infodev east africa ict review

8/3/2019 InfoDev East Africa ICT Review

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Table o contents ..................... ........................ ....................... ................... i

Foreword .................... ........................ ....................... ........................ ........... iii

Acknowledgements ....................... ........................ ....................... ........... iv

Executive summary .................... ........................ ....................... ............... 1

Abbreviations and acronyms ...................... ....................... ................... 3

Approach .................... ........................ ....................... ........................ ........... 5

Project scope ...................... ....................... ........................ ................... 5

Methodology ..................... ........................ ....................... ................... 5

The market ..................... ........................ ....................... ........................ ....... 7

Economic overview o the region ...................... ........................ ... 7

Mapping the ICT sector in East Arica ...................... ................... 7

Opportunities or ICT SMEs in East Arica ....................... ........... 10

Challenges or ICT SMEs in East Arica ..................... ................... 11

Existing interventions ........................ ........................ ....................... ....... 13

Donor-supported interventions............................. ....................... 13

Private sector driven interventions ....................... ....................... 15

Government interventions ....................... ....................... ............... 16

Proposed interventions..................... ........................ ....................... ....... 19

Overview...................... ........................ ....................... ........................ ... 19

Program concept ...................... ........................ ....................... ........... 19

Program component 1: develop a ully connected network 20

Program component 2: launch skills 2.0 ..................... ............... 23

Program component 3: support innovators ...................... ....... 26

Program component 4: enable job creators ...................... ....... 28

Program component 5: upgrade the business environment 29

Business engine coordinating oce .................... ....................... 31

Overall group-level risks and mitigation steps ..................... ... 31

Conclusion ..................... ........................ ....................... ........................ ....... 33

Appendix .................... ........................ ....................... ........................ ........... 34

Feedback session summaries ....................... ....................... ........... 35

Feedback session attendees ..................... ....................... ............... 35

Potential partner list ........................ ....................... ........................ ... 36

Expert interview list ..................... ........................ ....................... ....... 37

Citations ...................... ........................ ....................... ........................ ........... 38

Table o Contents


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The inormation and communications technology (ICT) sector has been the major driver oeconomic growth in East Arica over the last decade, growing on average by as much as 40%.

To date, growth has largely come rom innovation by large multinational and local enterprises.Small and medium-sized enterprises (SMEs) are poised to play a bigger role in the next phaseo industry growth. However, they ace a multitude o system-wide challenges that must beovercome in order or them to succeed. To understand the interventions required, a consortium

comprising InoDev, UKaid and Hivos unded a detailed, on-the-ground study o the ICTSME landscape in East Arica. This study was perormed by the Excelsior Firm, a US and Aricabased advisory rm that engaged over 100 policy makers, investors, academics, donors andentrepreneurs. The ndings suggest that the vision o a robust and dynamic ICT sector driven bySMEs that create jobs and world-class innovation is possible, and the likelihood o this outcomecan be improved with a ew targeted interventions. The ve proposed interventions consist othe development o a ully connected SME network, lling the skills gap in advanced business

and technical knowledge, providing start up and early stage unding or companies, enablingjob creation or knowledge workers and upgrading the business environment. Together, theseinterventions orm the components o a potential East Arican ICT Business Engine that couldboost perormance, not only within the ICT sector, but also continue to drive the economicdevelopment o the region.


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This report was prepared by a team rom The Excelsior Firm led by

Javier Ewing and consisting o Ory Okolloh and Lauren Rawlings. TheExcelsior Firm would like to express its appreciation to the numerous

individuals and organizations that contributed to this eort. Inparticular we would like to extend special thanks to the HonorableBitange Ndemo, Permanent Secretary, Ministry o Inormation and

Communication, Kenya, Dr. Ham Mulira, Presidential Advisor on ICT,Uganda, Mr. Paul Kukubo, CEO, Kenya ICT Board, Ms. Edith Adera,

International Center or Development Research, Proessor RajeevAggarwal o the Kigali Institute o Technology, Ms. Patricia Mwangi

o Financial Sector Deepening-Tanzania, and Mr. Theophilus Mlaki,Director o Inormation at the Tanzania Commission or Science and

Technology (COSTECH), Jessica Colaco and the rest o the iHub team,

Rakesh Rajani, Lorna Fernandes and their colleagues at Twaweza,and Daniel Stern, Barbara Birungi, and the Hive Colab team.

O course, this work would not have been possible without thesupport and input rom the sponsoring consortium o Hivos,inoDev, and UKaid. Our ndings were greatly enhanced by input

and eedback rom Ben White at Hivos; Seth Ayers, Tim Kelly,and Paul Scott at inoDev; and Victor Gathara and Mark Povey at

UKaid.

We would also like to sincerely thank the more than 100entrepreneurs, ICT proessionals, academics and experts who

participated in interviews, workshops and numerous discussionsover the past 3 months. We appreciate their dedication to the

advancement o the ICT sector in East Arica and their invaluablecontributions to this report.

We hope that the ndings and recommendations rom this report

will be used to support urther development o this sector that is avital part o the uture economic development o East Arica.

Acknowledgements

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Over the past decade the Inormation and Communications

Technology (ICT) sector has been among the major drivers oeconomic growth or Sub-Saharan Arica. This sector has witnessed

an annual compounded growth rate o 40% within the last veyears, the astest globally. In Kenya, or example, the ICT and mobilesectors have outperormed all other segments o the economy,

growing on average by over 20% annually over the last 10 years. Itis no surprise then that the ICT sector in Arica continues to garner

close attention as a potential driver o undamental change withinthe continent. Within the sector, mobile telephony dominates, ar

outstripping any other mode o connectivity excluding, perhaps,radio, and newspapers. On the other hand, Arica has the lowestcomputer and Internet usage rates o any region, with only 10%

o the continents population having access to the Internet suggesting a reservoir o untapped market potential.

