Source: Communications Commission of Kenya (2006) Key: NA – Not Available
The 2004/2005 tariffs (in KSh) for the three main telecommunications operators are shown in Tables 2 and 3. The current conversion rate is 1US$ = 72 KSh.
Table 2: ICT Pricing: Local Currency (Ksh.)
Source: CCK and individual operator web-sites Table 3: ICT Pricing - Local Currency (Kshs)
Source: CCK and individual operator web-sites Key:
National ICT Policy The Kenyan ICT policy remained in draft form for several years, largely because of a disjointed institutional framework for policy development, lack of a high-level ICT champion in government and lack of adequate and sustainable funding for ICT (Waema, 2005). Things began to move however after the Ministry of Information and Communications was created in mid-2004. This Ministry facilitated and led the organization of the first truly stakeholder-driven national ICT workshop held over a three day period (in June 2005). At the end of this workshop, a small group of participants was appointed to use the inputs from the stakeholders to create the final draft ICT policy. By August 2005, the Ministry of Information and Communications had prepared a cabinet memorandum on the draft ICT policy. This policy was discussed and approved by the cabinet in January 2006 and an ICT policy document published in March 2006. For the first time in more than two decades of failed attempts, Kenya had an official ICT policy (RIA, 2007). It was anticipated that the new policy would quickly be followed by an ICT master plan to implement the policy. However, just like the processes of developing the policy were long and drawn out, interviews with persons involved in creating the project to draw up implementation plans indicate that the process is going to take a long time. The main reasons for this are that the Ministry of Information and Communications does not have adequate capacity to lead the process, lacks funding and a committed champion, and the interests of the key stakeholders have started to become apparent, much like at the time of development of the ICT policy itself. For example, several private sector organizations have positioned themselves to influence the nature of the implementation plans to serve their own interests (RIA, 2007). A number of local institutions and groups have come to exert a significant influence on ICT policy and regulation. The more notable ones include the Telecommunications Services Providers Organization of Kenya (TESPOK), Kenya ICT Federation (KIF) and Kenya ICT Policy Action Network (KICTANET). TESPOK represents the telecommunications service providers in Kenya. For example, TESPOK lobbied government regarding the establishment of the Kenya Internet exchange Point (KIXP) and the liberalisation of very small aperture terminals (VSATs). It also encouraged the government to establish the Ministry of Information and Communications and helped to set up Internet exchange points in other regional countries (RIA, 2007). KIF is the umbrella body which brings together all private sector organizations with an interest in ICT. TESPOK and the Computer Society of Kenya are members of KIF, which vigorously lobbied the finalization of Kenya’s ICT Policy. KICTANET is a recently formed civil society organization that is a loose network of donors and NGOs. It collected comments from various parts of civil society in Kenya regarding the ICT policy and forwarded them to the Ministry of Information and Communication (MOIC). In general, three bodies, representing private sector, civil society and donors played a significant role in the development of the national ICT policy and also influenced regulatory reform (RIA, 2007).
Legal and Regulatory Framework Without a legal and regulatory framework ICT cannot fully take off. Hence, all the countries need to address this seriously and some of them have already started working on it. The Global Internet Policy Initiative (GIPI) organised a seminar in mid-2003 where the various benefits of legal and regulatory framework were documented at length. Nations around the worlds have moved from “benign neglect” of the internet to legislative and regulatory interest in promoting ICT development. By investing in modern technology and applying ICT tools to deliver services, India, for example, has given new impetus to economic growth. Some of the recommendations GIPI (2003) made were: for an open internet, necessity to work locally and develop consensus among stakeholders at the national level about the laws and regulations. What framework is required for the internet and ICT to flourish? All the regulatory and legislative process should be transparent, accessible by all the nationals and implemented without discrimination. Local barriers to ICT development and opportunities for reform should be considered. ISPs should have access to network facilities on the same terms Telecom provides their own ISP affiliates. Goods and services should be opened to foreign competition and there should be low trade barriers. Industries, governments and NGOs should encourage the creation of local language websites. Support should be given to the development of standards for browsers and other software that display local alphabets. Intellectual property should be protected adequately and in order to give profit to knowledge holders (Jain, 2006). Despite the vast amounts of literature devoted to the topic of this study, little is known about the precise causes of the great advances that have occurred in the field of ICT. At times, it seems that the evidence contradicts what theoretically must be happening, and this may be in part due to faulty regulatory infrastructures and policies. Regulatory infrastructures and policies rarely benefit from public interest, and because of this they do little to assist these developments. It is because Africa hardly produces its own policies and regulatory frameworks, African countries just adopt from the developed world. That does not fit in African context. More research is vital to base legal