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WHITE PAPER
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An examination of Kenya's ongoing technology-powered transformation and push to
transition to a Knowledge Society and regional ICT powerhouse


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Table of Contents

In this White Paper .................................................................................................................................................... 2
Situation Overview .................................................................................................................................................... 2
A Brief Look Back: The Emergence of Kenya as an African ICT Hub ...................................................... 2
Kenya's Current ICT Landscape ......................................................................................................................... 5
Leading Kenya to the 'Tipping Point' ................................................................................................................ 6
Looking Ahead: ICT's role in the future of Kenya .............................................................................................. 8
E-Government Services ....................................................................................................................................... 8
ICT as a Driver of Industry ............................................................................................................................... 11
Developing ICT Businesses ............................................................................................................................... 15
IDC Essential Guidance ......................................................................................................................................... 18















Copyright Notice: This IDC research document was published as part of a continuous intelligence service, providing written
research, analyst interactions, telebriefings, and conferences. Visit www.idc.com to learn more about IDC services.
Copyright 2014. Reproduction is forbidden unless authorized. All rights reserved.


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In this White Paper
This IDC white paper, developed with the sponsorship of the ICT Authority of Kenya, describes
Kenyas emergence in the field of ICT and its plans for a future where technology plays a more
central role in the nations socio-economic development. It discusses the context and key drivers
behind the surge in Kenyas adoption of technology, the countrys current ICT landscape, and
relative ranking vis--vis other countries within key international benchmarking studies relevant to
the domain. Moreover, the report evaluates how ICT can potentially make a difference in the future
of Kenya across three areas: electronic government services, ICT-empowered industries and
businesses, and the ICT sector itself, prior to a discussion of IDCs essential guidance.
In putting together this document, IDC benefited greatly from discussions with officials at the
Kenya Ministry of Information and Communications. In addition, IDC would also like to thank
Esther Muchiri, Vincent Njoroge, and Jeremiah Okello for the detailed information and
perspectives they shared as contribution to the report.

Situation Overview
A Brief Look Back: The Emergence of Kenya in the ICT Map
Information and Communication Technologies (ICT) have assumed a highly strategic role in the
development of the Kenyan economy in the current millennium. Between the years 2000 and 2012,
the country's wider transport and communications sector, of which ICT is a part of, grew by a
Compounded Annual Growth Rate (CAGR) of 7.7 percent, outperforming all other sectors of the
national economy.
1
IDC estimates that ICT spending in Kenya covering the domains of
hardware, packaged software, and IT and telecommunication services has surged considerably
over the past five years, growing from 8.9% of gross domestic product (GDP) in 2006 to an
estimated 12.1% of GDP in 2013.
2


1
Kenyan National Bureau of Statistics, Quarterly Economic Performance Release
2
World Bank, GDP values in Current US$; IDC, 2014, Covers spending on hardware, packaged software, and IT
and telecommunications services as per IDC taxonomy.


3
F I GURE 1
Ken y a ' s I CT Spend i ng as a Pe r c ent age of GDP, 20 06 - 2 013

Source: IDC, World Bank, 2014
Calling the Kenyan experience an 'emerging technology revolution' would not be a gross
exaggeration. The enactment of the Kenya Communications Act in 1998, which introduced
competition in the mobile communications sector and liberalized the larger telecommunications
market, was the critical catalyst that triggered the countrys ICT development. In 1999, prior to the
issuance of the first two mobile licenses, there were only 15,000 mobile subscribers throughout the
country. Effectively, less than one in a thousand Kenyan adults had mobile phone service.
3

Market liberalization guided by effective regulation of the sector spurred on a cycle of greater
consumer demand and increased competition among service providers which manifested itself
through incremental network capacity and a decline in tariffs. An estimated US$4.24 billion was
invested into mobile services between 2001 and 2012.
4
The landing of four undersea fiber optic
cables (TEAMs and SEACOM in 2009, EASSy in 2010 and Lion-2 in 2012) brought an additional
8.56 terabytes per second capacity to the country, resulting in faster and cheaper connectivity rates.
5

In addition, Internet and data services providers allocated another $80 million to infrastructure
investments between 2005 and 2012. As a result, as of September 2013, there were 31.3 million
mobile subscribers in Kenya, equating to a mobile penetration rate of 76.9 percent. Approximately
19.1 million Kenyans now have access to the Internet, equating to a penetration rate of 47.1
percent.
6