East Arica is a region that has globally recognized success inbuilding technology-based local enterprises and developing world-class innovation. Saaricom, a Kenyan company, has seen the market

penetration o its M-Pesa money transer product grow to over 15

million users within 3 years o launch. Mobile service penetration inEast Arica is as much as 5 times higher than Internet penetration,such that many applications that are available over the Internet in

other parts o the world are available via mobile networks. This istrue in spite o the limited computing and transmission capacity. Thelaunch o three underwater cables in the region is only expected to

enhance the availability o bandwidth and decrease prices, thoughprogress has been somewhat slower than expected. Aside rom

mobile telephony, other emerging areas o interest and investmentinclude technology inrastructure and broadband, sotware

development, local content development, and BPO centers.

Much o progress in the ICT sector in East Arica has been driven

by larger corporations due to scale requirements that necessitatesignicant upront capital expenditure. While this is laudable, thegrowth o a viable SME segment is undamental to the long-term

sustainability o the ICT sector and or addressing areas o unmetneed that may not be lucrative enough or larger corporations.

SMEs in the ICT sector, however, ace a set o daunting challenges

including access to business and technical skills, access to regionaland global markets and limited early stage nancing. In addition,these organizations must deal with a complex and immature

regulatory environment. Despite these challenges, it is evidentthat SMEs stand to contribute to several new segments o growth

or example value-added locally relevant content, as well as

sotware and mobile applications. The private sector, donors andgovernments have all instituted several initiatives to address theneeds highlighted above. For example, the private sector has

partnered with universities in the region to enhance skill-buildingor entrepreneurs. Donors on the other hand, are channeling theirsupport towards networking havens such as iHub in Nairobi which

is unded in part by Hivos, and the inoDev-supported MobileMonday or East Arica. Finally, governments are also making

signicant contributions in the development o the sector. TheRwanda government has ocused on streamlining the business

Executive summary


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registration process, or example, while Kenyas ICT Boardhas oered grants to SMEs to develop innovative content.

Given the current state o the EAC ICT landscape and the

challenges acing SMEs, what interventions are necessaryto strengthen the emerging SME sector and boost their

participation in economic development?

To address this question, inoDev, Hivos and UKaidcommissioned an intensive study o SMEs within the

East Arican ICT sector. The work was conducted by theExcelsior Firm, a US and Arica based advisory group.

Rigorous in its approach, the study centered on directand primary participation o over 100 entrepreneurs,

policy makers, donors, investors, and experts in order tounderstand the interventions and partnerships requiredto create a avorable environment or SME growth.

The results o this study show that ve key interventionsare required in order to enable SMEs overcome the

challenges they ace. These interventions include thedevelopment o a ully connected SME network, lling the

skills gap in advanced business and technical knowledge,providing early stage unding to companies, enabling

job creation or knowledge workers and upgrading the

business environment. Together these interventionsorm the components o a potential East Arican ICT

Business Engine that, i diligently implemented, couldboost perormance within the ICT sector and support the

economic development o the region. While ocused onEast Arica, the lessons elicited are applicable to otherdeveloping regions globally.

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BPO Business Process Outsourcing

CAGR Compounded Annual Growth Average

CCK Communication Commission o Kenya

EAC East Arican Community

EBITDA Earnings beore Interest, Tax, Depreciation, andAmortization

GDP Gross Domestic Product

GNI Gross National Income

ICT Inormation and Communication Technology

ICT4D ICT For Development

IP Intellectual Property

ISP Internet Solution Providers

IT Inormation Technology

ITU international Telecommunications Union

KICTB Kenya ICT Board

KIST Kigali Institute o Science and Technology

PPP Public-Private Partnerships

SIDA Swedish International Development Agency

SME Small and Medium Enterprises

SSA Sub-Saharan Arica

US United States

USD United States Dollar

WB World Bank

Abbreviations and

acronyms


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PROJECT SCOPE

InoDev, UKaid, and Hivos commissioned this project to understandthe needs o micro, small, and medium sized enterprises in the East

Arican ICT sector. For the purposes o this project, the East Aricancountries included in the study were Kenya, Rwanda, Tanzania, and

Uganda. The ocus or this project was SMEs as or-prot or non-

prot organizations with less than 50 employees and not exceedingUSD 1,000,000 in annual revenues/turnover.

The intention was to identiy high impact, sustainable interventionsto support growth and innovation in the SME sector that help

uel broader economic growth and development. The project wasthereore designed to achieve three objectives:

Describe the contours o the East Arican ICT market (size, dy-

namics, players and trends)

Understand the challenges and critical success actors or ICTSMEs rom the perspective o the regions entrepreneurs and

policymakers

Integrate eedback rom local stakeholders into a set o SMEsupport interventions that will enable donors, governments and

the private sector contribute to the transormation o the EastArican ICT landscape.

The main output o this project was a proposed program o

interventions to drive transormational change. To succeed inthis ambitious endeavor, the project articulated clear objectives

and designed a blueprint or implementation including levels oresourcing, budget and monitoring metrics.

METHODOLOGY

How this study diers in its approach

There are two primary ways in which this project diers rom many

o the previous eorts that have considered the SME landscape inthe EAC ICT sector.

First, the sponsor or this venture was a consortium comprised o

three o the leading donor organizations in East Arica inoDev,Hivos and UKaid. To the best o our knowledge, this is the rst

collaborative donor-led eort in this area and this combined ocushas led to several breakthrough insights.

Second, while the project team conducted secondary research

and analyzed existing data, the main ocus o consisted o onthe ground primary research in each o the countries o ocus

Kenya, Tanzania, Uganda and Rwanda. During a 3 month period,the consultants conducted surveys, interviewed stakeholders and

conducted workshops with over 100 proessionals in the ICT sector.The team also interviewed local policymakers, investors, and expertsor perspectives on the market and how to improve it.

What did we do?