framework to address country-specific problems (Jain, 2006). The initiatives have already been taken by Research ICT Africa (RIA) (2004). This network seeks to fulfill a strategic gap in the development of a sustainable information society and knowledge economy on the African continent by building information communication technology (ICT) policy and regulatory research capacity in Africa needed to inform effective governance. It will generate the information and analysis needed to inform appropriate but visionary policy formulation and effective regulation of ICTs across Africa. It will embark on sustained and rigorous research to provide decision-makers with the data and analysis to make informed decisions in the public interest (RIA, 2004). Although efforts are being made in this direction, a lot still needs to be done in terms of adequate legal and regulatory framework in Africa, if Africa wants to use ICT as an empowering tool for its development. The Kenya Communications Act (No. 2 of 1998) provides the framework for regulating the communications sector in Kenya. Enacted by Parliament in 1998, the Act was a deliberate attempt by parliament to give legislative teeth to the Postal and Telecommunications Sector Policy Statement, which had been issued by the then Ministry of Transport and Communications in January 1997 and updated in 1999 and 2001. The said Act is clarified and expounded in the Kenya Communications Regulations 2001 (RIA, 2007). The most influential document regarding ICT legislation and regulation in Kenya is the 1998 Kenya Communications Act (KCA). The KCA, which repealed the Kenya Posts and Telecommunications Act, provides the current framework for regulating the communications sector in Kenya. The Act unbundled Kenya Post and Telecommunication into five separate entities including Telkom, the fixed line operator; the Postal Corporation of Kenya (Posta); the regulator, the Communications Commission of Kenya (CCK) as the sector regulator; and the National Communications Secretariat (NCS) to advise the government on the adoption of a communication policy. It also created an Appeals Tribunal for the purposes of arbitration in cases where disputes arise between parties under the KCA (RIA, 2007). As part of the post-exclusivity regulatory strategy, CCK issued a statement in September 2004 containing a new licensing framework. The general goal of this framework was “to ensure that the regulatory environment in the sector is friendly to investment and conducive to the provision of modern communication services” (Waema, 2004). The specific objectives of the new licensing framework were to ensure that Kenya has a more dynamic and competitive ICT environment, improved access to ICT infrastructure and services and choice in the provision of communication services to meet socio-economic needs of the society. Other than the Kenya Communications Act of 1998, two more pieces of legislation are pertinent in the ICT sector: the Science and Technology Act, Caption 250 of 1977 and the Kenya Broadcasting Corporation Act of 1988. As recognized in the new ICT policy, these Acts are inadequate in dealing with issues of convergence, electronic commerce and e-Government. There is thus a need for a comprehensive policy, legal and regulatory framework to:
Impact of ICT on Private Sector development with specific emphasis on SMEs and their contribution to Economic Growth The SME sector has an important role to play in the present and future economic development, poverty reduction and employment creation in developing economies (Hallberg, 2000). Stern (2002) stresses that the SME sector is the sector in which most of the world's poor people work. SME sector growth largely exceeds the average economic growth of national economies in many countries and contributes significantly to employment creation. Accordingly, governments and donors alike have recognised the important role of the SME sector for overall development. As a result, many government policies are geared towards supporting their growth through a variety of programmes that range from tax incentives to technical assistance; from regulatory provisions to policy interventions; training and other types of business development services (O'Shea & Stevens, 1998). Arising from this, one of the key issues is to identify the current information practices and needs, as well as the obstacles that SMEs face in their daily business activities, and to provide guidance in creating relevant policy initiatives that will lead to more economic growth and employment. The establishment of the link between ICTs and profitability and labour productivity creates another set of policy imperatives for governments across the continent. ICTs are only useful if they can easily be acquired and used. The key obstacle identified by SMEs towards greater possession and use of ICTs is their cost. The high cost of ICTs in Africa has been attributed to policy choices that have limited competition, and the absence of regulatory capacity to regulate abuse of market dominance in wholesale and retail pricing (Gillwald, 2005 and Gillwald & Esselaar, 2004). This requires greater regulatory capacity, something that is missing from nearly all countries. To illustrate this, most governments are exclusively focused on the direct contribution of ICTs towards the economy in terms of profits and staff complements of major telecommunications operators. However, as this report makes clear, it is the indirect contribution of ICTs towards economic growth that is truly transformative: “ICTs have the largest beneficial impact in conjunction with other changes, including a new set of ICT skills/training, structural changes within business models and the economy, and institutional and regulatory adjustments” (ITU, 2006). This means that ICTs have to be looked at from a perspective that considers all causes of economic growth and attempts to provide a catalytic environment that uses ICTs to generate economic growth rather than the ICT sector's specific contribution towards GDP.