3
Communications Commission of Kenya, Communications Statistics Report 2008
4
Communications Commission of Kenya, Quarterly Sector Statistical Reports
5
http://www.bizrika.com/news-item/planned-undersea-cable-to-double-kenyas-bandwidth-capacity
6
Communications Commission of Kenya, Quarterly Sector Statistical Reports
7.0%
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2006 2007 2008 2009 2010 2011 2012 2013
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T ABL E 1
Sel ec t I n di c at or s of Ken y a' s Mobi l e a nd I nt er net Ex p ans i on , 20 00 - 20 13
Key Indicators 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013**
Mobile
subscriptions
(millions)
0.11 0.59 0.90 1.60 2.55 4.61 6.48 9.30 12.93 17.36 20.12 25.28 29.70 31.30
Estimated
Internet users
(millions)
NA NA 0.20 0.40 1.00 1.05 2.77 2.87 3.04 3.65 7.83 12.54 14.03 19.10
Average mobile
tariff per minute
(KShs)
NA NA NA NA 29.50 24.20 26.10 21.60 15.50 12.10 10.30 3.30 3.50 NA
Annual mobile
investment
(KShs, billions)*
NA 11.85 19.17 23.66 28.92 38.67 44.60 21.22 29.44 40.26 27.13 34.59 33.83 NA
Annual
data/internet
investment
(KShs, billions)
NA NA NA NA NA 0.20 0.76 0.83 1.17 53.87 2.76 3.42 3.91 NA
Source: Kenya Ministry of Information Communications and Technology, Communications Commission of Kenya
Note: * Includes investments in Telkom's fixed network after 2008;** As of September 2013; NA = not available.

While a liberal regulatory environment, greater market competition, and infrastructural investments
created an environment conducive the growth of mobility and internet access in Kenya, various
other factors have also greatly influenced the uptake of ICT in the country, including:
Positive government intervention. The government's policies and actions of recent years have
helped the ICT sector thrive. Key interventions include the setting of lower mobile termination
rates and the issuance of unified telecommunications licenses, among others. In 2006, the
national government announced its Vision 2030 roadmap, a strategic blueprint for economic and
social development
covering the
period 2008 to
2030 which
positions ICT as a
key development
pillar. Various
other official
documents, from
the Jubilee
Government
Manifesto, to the Connected Kenya 2017 ICT Master Plan continue on the same vein by placing
great focus on leveraging ICT for national economic and social development. The government


5
itself has championed the implementation of innovative ICT ideas. Some novel government-
backed schemes include the Kenya Open Data Initiative to boost transparency; the Shirikiana
cloud enabled shared services initiative to pool common resources in the Public sector; the
Huduma Kenya effort to expand the reach of government services; and the Tandaa grants to
promote local digital content, among others.
The mobile money revolution. ICT has had a transformative impact on Kenya's financial
sector as evidenced by the continued growth of mobile money services in the country. Today,
Kenya has among the most successful and innovative mobile money services in the world. As of
2013, 31 percent of Kenya`s GDP is now transacted through M-pesa mobile telephone banking
by an active user base comprising 74 percent of the country's adult population.
7

ICT incubation. Incubation has been another key driver, nurturing ICT innovation and
creating an entrepreneurial mindset. In 2008, Ushahidi was born as one of the first ICT
incubators in the country. Its success blazed a trail for the establishment of other incubators like
iHub, Strathmore
University`s
@iLabAfrica,
Nailab, and m-lab.
Through its ICT
Incubation Program,
the Kenya ICT
Authority has also
supported ICT
incubation using a
private-public
partnership model to support startup companies become commercially successful.
Increased local footprint of multinational ICT firms Due to a greater focus on the African
continent, a number of multinational firms have set up shop in Kenya. In 2009, IBM opened its
East African headquarters in Nairobi to serve the growing demand for IT services in the region
(and recently expanded its presence by launching its first African research lab in the country).
8

Seeing the opportunity and potential of the market, other MNCs followed suit including Google,
Huawei, Nokia-Siemens, Samsung, Qualcomm, Microsoft and GE. Beyond their contributions
in the area of job creation and remittance of requisite taxes, ICT vendors' efforts to create
awareness about the importance of ICT via awareness campaigns and capacity building initiatives
are helping to underscore the importance of ICT at a grassroots level.
Kenya's Current ICT Landscape
In 2013, the ICT market in Kenya reached a value of US$5.16 billion, of which telecommunication
services accounted for 71.9 percent, hardware made up 22.3 percent, and IT services and software
represented 3.0 percent and 2.8 percent, respectively. Spending is expected to continue growing
over the forecast period to reach a value of US$5.86 billion in 2017. Albeit coming from relatively
small bases, growth will be boosted by strong IT services (17.2 percent CAGR) and software (16.1
percent CAGR) spending, while also seeing positive momentum from the much larger markets of
hardware (3.7 percent CAGR) and telecommunication services (1.7 percent CAGR).

