ICT investment key to Kenya’s economic growth

Posted on November 16, 2014 12:20 pm

If Kenya wants to escape the middle-income trap, it should invest heavily in information technology and open the market for 4G operators although there have been reports that the country’s leading mobile network operator Safaricom already has one. Research shows that every 10 percent of improvement in Internet penetration can potentially add up to 1.5 percent to gross domestic product and every doubling of Internet speed adds another 1 percent to a country’s GDP. Unfortunately, few new investments are being made in Kenya as witnessed with the recent exit of Yu Mobile that left three players Airtel and Orange Telkom both of which are struggling. Part of the problem lies with the current infrastructure, which is dominated by incumbent Safaricom. Having invested heavily, it is natural that the company is keen to protect its market share. But this is holding back the country. Providing Internet access to all its citizens and businesses will help drive trade and promote innovation. In Kenya and East African countries, however, Internet access costs are among the highest in the world.

Nairobi Skyline(Photo by Duncan Edwards - Australian adventure)
Nairobi Skyline(Photo by Duncan Edwards – Australian adventure)

To join the ranks of advanced countries, Kenya should push for 4G connectivity, which is more efficient and effective, because better connectivity is the key to becoming a smart economy. Information and communications technology contributes 8 percent to Kenya’s $55 billion GDP, but only makes up less than 2 percent of Kenya’s GDP. Kenyan companies, as a result, do not use the Internet to innovate or promote trade and commerce with as much frequency or success as it should be. For Kenya to move up the economic value adding ladder the government must create the right regulatory environment and open up the market for new telecommunications and broadband players. It is a political decision for the government to make rather than a purely economic decision. At the heart of the issue is whether the current players are willing to bite the bullet and move on or, because of the interests of their shareholders, they hold the nation of 40 million back.

Contador Harrison