Small and Medium Enterprises in Kenya The Sessional Paper No. 2 of 2005 defines the Small and Medium Enterprises (SMEs), which it refers to as Micro and Small Enterprises (MSEs) as all enterprises, both farming and non-farming, employing less than 50 persons. The annual economic surveys refer to the SME sector as the “informal” sector. The last SME baseline survey was carried out in Kenya in 1999. There are about 1.3 million micro and small enterprises in Kenya employing some 2.4 million people. Almost two-thirds of all SMEs are located in the rural areas. About 17% are found in Nairobi and Mombasa. Table 4 shows the location of these enterprises in the different strata to which the country has been divided. Nairobi and Mombasa account for 9.7% of the national population. Out of the total 1,289,012 SMEs in the country, Nairobi and Mombasa account for 204,280 of them; this is 15.8%. Compared to their population, Nairobi and Mombasa have a relatively high number of SMEs. Likewise, the rural areas contain over 80% of the total population and 65.6% of the SMEs. Thus, compared with the other strata, the major urban areas have a higher density of SMEs per given population. The average number of people working in each enterprise is 1.8. In Nairobi and Mombasa, the average is 2.0, and in the rural towns, it is 1.6 (National MSE Baseline Survey, 1999).
Table 4: Total Number of SMEs and Their Employment
Source: National SME Baseline Survey 1999 (CBS, K-Rep, ICEG)
Table 5 shows the percentage distribution of SMEs of different employment sizes. Nationally, about 70% of the SMEs are one person units, whether in the major urban towns or in the rural areas. The size distribution of SMEs among the different strata is very similar, except for rural SMEs in the 6-10 size group which is a higher proportion than the other strata. As already indicated, the average size of SMEs is about 1.8 regular employees. However, there are no SMEs in the size ranges above 15 people either in the small towns or in rural areas. Similarly, all the enterprises that employ more than 25 people are found in Nairobi and Mombasa (NSMEBS, 1999). Although a new baseline study is long overdue, comparing results of earlier baseline surveys from 1993 and 1995 with the baseline study of 1999 shows that the sector had experienced growth.
Table 5: Percentage Distribution of SME sizes
Source: National SME Baseline Survey 1999 (CBS, K-Rep, ICEG)
The distribution of persons engaged in SME sector activities by industry is given in Table 6 for 2000 to 2004. The wholesale and retail trade, hotels and restaurants industries accounted for the largest number of jobs, comprising about 58% of the total jobs. The manufacturing industry is second, accounting for an average of 22% of the total jobs in this sector. The two accounted for an average of about 80% of the jobs generated in the sector over the years (NSMEBS, 1999).
Table 6: Distribution of Persons engaged in SME Sector Activities by Industry (‘000s)
Source: Economic Survey 2005
The contribution of SMEs to both employment creation and to GDP is shown in Table 7. It shows that the SME sector has consistently contributed over 400,000 annually and contributes over 70% of the total employment in Kenya (with the last two years being over 75%). Although most figures are not available, the SME sector has a significant contribution to GDP (18.4% in 2002) (RIA, 2006). According to the Sessional Paper No. 2 of 2005, the overall goal of the Kenya SME policy framework is to develop a vibrant SME sector capable of promoting the creation of durable, decent and productive employment opportunities, stimulating economic growth, reducing economic disparities, strengthening linkages between firms, diversifying the domestic production structure and industrial base, leveling the playing field between SMEs and the larger enterprises, improving the SME sector funding and enhancing institutional collaboration and coordination of interventions in the sector (RIA, 2006).
Table 7: Contribution of SMEs to Employment Creation and GDP
Source: Economic Survey 2002, 2003 and 2004.
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