7
http://www.gsma.com/mobilefordevelopment/mmu-releases-infographic-on-the-kenyan-experience-with-
mobile-money
8
http://www-03.ibm.com/press/us/en/pressrelease/38568.wss


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F I GURE 2
Ken y a I CT Spen di ng , 20 13 Ac t u al an d 20 14 - 17 Fo r ec as t ( i n US$ Mi l l i ons )

Source: IDC, 2014
Factors contributing to the ICT market's growth include the anticipated spending on technologies
arising out of various infrastructure projects such as the Konza Techno City, the new terminal at
Jomo Kenyatta International Airport, and the Lamu Port project. The construction of a fifth
undersea cable that would double the amount of current bandwidth in the country is currently in
progress
9
. The country is also currently extending and enhancing the redundancy of its National
Optic Fibre Backbone Infrastructure (NOFBI) network in order to expand fiber capacity to all
parts of the country.
10
Recent regulations introduced, such as the Central Bank's mandate for banks
to set up disaster recovery sites as a measure to improve security, will also contribute positively as
will projects receiving support from international agencies, such as the World Bank-funded
Integrated Financial Management Information System (IFMIS) or the USAID-sponsored
enhancements in health systems.
Leading Kenya to the 'Tipping Point'
A 2010 World Bank report on the Kenyan economy noted the rapid uptake and transformative
impacts of a surging ICT sector in the country, particularly in successfully extending a home-grown
platform for financial access to the wider public through mobile money. It also raised the possibility
that given the positive momentum created by market reforms and ICT adoption, Kenya could be on
a 'tipping point' towards a period of rapid sustained growth.
11
While Kenya has indeed made solid
progress in terms of its ICT uptake levels, IDC believes there remains much room for further

9
http://www.bizrika.com/news-item/planned-undersea-cable-to-double-kenyas-bandwidth-capacity
10
http://china.aiddata.org/projects/30384
11
World Bank, Kenya Economic Update December 2010, Issue Number 3; The concept of the 'tipping point' was
popularized by the author Malcolm Gladwell in reference to the moment upon which a phenomenon attains
sufficient critical mass after which it 'tips' into a period of exponential growth.
0
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2013 2014 2015 2016 2017
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Software IT services Hardware Telecom services


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improvement. As illustrated through the various global indices in Table 2 that benchmark national
innovation, ease of doing business, national competitiveness, and ICT development, Kenya has
attained a prominent position when viewed against other nations in Africa. However, further traction
must be gained for the country to figure as the foremost technology hub on the continent and
among the global leaders in ICT. And this is precisely the vision outlined by the Government of
Kenya in its 2013-17 National ICT Master Plan is to boost Kenyas position to that of a regional
ICT hub and a globally competitive digital economy.
T ABL E 2
Ken y a s Lat es t Rank i ng s on Va r i ous Gl obal I nd i c es
Index Description of Index Global
Rank
African
Rank
E-Government
Development Index
This Index measures the willingness and capacity of national administrations to use
ICT to deliver public services by assessing the scope and quality of online services,
development status of telecommunication infrastructure, and inherent human capital.
119th (out
of 189)
7th
The Networked
Readiness Index
This Index measures the propensity for countries to exploit the opportunities offered
by ICT. The index is comprised of three components: the ICT environment offered by
a given country, the readiness of key stakeholders to use ICT, and the current usage
of ICT.
92
nd
(out
of 144)
8th
Global Innovation
Index
This Index provides a ranking of world economies innovation capabilities and results
by utilizing metrics related to its innovation inputs and outputs.
99th (out
of 142)
9th
Global
Competitiveness
Index
This Index provides an assessment of national competitiveness benchmarked against
other countries worldwide. It measures the set of institutions, policies, and factors that
set the sustainable current and medium-term levels of economic prosperity.
96th (out
of 148)
10th
Knowledge
Economy Index
This Index represents a countrys overall preparedness to compete in the Knowledge
Economy. It is based on four pillars, namely the economic incentive and institutional
regime, innovation and technological adoption, education and training, and ICT
infrastructure.
111th (out
of 146)
11th
Ease of Doing
Business Index
This Index measures regulations directly affecting business within a country based
indices such as dealing with starting a business, obtaining construction permits,
getting electricity, registering property, getting credit, protecting investors, paying
taxes, trading across borders, enforcing contracts, and resolving insolvency.
129th (out
of 189)
13th
ICT Development
Index
This Index measures the digital divide and compares ICT performance across
countries. It is based on 11 ICT indicators, grouped in three clusters, namely ICT
access, use, and skills.
116th (out
of 157)
14th
Source: World Economic Forum and INSEAD, Global Information Technology Report 2013, World Economic Forum Global
Competitiveness Report 2013-14, United Nations E-Government Survey 2012, World Bank Knowledge for Development Program
2012, IFC and World Bank Doing Business report 2014, INSEAD, World Intellectual Property Organization and Cornell University,
The Global Innovation Index Report 2013, International Telecommunication Union Measuring the Information Society 2013