The team held two rounds o workshops to solicit eedback romentrepreneurs in each o the our countries, understand their

Approach


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ICT experience

Years

3-5

6-10

11-20

NA

0-2

+21

Software

Network

ContentMobile

Nontechnical

Hardware

Data centers

Security

BPO/contact

6-10

11-25

26-50

50+

NA

1

2-5

Exhibit 1: Profile of the ICT SME participants in East Africa

Rwanda

Uganda

Tanzania

Kenya

Survey participants

Number

Type of ICT services provided

Number

Company size

Number of employees

perceptions o the market, as well as their challenges.Based on this input as well as desk based research,

the team developed a set o potential interventions thatwere validated and prioritized in a second round o

eedback sessions with entrepreneurs and other majorstakeholders.

Whom did we speak to?

Over the course o the project the team conducted brie

surveys with over 90 entrepreneurs, over 50% o who had3-10 years o experience in the ICT sector and primarily

worked at companies with 5 employees or less. Themajority o participants had sotware, network, content

development, and mobile experience. In addition to thesurvey and workshops conducted, the Excelsior Firm alsointerviewed over 20 ICT and SME experts in the region

and worldwide.

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ECONOMIC OVERVIEW OF THE REGION

GDP, GNI per capita, income and literacy

Together, Kenya, Rwanda, Tanzania, and Uganda have a population

o more than 120 million people and GDP nearing USD 70 billion.However, the combined GDP o these East Arican countries is

much smaller than that o Arican giants like South Arica (USD 275billion) and Nigeria (USD 200 billion)4. The industrial developmentthe entire East Region remains heavily dependent on agriculture,

but other key industries such as services, manuacturing andICT have seen recent increases in economic importance. Kenya,

which accounts or 32% o the regions population, is the majoreconomic powerhouse in East Arica accounting or more than43% o the regions GDP and also possesses a higher GNI per

capita and adult literacy rate than its neighbors. Ater a decline in2008, the modest recovery o Kenyas GDP growth in 2009 can

largely be attributed to strong growth in services and constructionat 62% and 13% contribution to GDP overall. In act Kenya was

one o the ew countries in the world where GDP grew more in

2009 than 2008. The Kenyan ICT Board is committed to urthereconomic growth and specically in driving the ICT contribution to

GDP rom 3% to more than 10% over the next three (3) years6. TheTanzanian economy is dominated by the agricultural sector at 27%

o GDP. Nearly 80% o the workorce is continues to be employedby this sector. Relative to Kenya the services sector in Tanzania

contributes a smaller portion o GDP at 50%. However, like Kenya,the Tanzanian government has been looking or ways to diversiyaway rom agriculture and into services. Ugandas economy is

balanced between agriculture (23%), services (50%) and industry(23%). Rwanda on the other hand remains a primarily subsistence

based economy with agriculture still accounting or over 40% oGDP. Rwandas services sector contributes 42% o GDP, the lowest

percentage in East Arica, among the our countries we examinedin this project4.

MAPPING THE ICT SECTOR IN EAST AFRICA

Sub-Saharan telecommunications sector growing at 40% CAGR

Overall the telecommunications market in Arica has witnessed

tremendous growth in the last decade. According to McKinsey& Company estimates, the overall telecommunications sector in

Arica has experienced explosive growth since 2003, with industryrevenues growing at a 40% CAGR rom 2003-2008. The industryhas also seen the overall telecom subscriber base reach over 400

million in 2009 and likely exceed hal a billion by 20111,5.

The major driver o this growth has been mobile telephony. TheUNs International Telecommunication Union (ITU) estimated

that there were 4.6 billion mobile phone subscriptions globally bythe end o 2009, o which around 250 million subscribers are in

Arica. In act, according to ITU estimates, the Arican continenthas the highest annual growth rate in mobile subscribers. East

Arica in particular is estimated to have almost 50 million mobilesubscribers resulting in a mobile penetration o about 40% o the

total population5.

The Market


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8

Mobile subscribers 2009

Millions

Tanzania

Kenya

Rwanda

Uganda

Exhibit 3: Mobile subscribers in East Africa

Kenya

Rwanda

Uganda

Tanzania

Rwanda

Uganda

Tanzania

Kenya

Exhibit 2: Selected World Bank Statistics for East Africa

GDP USD

Billions

Population

Millions

GNI per capita

USD

Adult literacy rate

Percent


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While the growth o mobile subscriptions is welldocumented, specic data or the ICT sector is less readily

available. Experts estimate that given the underlying useo mobile phone inrastructure or ICT within East Arica,

the levels o growth seen in mobile subscriptions, mirrorthe growth o the entire ICT sector. This growth hasmaniested itsel in the creation o new jobs, with World

Bank Kenya Economic Update putting the estimates atover 70,000 new ICT jobs in Kenya alone over the past

ve years2.

Large corporations are major drivers o ICT growth

Much o the progress in the ICT market in East Arica to

date has been driven by the large corporations. This ismainly due to the large-scale requirements that requiresignicant upront capital expenditure. Most o the related

business technology services such as data storage, cloudcomputing and sotware development are all dominated

by large oreign entities. As in other developing markets

like India, the growth o a viable SME segment will beundamental to the long-term sustainability o the ICTsector since SMEs are likely candidates or innovativesolutions to address unmet needs within the ICT market.

Quantiying the number o ICT SMEs

Through our surveys, interviews and secondary researchwe attempted to determine the number o SMEs and ICT

specic SMEs in Arica. What became apparent relativelyearly in the process was the limited sources o inormation

or the number o SMEs either within a specic countryor across the region. While the stated estimates varied

widely, our research rom expert interviews and sourcessuch as the Kenya ICT Board, show that there are

approximately 3,000 - 5,000 ICT SMEs in East Arica today.Kenya alone or example, has least 1,000 - 2,000 ICT SMEsas o 20106. Going orward there is a need or such data to

be tracked and monitored more closely.

