the licence fee for third-generation (3G) mobile internet services by 60 per cent to £6.2 million to raise penetration and announced that it would not charge for an upgrade to 4G. It also cut mobile phone interconnection fees in August by 50 per cent to encourage telecom companies to lower the cost of calls for end-users.

Kenya is a vast country and telecoms have helped to bridge distances between rural and urban areas. Charles J K Njoroge, director general and CEO of the CCK, says, “Today, people do not have to travel long distances to deliver messages, pay school fees or to pay farm workers. They can use services provided by mobile operators.”

However, Craft Silicon’s Elma platform is not the only contender in the mobile money market. It faces stiff competition from other players such as M-Pesa from Safaricom, Airtel money, Orange money and Yu cash.

Safaricom’s CEO Bob Collymore believes necessity lies behind many of the industry’s innovations. “When we developed M-Pesa we did not develop it as a fancy banking solution which would make profits quickly; rather we developed it as something we thought ordinary Kenyans needed and would make a difference, as they did not have means of transferring money efficiently,” he says. “Innovation stems from need, so do not believe for a second that an iPad is an innovation; it is a toy.”

In addition to the fast-growing market of telebanking, Kenya also aims to become a major hub for business process outsourcing (BPO). At least six Asian, American and European firms have expressed interest in competing for contracts to build Kenya's dream ICT park on a 5,000-acre site 40 miles south of Nairobi. A city built specifically for technology firms, the £6.2-billion Malili Konza Technopolis is expected to create 80,000 new jobs in its first four years. It will host BPO ventures, a science park, a convention centre, shopping malls, hotels, international schools and health facilities.