8
Looking Ahead: ICT's role in the future of
Kenya
For Kenya to achieve the full benefits of ICT, three focus areas have been identified as key strategic
pillars as part of its 2013-17 National ICT Master Plan. These three pillars are in-line with the
Vision 2030 roadmap to transform the country into a modern, globally competitive, middle income
nation offering a high quality of life for all citizens, as well as the Jubilee Government Manifestos
vision of leveraging ICTs to propel Kenya into Africas high-tech capital and create a Silicon
Savannah.
The first pillar of the ICT Master Plan covers the domain of e-Government services, by seeking to
ensure that the provision of e-Government information and services support national efforts to
improve productivity, efficiency, effectiveness and governance. The second pillar is ICT as a Driver
of Industry, which aims at transforming key economic sectors, and Small and Medium Enterprises
(SMEs),

in particular, through ICT in order to significantly enhance their productivity, global
competitiveness and growth; and the third pillar is Developing Kenyan ICT Businesses to deliver
exportable quality products and services that are comparable to the best in the world, which will in
turn help to develop a thriving local ICT sector.
Pillar One: E-Government Services
Rationale
Historically, governments globally have had processes characterized by asymmetric information,
meaning that information was not equally shared among all parties involved. Traditional government
enterprise architectures were typically designed around transaction-based models with usability as an
afterthought few if any government systems were designed with the concept that agencies would share
information with other agencies and citizens, or that citizens would select the services they want, when
they want, and through the channels they choose.
However over time many governments have increasingly focused on improving their service delivery
capabilities. The Government of Kenya, for instance, has gradually increased the efficacy of its
electronic government services vis--vis international and African peer nations by seeking out
opportunities to deliver more holistic, citizen-centric, transparent, and automated public services. Kenya
has nudged upwards in the United Nations Department of Economic and Social Affairs e-Government
Development Index, from a rank of 126
th
globally or 14
th
place among African nations in 2004, to 119
th

rank internationally or 7
th
place in Africa in 2012.
12
While the change in Kenyas international ranking
demonstrates that there has been some progress in its e-government development, it also signals wide
room for further improvement. Among the greatest obstacles impeding development of the strategic
pillar in Kenya include low automation levels of operational processes within the government, the

12
United Nations Department of Economic and Social Affairs, 2005 and 2012 Global E-Government Survey


9
existence of departmental silos, and disparate non-standardized data formats that make information
difficult to access.
Key Priorities of the Strategic Pillar
ICT can serve as a
cornerstone in the
governments effort to
improve public sector
transparency and
efficiency, cut
bureaucratic red tape,
and better engage with
citizens. Given its key
role in the economy, introducing such incremental efficiencies to the Kenyan government sector will not
only positively impact its internal operations, but the lives of citizens and the productivity of the
countrys private and non-commercial sector as well. This sentiment is affirmed by the Jubilee
Government Manifesto: We understand that ICTs do not operate in a silo. The adoption of ICT across
all our policy positions is critical if we are to meaningfully utilize ICT in the way we do business.
13

The pillar e-government services aims to attain three key goals by the year 2017, namely:
increasing public value of e-Government services with 50 percent of adults accessing at least one e-
service; 80 percent of users indicating they are very satisfied with the quality of government
electronic services; and improving the e-Government Development Index and Ease of Doing
Business ranking internationally to below 90 and 100, respectively, by 2017. A three-pronged
strategy to attain the aforementioned objectives is outlined in Table 3 below:
T ABL E 3
St r at egi c Ai ms f o r t he e- Go v e r nme nt Ser v i c es Pi l l ar
Strategic Aims Detailed Actions
Simplify and automate integrated
end-to-end e-Government
processes.
Develop a one-stop non-stop service model, re-engineering required processes, leading
to the creation of citizen, business, and investor portals; End-to-end automation of three
widely-used services, the universal single registration system, company registry system,
and national land information management system and associated Huduma services
Leverage e-Government services
to help boost growth of the
private sector
Create a pro-business environment and boost the growth of the private sector, especially
the ICT industry, through partnerships in innovative projects and seamless e-Government
services
Promote e-Government as the
service channel of choice
Improve the effective delivery of Government services by adopting IT enabled services
(ITES) customer support perspective to support e-service delivery
Source: ICT Authority Kenya, ICT Master Plan Taskforce Report, 2014