Mobile technology outstrips other modes o connectiv-

ity

Due to very low xed-line penetration (estimated ataround 3 lines per 100 inhabitants), Arica has the

lowest computer and Internet usage rates o any region.However, the high mobile cellular penetration relativeto xed line subscriptions combine to make Arica the

region with the highest ratio o mobile cellular to Internetusers in the world5.

While the mobile market is ar rom saturated, East Arica

overall has 40% o the population subscribed to mobiletelephones, while the rest o the world is at 67%. The

annual growth rate has been high in all o the East Aricancountries studied. From 2003-2008, growth was between

50-70% or each country in the region, with Tanzania inthe lead at 68% annual growth5.

This dierence between xed line and mobile penetration

is urther corroborated in recent survey data. The latestTNS Digital Lie Kenya Survey shows that 60% o Kenyans

Exhibit 4: Mobile, Internet, and fixed broadband subscription

penetration

Rwanda 24

Kenya 49

Sub-Saharan

Africa38

World 67

Tanzania 40

29Uganda

Mobile cellular

penetration

Percent

Internet users

Per 100 inhabitants

Fixed broadband

subscriptions

Per 100 inhabitants

10.0

1.6

3.0

10.0

9.0

26.0

0.02

0.08

0

7.00

0.10

0.02


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access the Internet through mobile devices, whilecomputer usage was below 40%, whether at home, work,

or an Internet ca8. Furthermore, many applicationsavailable over the Internet in other parts o the world are

available in East Arica via mobile networks.

High mobile usage rates have spawned a number o

remarkable success stories o local innovation within themobile telephony and data services sectors7. In Kenya, orexample, Saaricom has seen the market penetration o its

M-Pesa money transer product grow signicantly since itwas launched. The company has a total o approximately15 million subscribers today. Out o necessity, mobile

application development has become a very active areao development and has become very sophisticated.

This is evidenced by Virtual City, a Kenyan company thatwon the top prize o USD $1 million at Nokias Growth

Economy Venture Challenge. Nonetheless, East Aricastill suers rom a dearth o ICT developers with thenecessary skills and resources to convert a good idea or

application into a winning business model. Additionally,the requirements o the ormal business sector oten

require more computing and transmission capacity thanis available using mobile devices and networks. This is an

area o untapped potential or local companies, as oreigncompanies currently dominate these services.

Inrastructure investment

Common to all countries in East Arica is the massive

investment undertaken by both the governmentand private sector in technology inrastructure, rom

the landing o the underwater cables in 2009 to lastmile initiatives or broadband access. According to

Inormation and Communication or Development2009 report, every 10 percentage point increase inbroadband penetration corresponds to a 1.2 percentage

point increase in economic growth9. This realizationhas ueled government and donor-driven activity,

as communications inrastructure investments areundamental to the growth o the economy as a whole.

OPPORTUNITIES FOR ICT SMES IN EASTAFRICA

Based on interviews and market research, we uncovered

several high potential areas within the ICT sector that aresuitable or SMEs participation. These include:

1. Design and user interace development:

As more people in the region access applications oncomputers and smart phones, well designed websites

with intuitive user-riendly interaces will become in-

creasingly important, particularly as they drive tra-c and encourage the use o e-commerce. Examples

o companies already oering these services includePamoja Media and Digital Squad in Kenya and Design

Kingdom in Uganda.

2. Remote delivery o services (education and health-

care):

There is a growing shit rom building simpler ap-

plications aimed at social networking to those thatuse technology in sectors such as education and

healthcare the so-called ICT4D applications. Exam-ples include Applab in Uganda which has deployed

applications to rural areas, ocused on weather andagricultural services. Many such applications aim toexpand the benets o ICT use beyond urban sectors

and into rural areas.

3. Linking mobile payment solutions to commerce:

There is increased demand to link mobile paymentsystems like M-Pesa with online based e-commerceand trading platorms. E-commerce websites such as

Amazon, iTunes, Facebook (Facebook Credits), andGoogle Checkout are dicult to use in East Arica

due to the lack o integration between desktop andmobile platorms. As a result, there are opportunitiesor e-commerce and commercial application devel-

opment. Pesapal in Kenya is one company in Kenyaattempting to bridge this divide.

4. Content generation:

As use o the Internet matures in East Arica, content

generation will become more important. Severalcompanies have emerged in this area, especially re-lated to search products. These include Google Bara-za, Eatout.com, and e-government sites like that o

the Kenyan government.

5. Sotware development:

While established companies like Microsot and SAP

dominate the sotware development market, thereis demand or cheaper products and products that

specically address local needs, such as applicationsin local languages. For example, Crat Silicon is oneo the largest local sotware companies in East Arica,

ocusing on nancial services or local use. SMS Me-dia in Uganda is another example o a vendor dier-

entiating itsel with local language content.

Opportunities in BPO and contact centers

Conditions may now be ripe or the BPO and contact


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12

Exhibit 5: Highlighted country strengths and challenges

Uganda

Kenya

Rwanda

Tanzania

Strengths

Strong physical space and

network capabilityGovernment involvement through

ICT Board

Best-in-Africa business set-up

process

Highly engaged government

support for ICT

Educational anchor through KIST

Upcoming infoDev supported

incubator

Emerging grassrootsentrepreneur network

Wide set of active business

networks and associations

Areas for improvement

Few trusted networks and mentorship

Finance for seed stage entrepreneurs

Onerous regulatory regime

Focus on BPO and contract services

Access to markets for local SMEs

Limited trusted networks and mentorship

Community for entrepreneurs

Technical skills and practical experience

gapLimited market and investment funding

Lack of incubation facilities for early

stage companies

Limited hands on government

involvement


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Several interventions already exist to support East Arican SMEs aswell as companies within the technology sector. However, very ew

o these interventions are specic to SMEs in the ICT sector.

We segmented the currently available interventions in three areas.

