According to the government-funded Julisha survey released by the Kenya ICT Board and the ministry of Information and Communications last Tuesday, 23.9 per cent of local ICT companies have a presence in Uganda, while only 19.7 per cent and 14.1 per cent have invested in Ethiopia and Tanzania respectively.
The report covering the period between January and December 2011 says preference for Uganda in the region is informed by the stable investment environment in the country.
“While Uganda is a smaller market than both Ethiopia and Tanzania, more local players have invested there than in the other two countries. This is mainly due to the more relaxed investment environment in Uganda,” the research note prepared by the International Data Corporation says.
Nascent stage
South Sudan is a nation whose fledgling economy has become a major investment destination for Kenyan and regional ICT entrepreneurs, lured by lucrative opportunities in government business and non-governmental organisations.
“Southern Sudan has recently become a main focus area for local players despite the high risks of operating in that country and its high dependence on oil for foreign exchange. Some companies are willing to take risks, especially to pursue opportunities in government and with international non-governmental organisations,” the survey report says.
But complicated and prolonged local procurement procedures in government organisations have denied the players opportunities that would otherwise propel their growth.
“Business engagement with the government is a major problem area owing to protracted procurement cycles. These and cyclical spending with government are somewhat frustrating and need to be addressed in order to deliver value on both the demand and supply sides,” the study says.
Admitting that the current complex nature of government procurement procedures have kept local companies at bay, especially in bidding for public tenders, Information and Communication permanent secretary Bitange Ndemo said the process has to be improved to encourage the growth of local talent.
“One of the main improvement areas revolve around the procurement process and creation of more local jobs in the sector. We should align the systems to ease procurement procedures, but this will not be easy because we are likely to encounter a lot of resistance from some government departments,” Dr Ndemo said.
According to the report, inconsistency in import regulations and tariffs also continues to be hurdles for local startups.
The study blames these irregularities on a poor understanding of different ICT goods or poor definitions of the different classes of ICT products on the part of policy makers.
For instance, local software developers are currently grappling with a government decision in June last year to waiver import duty on all foreign software.
In his Budget statement last year, Finance minister Njeru Githae said the government had removed all import duty on genuine imported software thereby exposing local software developers to unfair competition from multinationals.
Efforts by the Communications ministry to have the Treasury reverse that decision have been futile with some local developers threatening to withdraw from the Kenyan market.
“We have tried to follow up, but there is no formal commitment by the Treasury to date to review that decision. Someone with selfish intentions must have ill-advised the minister,” Dr Ndemo said.
The Julisha report estimates that about half of Kenyan homes have access to the Internet, either through desktops, tablets, smartphones or laptops.
Despite the rapid growth in the smartphones market, 78 per cent of 17 million Internet users in the country still access it through desktops while 61 per cent use laptops. Those using smartphones are only 37 per cent while only 14 per cent use tablets.
A boom in growth is expected as the country with the devolved government, creating new business opportunities.
“Overall, the Kenyan ICT market continues to thrive. From 2013 onwards, the most notable issues will include the new government structure as county governments wean themselves away from national governments to become more autonomous creating more investment opportunities,” the study notes. -Daily Nation