13
Jubilee Government Manifesto, Transforming Kenya Securing Kenyas Prosperity (2013-2017)


10
A Glimpse of the Future
Looking into the future, the success and further expansion of its one-stop, non-stop service model
will have allowed the Kenyan government to create a platform for greater inter- and intra-agency
cooperation in order to provide high-quality electronic services. Government entities will be able to
capture and make relevant adjustments to service features based on the inputs of employees who
directly serve citizens as well as the feedback of citizens themselves, and therefore become more
citizen-centric organizations.
The government as a whole will also begin to become more forward looking by beginning to
emulate private-sector best practices, such as deploying knowledge management solutions to
capture resident knowledge and share citizen needs, requests, and information with key agency
service providers, deploying business process management to automate processes, defining and
applying uniform service standards across all contact centers (i.e., wait times and claim-processing
times), then providing this information to the public and proactively communicate current
performance levels against established standards. At this stage, the majority of information will be
shared electronically among Kenyan government entities, increasing the efficiency and the quality
of services.
All of Kenyas government entities will be able to offer multichannel choices of communication
and deploy innovative tools and practices that make it easier for the public to engage with
government and each other. Citizens who are disseminating government information online
through Web 2.0 technologies can count on government to respond to requests with agility,
accuracy, and consistency.
Internationally, the Government of the Emirate of Dubai can be considered as a good example for
Kenya to follow in this domain. Dubai has taken great strides to consolidate and align assets across
government entities and private suppliers in order to deliver enhanced citizen services. Some of the
'connected government' initiatives already in place within Dubai include a Government Information
Network to exchange secure information among entities, a unified Government Resources Planning
System (GRPS) to centrally coordinate internal operations, and a roster of shared services for electronic
payments (ePay), electronic surveys (eSurvey), multi-channel contact (AskDubai), mobile messaging
(mDubai), cross-government information exchange (SYNC), a unified government services repository
(GESS), and hosting portal services (eHost).
The Emirate of Dubai also recently disclosed that 38 percent of all its government services are now
accessed and fulfilled exclusively via the online channel. Equally important is that over 90 percent of
users of e-Government services have indicated being satisfied with these, which is a positive sign for the
future. To demonstrate its commitment to providing government services across a wide choice of access
channels, all government entities in the Emirate will provide their services via mobile phones, text
messaging, and other portable devices by 2015.
14


14
Department of Dubai Smart Government, 2014


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Pillar Two: ICT as a Driver of Industry
Rationale
SMEs, defined as formal and informal commercial entities having between 11 to 99 employees and
an annual turnover between KShs. 500 thousand to 800 million
15
, have been identified as a high
priority enterprise segment that can drive the achievement of Kenyas Vision 2030. In Kenya,
SMEs comprise about 75 percent of all businesses, employ approximately 4.6 million people (30
percent of the working population), account for 87 percent of new jobs created, and contribute to
18.4 percent of the GDP.
16
However these organizations currently face binding challenges that
make it difficult for them to realize their full potential. These include limited market access and
poor access to information, finances and technology, among others. The current GDP of Kenya is
in excess of US$ 40 billion, which could go even higher if SMEs relative level of contribution to
the economy is amplified by breaking down their major barriers to doing business. Making SMEs
across key strategic sectors an integral part of the economy can help spur Kenyas socioeconomic
development.
Figure 3 illustrates this point by examining the business performance variance within US-based
industries. From the 1960-80s, the inter-quartile range for enterprise gross profit margin (i.e. the
difference in the gross profit margin between firms at the 75th percentile and firms at the 25th
percentile) held steady at about 20 percentage points. However, starting in the mid-1990s the gap in
business performance between ICT-usage leaders and laggards in the United States started to increase
substantially, and by 2006 stood at nearly 35 percentage points.
17

These results are consistent with the idea that the cluster of innovations arising from ICT developments
starting in the mid-1990s provided forward-looking firms a competitive advantage over others via
adoption of ICTs.

15
Definition is as per the countrys Micro, Small, and Medium Enterprise (MSME) Bill of 2009.
16
Kiveu, M. and Ofafa, G. (2013). Enhancing market access in Kenyan SMEs using ICT. Global Business and
Economics Research Journal, 2(9): 29-46.
17
Brynjolfsson, Erik. "ICT, innovation and the e-economy" European Investment Bank Papers, Volume 16 -
Number 2 (2011) 68. http://www.eib.org/attachments/efs/eibpapers/eibpapers_2011_v16_n02_en.pdf


12
F I GURE 3
I nt e r - qu ar t i l e Ra nge i n Gr os s Pr of i t Ma r gi n i n US I ndus t r i es , 1 962 - 2005

Source: European Investment Bank, 2011

Kenyan SMEs have demonstrated that they have the ability to adopt various technologies that have
a compelling cost-to-value proposition. For instance, today more than 95 percent of SMEs in the
country already own mobile phones.
18
. While SMEs may use ICT for communication, social
networking and general information acquisition, there seems to be lack of awareness of the range of
opportunities that ICT offers. At the economic base of the pyramid, for instance, few SMEs are
currently exploiting their mobile phones full potential by using applications (with the exception of
M-PESA). This is due to a lack of awareness/marketing campaigns, confusion about the difference
between applications, phone functionalities, and Internet, and challenges in the use of
applications.
19