Donor-supported interventions

Private sector driven interventions

Government initiatives

DONOR-SUPPORTED INTERVENTIONS

Overview

To date, the donor community has supported several eorts ocusedon building the skills and networks required or successul ICT

entrepreneurship. The current need is on how to expand the impactto a broader set o enterprises. The interventions have been ar less

successul on improving access to nance, particularly or start-up and early stage enterprises. Furthermore, coordination between

local government and donors has been could be improved.

Donor supported interventions: what is working?

Access to technical skills

Donor-sponsored interventions have been successul in supportingcompetitions aimed at spurring innovation in the technology sector

including among SMEs. These are typically run in conjunction withprivate sector companies. Examples include the Apps or Aricacontest; the G-20 SME nance challenge; the Enablis sponsored

Chora Bizna competition; and the Tandaa local digital contentcompetition sponsored by the Kenya ICT Board. There is also a

ocus on education and training including eorts by groups like the

Dutch organization Butteryworks, which provides digital designtraining or underprivileged youth in Nairobi and the RockeellerFoundation support o the E-Health Center o Excellence at KIST.

Access to business skills

Donor-sponsored initiatives have also been successul in helping

trainees develop practical business skills. Nairobits and the CreativeEnterprise Project are two noted examples. A ocus area has been on

enabling the broad set o SMEs (not necessarily technology ocusedSMEs). Examples include the IFC SME toolkit available online and

the Enablis Entrepreneurial Network unded by CIDA with memberentrepreneurs in Kenya, Tanzania and Rwanda.

Access to business networksDonors have successully sponsored business networking events and

procured physical spaces that connect entrepreneurs and investorsin local markets. Examples include iHub in Nairobi, supported by

Omidyar Network and Hivos; naiLab in Nairobi, supported by The1% Club; and the Hive Colan in Kampala, supported by Apprica.

Donors are also supporting networking opportunities through eventslike Mobile Monday unded by InoDev.

Existing

interventions


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Access to customers and markets

Donors have increased their eorts to enable SMEaccess to markets by opening up access to procurementprocesses. Examples o such interventions include the

recently announced Sub-Contracting and PartnershipCenter in Uganda (SPX) which is unded by the United

Nations Industrial Development Organization (UNIDO).This eort seeks to provide SMEs with access to supply

chains currently dominated by larger companies. TheBandwidth Capacity Support Project unded by theInternational Development Association (IDA) is designed

to help BPO companies meet the cost o internet access.Finally, the Creative Enterprise Project, a partnership

between the British Council and the StrathmoreUniversity Enterprise Development Center in Kenya,

ocuses on training and mentoring entrepreneurs in thecreative arts.

However, many entrepreneurs bemoan the onerous

tender requirements or government and donor-undedprojects and lack o readily available inormation on

how to compete successully. Additionally, there is aperception among SMEs that the procurement processunairly avors oreign rms.

Donor supported interventions: what is not working?

Access to nance

The most commonly cited gap is the limited access to

nance at the seed stage (USD 25,000 to USD 100,000).Most donor-supported SME unding is either at the microlevel or driven towards more established technology

companies, or example, Crat Silicon, unded byFanisi Capital. The most prominent unds with donorcommunity involvement tend to invest in mature

companies. Examples o these donor-related unds areAureos Capital (initially unded by Norund); East Arica

Capital Partners (US OPIC); Fanisi Capital (Norund, IFC,Finund and others). The IFCs Grassroots Business Fund

is one o the ew interventions that appear to targetmore early-level businesses, although with a minimuminvestment o USD 250,000, the target range is still north

o the needs o many SMEs in East Arica. This unding gapor SMEs makes it dicult or them to grow into larger

enterprises.

Furthermore, when suitable unds are available to SMEs,application numbers are requently low. This is in part

due to lack o inormation, but also because o onerous

Table 1: Existing interventions donor-sponsored

What is working? Implications

Access to

business skills

Creating training programs

that help trainees develop

practical skills

Build a similar set of skills in

Rwanda and Tanzania

Access to busi-

ness networks

Sponsoring networking events

and providing physical spaces to

connect entrepreneurs

Create steering committee of

ICT thought leaders to ensure

sustainability

Access to cus-

tomers/markets

Increased efforts to open up

access to procurement processes

Increased lobbying for specific

set asides for SMEs and

process help

Mobile apps developed; shift

focus to extend to other areas,

e.g., content development

Helping entrepreneurs identify

people with technical skills

needed to start a company

Access to

technical skills

Strong

inter-

ventions

Donors not keen to partner with

governments due to lack of trust

in execution capabilities

Coordination be-

tween donors and

local govern-ments

Access tofinance

Limited access to financing at theseed stage and a complicated

application process

Address the limited availability ofseed-stage funding and

streamline application process

Better approach required to

avoid disparate outcomes

Inter-

ventions

requiringenhance-

ment

What is not working? Implications


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application processes that are oten too challengingor local companies. For example, some interviewees

indicated that they had ound The World Bank broadbandsubsidy application process time-consuming and overly

intrusive, and had not applied as a result.

Coordination between local government and donors

A regular rerain rom government and policy-makers isthat donors plans are not coordinated closely enough

with existing government plans, leading to disparateoutcomes in spite o shared goals. While there are oten

justiable reasons or this approach, such as slower andeven corrupt bureaucratic processes, a smarter approach

is required in order to coordinate eorts between donorsand local governments, at the minimum to ensure theplans arent working against each other.

PRIVATE SECTOR DRIVEN INTERVENTIONS

Overview

Corporations such as Saaricom, IBM, Nokia and Googleare regularly in the news supporting new initiatives aimed

at SMEs. To date, these private sector interventions havebeen most successul in creating access to technicalskills, access to business networks and access to

nance. However, such interventions have been ar lesssuccessul in building a sense o trust between established

companies and SMEs.

Private sector interventions: what is working?

Access to technical skills

Private sector companies have successully partneredwith educational institutions to harness synergies and

help students develop the technical skills required inorder to be eective. This model is the direct analog o

private company-university relationships that exists

in developed world countries like the US. Examples opartnerships that have been geared towards educationalinstitutions include: IBMs partnership with the Universityo Dodoma in Tanzania to acilitate research projects on

cloud computing and business analytics; Saaricomspartnership with Strathmore University in Kenya to

launch an Innovation Center; and Nokias partnershipwith the University o Nairobi to develop and run a

research center. In addition to these specic partnerships,competitions have been used to showcase innovationand provide support or local entrepreneurial ventures.

Examples o these types o competitions include theNokia Growth Economy Global Challenge and the Google

Code Challenge.

Access to business networks

A number o partnerships between private sector

companies and ICT SMEs revolve around organisedevents. For example the regional Mobile Monday seriesis ocused on engaging and connecting the local mobile

applications community; the G-Arica series sponsoredby Google raises awareness about Google products

and opportunities or developers; and the IPO 48 start-

Table 2: Existing interventions private-sector-sponsored

The best way to identify these

technologies that impact the

masses

Access to

technical skills

Access to busi-

ness networks

Networking opportunities provide

opportunity to collaborate and

share experiences

Partnering with a notable private

company over the long term

would enhance the network

Private company-university

relationships similar to model

in U.S.

Access to

finance

Private sector-driven investment

funds is key source of funding for

technology SMEs

Create a trusted network with

clear code of conduct and

steering committee

Strong

inter-

ventions

Relationship

between large

companies

and SMEs

Trust issues between established

companies and their SME

partners are mostly IP-related

IP protection and code of

conduct still weakInter-

ventions

requiringenhance-

ment




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16

Trusting relationships between established companiesand SMEs

Overall, the most signicant shortcoming o private

sector interventions have been trust issues betweenestablished companies and their SME partners. On the

one hand, established companies are concerned about

the protection o corporate intellectual property, whileSMEs worry about the risk o larger partners stealing withtheir business plans.

GOVERNMENT INTERVENTIONS

Overview

Governments in all our countries have committed to

investing in ICT as an important part o their nationalgrowth plans. However, there is some variation in

government involvement within each country and a needor an integrated policy ramework by the East AricanCommunity Secretariat.

To date, government initiatives have been most successulin creating access to business skills, providing content

to spur application development and demonstratinga high level o visibility and participation, particularlythe governments o Kenya and Rwanda. However,

these interventions have been ar less successul inimproving access to markets, providing an overall

supportive regulatory environment and osteringstrong relationships between SMEs and governments.

Government interventions: what is working?

Access to business skills

Governments have championed ICT through skillincubation eorts and networking events, or example,

the Tandaa workshops in Nairobi supported by the KenyaICT Board. This high level o government visibility has

enhanced their credibility in the eyes o entrepreneurs.

Providing content to spur application development

There has been a strong eort on the part o governments

to make available previously ofine local contentavailable online. Kenyas push or e-government is a notedexample. The availability o data will serve to encourage

application development across the region.

Active government participation in Kenya and RwandaThe governments o Kenya and Rwanda have spearheaded

eorts to boost ICT investment to inrastructure as wellas BPO and contact centers. The Kenyan government,

or example, provided large subsidies or the building o

up weekend in Kenya is driven by entrepreneurs romEstonia.

Another growing area o support is in the incubator andtechnology hub sector. The iHub in Nairobi is supportedby companies like Wananchi/Zuku and Google; Silicon

Valley-based I/O ventures is a potential supporter o the

new incubator in Tanzania; and Hive Colab got its startvia the privately unded App Arica Labs. Furthermore,Arilabs is an eort being driven by Erik Hersman and

the iHub team, along with other incubators throughoutArica, to build relationships and share knowledgeamongst developers across the Continent.

However, in addition to events, entrepreneurs haveexpressed a desire or ormalized sharing o ideas acrosscompanies. In particular, many entrepreneurs believe that

developing case studies based on local success storieswould be a great way to share ideas about what works

and what does not work or dierent business models

and to inspire the next generation o entrepreneurs.Access to nance

Though it is still in a relatively nascent stage in the region,private-sector driven investment unding is proving

to be a key source o unding or ICT SMEs. There areseveral investment unds purely unded by the privatesector, or example E-Ventures Arica, ounded by two

Dutch entrepreneurs. Within its rst year o its operation,E-Ventures Arica has already invested in three ICT

SMEs, a relatively higher number compared with donor-supported unds. The Midnight Sun team have also

proposed an iAccelator program that would nance 30

technology entrepreneurs ocusing on Kenyan massmarket consumers, with investments o USD 25-30,000

or 20% equity in 1-year partnerships.

This is important, as a high-level mapping o the nancingmarketplace with the more prominent names shows

limited activity taking place in the critical nancing rangeor these entrepreneurs. In addition, the key nancing

gap area o USD 25,000 to USD 100,000 is on the lowerend o the scale that the unds ocus on, which creates a

disadvantage due to the private equity business modelthat encourages larger deals.Though unding rom privatesector partners is increasingly available, entrepreneurs

consider most o the local unding to be either predatoryor dicult to access. As one entrepreneur noted, There is

local money, but the networks are not transparent.

Private sector interventions: what is not working?


23/98

underwater telecoms cables in East Arica. They havealso provided grants to BPO organizations. The Kenya

ICT Board has also championed local content creationand application development with initiatives such as the

Tandaa Digital Content Grants Program.

Government interventions: what is not working?

Access to customers and markets

One area o concern with regard to government support

o technology SMEs has been government procurementprocesses, which SMEs nd challenging. The challenges

take many orms, including onerous applicationprocesses and experience requirements or governmentvendor selection. Some governments, such as that in

Rwanda, have successully addressed this concern withSME-ocused tenders and initiatives.