Greater ICT adoption by SMEs across a wide range of industry sectors can support the effort to
economically empower these organizations by opening a myriad of opportunities, such as gaining
wider access to local, regional and global markets, improving communications with prospects and
customers, allowing for better competitive positioning, streamlining logistics, improving knowledge
on production of quality products, and reducing market research and networking costs, among
others.
Key Priorities of the Strategic Pillar
The aim of boosting ICT utilization levels across a number of key sectors, and for SMEs in
particular, will be supportive of the Vision 2030 goal to develop Kenya into a regional technology
hub, and foster a domestic ICT sector with a larger contribution to GDP. The pillar ICT as a
Driver of Industry looks to stimulate evolution in the sectors via several flagstone projects
presented in Table 4 on the succeeding page:

18
Ibid.
19
World Bank working paper, Mobile usage at the base of the pyramid in Kenya,
http://documents.worldbank.org/curated/en/2012/12/18806923/mobile-usage-base-pyramid-kenya


13
T ABL E 4
Pr i o r i t y Sec t or s and Fl a gs hi p Pr oj ec t s f o r I CT as I n dus t r y Dr i v er Pi l l ar
Sector Flagship Projects
Health An integrated national health system that will integrate the various systems that
are developed and implemented in the health sector, including the physician
management system, drug supply chain system, and hospital management
system.
A central health data repository shared by all health institutions, as well as a
health e-portal that will provide services and summary statistics to relevant and
authorized stakeholders.
Education The on-going school laptop project to provide teaching and learning tools for
pupils entering standard one in primary schools beginning in 2014. It is envisioned
that this project must include a review of the existing school curricula, conversion
of courseware into digital form, ICT training for teachers, and broadband internet
connectivity to the schools.
Automation of academic and administrative processes at all levels of education in
order to have all education information online. This will include an education e-
portal that provides services and summary statistics to the public.
Security An integrated security, intelligence and surveillance system project will be
implemented. Central to the effort will be a personal information data hub, a cross-
agency database and master data platform, data warehouse, crime analytics, and
profiling platform, as well as broadband connectivity in police stations. The system
will provide law enforcement with real-time data on incidences and suspects.
Agriculture A National Agriculture Commodity Exchange will be implemented to facilitate
commodities trading by providing reliable, timely and accurate marketing
information and intelligence to farmers and other stakeholders via mobile phones
and other end-user devices and enable farmers sell produce via the exchange.
An electronic animal monitoring system that is able to track livestock ownership
for security reasons and feeding practices will be implemented. This will provide
end-to-end data of farm animal produce.
Financial Services A national payment gateway project will be implemented to facilitate secure online
payments by supporting multiple financial institutions to carry out electronic
transactions and simplify the processing of payments.
Trade, Transport, and Logistics A Single window system to facilitate cross border trade through the submission of
regulatory documents such as custom declarations, applications for import/export
permits, certificates of origin, trading invoices, etc on a single entry screen.
National physical addressing system will provide street addressing, numbering
and coding of all properties to facilitate logistics-based economic activities.
Transport integrated management system (TIMS), which includes the automation
of key processes in the transport industry, including driver testing, PSV/TLB
licensing, traffic violations and prosecutions, motor vehicle inspection, etc.
Source: ICT Authority Kenya, ICT Master Plan Taskforce Report, 2014


14
A Glimpse of the
Future
The 2013 World
Economic Forum
report asserts that
digitization has a
measurable effect on a
nations economic
growth and job creation. It further suggests that emerging markets would be able to translate a
comprehensive digital boost into helping lift over half a billion people out of poverty over the next
decade. Accordingly, there is a great opportunity for Kenyan SMEs in the various sectors identified
under this strategic pillar to embrace digitization.
While the majority of sector-wide processes in the country may still not be digitized, the groundwork
being laid via the relevant flagship projects will help SMEs mature in their thinking about the value of
ICT. For instance, the ICT skills capacity-building effort being exerted as part of the school laptop
project will lead to future entrepreneurs and business owners who are more IT savvy; the National
Agriculture Commodity Exchange should lead to farmers and agricultural traders who are more
successful in their businesses; a single window cross-border trading system should lead to exporters who
are able to more seamlessly conduct their business operations, etc.
Ultimately, successful initiatives will enter a positive feedback loop, generating buzz, interest, and
utilization among local businesses. As a result, SMEs will push (or themselves innovate and invest) so
that once segregated island systems are fully interconnected, further expanded, and harmonized with
each other. New ICT systems will then be developed to account for unmet or entirely new
requirements, fulfilling the goal of transforming Kenya into a regional technology hub, and fostering a
domestic ICT sector that makes a larger contribution to GDP than at present.
Improving the ICT capabilities of SMEs is a key strategic imperative for many other governments
internationally. Among them, the Hong Kong government supports the adoption of ICT among SMEs
through the Office of the Government Chief Information Officers (OGCIO's) Sector-specific Program
(SSP) and IT Training Program for SMEs (ITTP). Since 2004, the government programs have
supported 24 projects in 17 business sectors benefiting over 17,000 practitioners from SMEs. These
projects mostly focus on IT skills training, as well as development of websites and software applications.
A new SSP was launched in 2013, setting aside US$3 million for sponsoring projects that develop
applications and solutions for individual SME sectors. Two portals, InfoCloud and InfoSec were
launched which provide SMEs with information on cloud computing and IT security, including user
guides and best practices.
20