Supportive regulatory environment

The business environment in East Arica presentsdiculties or SMEs, including challenging and restrictive

registration, licensing, and taxation processes. Feedbackrom interviewees suggested that the licensing processes

in Kenya, Uganda and Tanzania raise the barrier orcreating a new company too high. Rwanda is a clearexception in this regard.

Relationships between government and SMEs

Another requently noted problem area is the perceivedweakness o the relationship between ormal government

entities and the SME community. Entrepreneursinterviewed said that while larger businesses have

access to lobbyists and lawyers, little is done to advocateor the needs o small businesses. More importantly,entrepreneurs believe that current legal intellectual

property protection provisions are inadequate both asthey exist on the books and in terms o enorcement.

Exhibit 6: Financing gap in East Africa

Funds (not exhaustive)

Africa Media Venture Fund

Business Partners

eVentures Africa Fund

Fanisi

Fusion Capital

Grofin

Open Capital Fund

Actis

20 - 140

Typical financing range

USD, thousands

Key gap for

SME financing

50-500

25-250

500-3M

100 - 500

50-1,000

500-2M

>10M

Typical structures

Equity, board seat

Quasi-equity 1

N/A

Equity

Equity

Equity

Equity, quasi-equity 1,

and debt

Equity

1Could include revenue participation

Note: Logarithmic scale


24/98

18

Table 3: Existing interventions government-sponsored

Do more: any additionalsupport and expertise from other

geographies/regions/countries toexecute on the goals of trans-

parency and openness should

be available

Providing content

to spur applica-

tion development

Posting a lot of previously offline

local content online (push for

e-government)

Local governments good at

supporting incubation efforts and

attending networking events

Spearheading efforts to boost the

technology space from investment to

infrastructure

Active govern-

ment participation

in Kenya andRwanda

Access to

business skills

Strong

inter-

ventions

Inter-

ventions

requiringenhance-

ment

Export the Rwanda setup modelRegulatory environment is not

supportive of start-ups

Supportive

regulatory

environment

Initial kick-start effort can be

centered around set-asides and

procurement training

Local market procurement pro-

cesses appear to be biased

against start-ups

Access to cus-

tomers/markets

Direct lobbying or building SME

networks to critical mass to

advocate for themselves

Perceived weakness of the rela-

tionship between formal govern-

ment entities and the SMEs.

Relationship

between govern-

ment and SMEs




25/98


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20

address systemic and environmental challenges.Develop a Fully Connected Network (Component One)

aims to strengthen business networks so that they aremore supportive o entrepreneurs and more conducive

to innovation. Launch Skills 2.0 (Component Two) isdesigned to improve quality o and access to technicaland business training. Upgrade the Business Environment

(Component Five) consists o activities to create a morebusiness-riendly environment with a special ocus on

policies and practices to eradicate the challenges aced byICT SMEs. This combined approach o direct intervention

to build local institutional capacity is designed to driveimmediate impact that can be sustained over the longterm.

Program Component 1: Develop a Fully ConnectedNetwork

These networking opportunities are greatand we canshare solutions or the problems we all ace.

I need to talk to someone that has done this beore.

The desired outcome o this program component isa networked community o trust that collaborates,

competes, and provides its members advice, mentoring,nancing, skills, and representation.

This eort seeks to embed the right cultural norms and

governance or shared knowledge and collaborationwithin the local community o entrepreneurs. In manycases it requires strengthening the already existing

business networks.

This component would be comprised o helping thesegroups increase their SME membership and theirvalue proposition to entrepreneurs. It includes programdevelopment and support or events and spaces that bring

members together in the physical world to strengthenworking relationships developed online.

Objectives

Foster a business culture that breeds innovation andcollaboration

Create a shared knowledge base

Continue to grow and broaden a sustainable network

Activities

Support the establishment and strengthening o ICTbusiness associations, networks, and clubs

Support the establishment o spaces that encourageconvening and collaboration

Develop and disseminate case studies and how-toguides

Issues addressed

Access to markets, access to business skills, access to

technical skills.

Partners

Existing ICT business associations and networks,individual entrepreneurs and companies, universities,

international organizations, specically:

Kenya: iHub is already recognized as a critical node

o activity, events, and networking by nearly all partso the ICT ecosystem (entrepreneurs, private rms,donor community, government, academics) in East

Arica.

iHub is currently developing programming to le-verage its naturally orming network, as well as

extend its impact within the region by connect-ing with other networks and technology spaces

through the Arinet initiative; both initiatives areworth supporting and extending. Additional en-

trepreneur networks that could be integrated in-clude Strathmore Universitys entrepreneur com-munity and the entrepreneurs taking part in the

Tandaa programming. Extending the iHub launchand development model to other locations in East

Arica would deliver the benets as discussed inthe iHub case study example.

However, to deliver the next level o the ully net-

worked environment, entrepreneurs and expertshave identied a set o programming and capabili-

ties or iHub and other locations/networks to de-liver. These capabilities are listed in the ollowingexhibit.


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Exhibit 7: What might iHub version 2.0 look like?

Programs

Mentorship

program

On-going, structured program with assigned mentors and mentees at

manageable ratios (e.g., 1:5)

Clear responsibilities and time commitments for both groupsDefined business roadmap to drive progress and milestone achievement

Active feedback

from the

community

Periodic surveys and focus groups to all stakeholder categories to ensure

events, programming and skills development meets expectations

Creative collabo-

rator matching

Links to other professional and academic networks to provide a full

compliment of business and technical skills (e.g., accountants, lawyers,

marketing professionals)Also links to potential collaborators outside of specific geography

(e.g., Afrilabs as a connector)

Knowledge

warehouse

Key data sources required to every early tech enterprise

Business start-up guide, tailored at the country or locality level Access to basic data sources to complete business plans (e.g.,

census)

Strong commu-

nity norms and

mechanisms

Clear and communicated code of conduct

Mechanisms to resolve disputes within the community

Rwanda: While there are no dominant physical spac-

es or ICT/developer networks within Rwanda, the Ki-gali Institute o Science and Technology has business

incubation space. A clear challenge will be orming

the initial network o entrepreneurs and developers.Fortunately the government, through the RwandanDevelopment Board, is supportive o the developmento the physical space and the network, and would

preer to see the process led and driven by the entre-preneurs themselves.