20
Office of the Government Chief Information Officer, Hong Kong Special Administrative Region


15
Pillar Three: Developing ICT Businesses
Rationale
By identifying the development of a globally competitive domestic ICT industry as a strategic pillar of its
National ICT Master Plan, Kenya recognizes that a thriving domestic ICT sector can deliver
commensurate value-add to the local economy. Research by the Organization for Economic Co-
operation and Development (OECD) confirms the ICT has contributed in the range of 7 to 9 percent
contribution of total value-added in the business sector in OECD countries. Interestingly, the rate of
ICTs value add has remained relatively stable over time, exhibiting a CAGR of 0.7% between the years
of 1995 to 2009.
21
This potential level of economic contribution highlights the importance of developing
the ICT sector.
F I GURE 4
I CT Sec t or Val ue - added as a Subs et of Bus i n es s - Val ue - a dded , 199 5 - 2 009

Source: OECD, 2011
A recent study focusing on the Internet Economy by McKinsey Global Institute rates Kenya as a leader
in Africa along with Senegal in terms of the relative economic contribution of the Internet as measured
by its iGDP (or the Internets relative contribution to the overall economy as a share of total GDP). It
totals all the activities linked to the creation and use of Internet networks and services in four major
categories: private consumption, public expenditure, private investment, and trade balance. The report
notes Kenyas iGDP is dominated by private consumption, while the largest component of Moroccos
iGDP is a trade surplus resulting from its business process outsourcing (BPO) industry
22
, highlighting
the need for Kenya to grow a more diverse ICT sector. The opportunity for Kenya lies both in ICT
related innovations that create a new market where one did not previously exist, as well as in leveraging
ICT solutions to deliver productivity and efficiency enhancements to all sectors of the economy.

21
OECD Internet Economy Outlook, 2012
22
McKinsey Global Institute, Lions go digital: The Internets transformative potential in Africa , 2013
http://www.mckinsey.com/insights/high_tech_telecoms_internet/lions_go_digital_the_internets_transformative
_potential_in_africa


16
Key Priorities of the Strategic Pillar
The following outcomes are expected by 2017 within this strategic pillar: the creation of at least 180
thousand jobs alongside the establishment of 55 ICT entities, at least 10 successfully commercialized
application innovations and domestic retention of at least 60 percent of revenues raised from ICT
intellectual property, an increase in the countrys Networked Readiness Index and Global Innovation
Index ranking by 15 points, the classification of ICT as an independent sector by 2016, an additional 2
percent value-added contribution to GDP by 2017, and wide recognition of Kenya as a regional ICT
Hub. A robust action plan is needed to transform the vision of a globally competitive domestic ICT
industry into reality. The objectives and actions outlined to achieve this are presented in Table 5 below:
T ABL E 5
St r at egi c Ai ms f o r t he De v el opi ng Ken y a n I CT Bus i n es s es Pi l l ar
Strategic Aims Detailed Actions
Work with the relevant State
Departments to promote ICT
innovations and their
commercialization
Establish innovation centers of excellence (CoEs) and science and technology (S&T)
parks for R&D for developing ICT applications and services.
Promote technology innovation through Government
Create programs to support commercialization of innovations
Promote commercialization of Government ICT services.
Promote Intellectual Property Rights (IPR) to safeguard innovations
Grow the number of IT Enabled
services (ITES) companies and
the range of services provided
Promote outsourcing of Government ICT operations
Encourage local firms to outsource
Develop the ITES industry to go international
Integrate ITES into all national policies and develop industry ITES standards to create
depth in understanding of ITES to ensure growth of the industry
Grow and monitor the local ICT
industry
Develop standards and guidelines for software and hardware manufacturing that are
internationally recognized and accepted as best practices
Support Kenyan ICT companies through local procurement and export promotion
frameworks
Form effective partnerships to create an excellent growth environment for local ICT
companies.
Provide incentives to promote digital local content development
Categorize ICT as a stand-alone sector with its own classification standards
Facilitate data collection on ICT as an economic sector by relevant Government
departments and agencies
Source: ICT Authority Kenya, ICT Master Plan Taskforce Report, 2014




17
A Glimpse of the Future
Given successful attainment of its strategic aims, Kenya will be able to develop a more vibrant multi-
sectoral and self-integrated ICT business ecosystem that drives economic growth in traditional
economic sectors as well as create new intellectual property. Konza will provide a model of an industrial
park, which will be emulated at various levels of scale in the counties. Other Innovation Parks or
Technology Clusters will also begin to spring around universities and cities, attracted by incentives like
tax breaks and subsidized office space, thereby bringing employment and kick-starting innovation and
entrepreneurship.
Home grown ICT businesses out of the innovation centers of excellence (CoEs) and science and
technology (S&T) parks will be able to leverage their detailed knowledge of local requirements to
develop solutions for key domestic industries such as Agriculture, Transportation, Water, and
Healthcare, which if successful, could then be marketed internationally with government export
promotion frameworks and private investor support. The significant prioritization of outsourcing of
government ICT operations will act as a incentive for new firm establishment and employment.
Ultimately, having a successful and growing ICT sector will provides employment for competent
graduates of technology programs.
Beyond amalgamating solutions developed internationally, Kenyas ICT innovations will utilize locally
developed software and hardware components. Examples of hardware designed in Kenya-for Kenya
already exist, such as BRCK, the cloud managed wireless router and backup battery device designed by
the Ushahidi team. In addition, software companies in the incubation labs and elsewhere are already
building business applications like Peach CRM, Kopo Kopo and Tangaza payment platforms, and
Virtual Citys Agro Manager and Supply Chain solutions. Promoting and incentivizing such innovations
will benefit not just the ICT Sector but become engines of growth for the wider economy.
Internationally, South Korea is an exceptional case of a nation utilizing ICT to help propel it from one
of the poorest countries to a technology superpower. In 1962, devastated by civil war, Korea had merely
US$ 87 of Gross National Income per capita, equivalent to that of Ghana at that time. With the ICT
industry reaching a ratio of 135.5 percent of GDP in 2012, the country is now a world leader in
hardware manufacturing, particularly semi-conductors, mobile phones, and televisions, as well as in the
online game industry. Among the key factors behind Koreas success in the ICT sector is the robust
support of its national government, which remains active throughout the effort of planning and
implementing national projects. The South Korean government has effectively used various policy tools,
ranging from master plans, regulations, and creating funds as supporter or enabler of the ICT
development. The government also gives significant importance to R&D, and heavily funds and
partners projects in domains such as electronic information (semiconductors, etc.), information and
communication media (information home appliances, etc.), next generation communication networks
(mobile, etc.), software and computing (knowledge information protection, etc.), knowledge service
(ubiquitous sensor networks, etc.), and industry convergence technologies.
23


23
South Korean Ministry of Science, ICT, and Future Planning, 2013 Annual Report on the Promotion of the
Korean ICT Industry


18
IDC Essential Guidance
This white paper has presented several compelling examples of how ICTs can make a difference to a
countrys socio-economic realities. Clearly, there are gains to be had by Kenya taking advantage of its
positive momentum in adopting ICTs to transform itself into a knowledge society and figure among the
foremost technology hubs on the continent. IDC provides the following three areas of essential
guidance that we believe will have strong bearing on Kenyas ability to successfully actualize on its
potential.
The first is to the need to ensure all key ICT industry stakeholders, across the private, public, not-
for-profit, and academic sectors do their fair share to promote a comprehensive digital boost in
the country. ICTs are firmly entrenched within the national agenda. The alignment of the National
ICT Master Plan with the Kenya Vision 2030 sets a clear roadmap for creating a digital ecosystem.
Success will now be determined on the degree to which parties can align themselves, work with each
other, and execute against the plan. In the end, even the best vision statements and action plans will not
help unless there is a concerted effort by all key parties towards their attainment.
The second is the requirement
to stay on top of rapidly
evolving ICT developments
in order to understand how
Kenya can continue to play
a role. The sector is
experiencing many disruptive
changes. In particular, the
degree of innovation,
convergence, and the use of
new types of technology services models globally are accelerating. The key will be for Kenya to be able
to consider these market changes, reflect, and react, with the mindset of targeting a shift to ever-higher
value national technology capacity. A key part of this is institutionalizing the recognition, support, and
reward of ICT innovations.
The third is the need for the government to be vigilant in monitoring and taking expedient action
to ensure that the Kenyan ICT ecosystem remains primed for growth. Be it in the area of
financing critical infrastructure, attracting foreign investments, establishing Public-Private
partnerships, legislating ICT-sector friendly laws and regulations, negotiating international treaties
and conventions, skills capacity building efforts, employment creation, or Research & Development
funding and incentives, the government must effectively manage the various levers that will
stimulate the sectors healthy development.


19

This publication was produced by IDC
Government Insights in April 2014.