Tanzania: The Tanzanian Commission on Science and

Technology (Costech) is in the process o developingan incubator space or entrepreneurs. However there

was some concern on the direction o the space withgovernment guidance. A ew structured networks ex-

ist, led by respected mid-tenure entrepreneurs that

could orm the hub o the network. Uganda: Hive Colab, near Makerere University Busi-

ness School in Kampala, has the core physical pres-ence and has started to host some programming. Im-

provements could include connecting this space withadditional marketing and development resources,and entrepreneurs associated with other Ugandan

academic institutions.

Timeline

Phase 1: rene initiative act base and consolidate

support

iHub 1.0

Develop partners among potential physical

space providers (i.e., academic institutions ordonor community) and existing network part-

ners Month 1

Assign roles among partnership team, includ-ing key chairpersons roles Month 2

Agree on guiding principles or the space and

network (potentially using iHub as an example) Month 2

iHub 2.0 (Kenya): Understand current capabilities

and resourcing across ve program modules (e.g.,mentorship program) Month 3

Phase 2: develop specic action plans

iHub 1.0

Develop business plan or network space rev-enue/ operating und model, marketing plan,

operations plan Month 3


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22

Develop site location, build out, and IT supportplan or space Month 3

Consolidate potential stakeholder database(e.g., entrepreneurs, local ICT rms, multi-national ICT rms, donors, government, aca-

demia) at the institution, rm, and individual

levels Month 3

iHub 2.0

Develop specic workplans and timing orimplementation o 5 module areas. Leverage

existing plans or Arilabs Month 3

Secure initial nancing or build out and rst 12months operations Month 3

Phase 3: execute implementation plan

iHub 1.0

Build out physical space Month 4-5

Develop events plan or next 6-12 months Month 4-5

Design networking and mentorship program-ming Month 5

Sot launch, begin to shit existing program-

ming to the physical space Month 5

Full launch with stakeholders and dignitaries Month 6

Begin networking modules (once stakeholdersare acclimated to the space) Month 7

iHub 2.0

Identiy network participants, mentors and

non-tech collaborators Month 4-5

Design eedback collection mechanisms (po-tentially in conjunction with the overall Busi-

ness Engine Coordination Oce) Month 4-5

Design networking and mentorship program-

ming Month 5

Design conict resolution mechanisms andcommunications strategy - Month 5-6

Phase 4: monitor and track progress (on-going)

Resource requirements: Year 1 requirementso ~USD 300,000 - 500,000; Year 2 o USD200,000 - 400,000

Initial ramp-up requirements

Time rame: Months 1 - 3

People requirements - program manager (1 FTE);

administrative resource (1 FTE) to coordinate thevarious stakeholders, travel/non-compensation ex-

pense budget

Financial requirement: Total USD 300,000(100,000 per country, ex-Kenya)

Physical space build out, USD 50,000, basedon iHub experience

General and administrative (including sta) o

USD 50,000

On-going requirements

Time rame: Annual basis

People requirements - program manager (1

FTE) to drive events, programming and networkdevelopment; administrative resource (1 FTE) to

coordinate the various stakeholders, travel/non-compensation expense budget (include support

or expanded iHub 2.0 capabilities in Kenya)Financial requirements: USD 200,000 per an-num, based on ramped up iHub experience (to be

conrmed)

Time to sel-sustainability/partial-sustainability:12-24 months, through a combination o spon-

sored programs, membership ees, and grants

Metrics

Monitoring and evaluation

Input metrics and leading indicators

Number o active entrepreneurs in network da-tabase

Amount o sponsorship at the network level

(vs. event level)

Number o events held

Output and result metrics

Number o collaborative projects started (case

studies will be required)

Growth o active membership over time

Growth o mentors over time

Growth o existing and new companies estab-lished by members

Participant satisaction ratings

Evaluation o skills by entrepreneurs at startand end o program, and 6 months ater com-

pletion

- Sel-evaluation

- Mentor evaluation


29/98

Percentage o businesses operated by program gradu-ates that survive or 1, 2, 3 years ater program com-

pletion (versus baseline rates)

Risks and mitigation tactics

Key risks

Inability to drive meaningul trac to the locationupon launch

Inability to sustain trac over time

Inability to recruit and retain mentors

Mitigation tactics

Identiy network nodes in each community toensure initial trac academic institutions, keybig brother entrepreneurs

Provide a mix o immediate incentives (e.g., iHub,very ast Internet available or techies), and longer

acting incentives (e.g., quality programming); ac-tively poll and survey participants to ensure satis-action

Design and communicate value proposition ormentors (e.g., access to talent, access to technol-

ogy); buttress with community norms and trans-parency to build condence that ideas will be pro-tected

Program Component 2: Launch Skills 2.0

Were geeks. We need people who can market and

communicate.

At university we learned how to code, but ourproessors dont know other things we need in the real

world.

The availability o highly skilled knowledge workerswill be critical to the success o the East Arican ICTsector. Companies o all sizes need access to world-class developers, programmers, network engineers, andother technical specialists in order to compete globally.Entrepreneurs and their employees will also need soundbusiness and project management skills in order to startand run their businesses successully. Upgrading theskills and educational resources available will ensure a

ready supply o well-trained IT proessionals earning thecondence o local employers, international clients, andinvestors.

Launching Skills 2.0 will require co-operation withacademic and training institutions to ensure that youngEast Aricans have the ull range o business and technicalskills that they need. Entrepreneurs and their employeesshould understand basic business principles, projectmanagement, and the undamentals o core disciplines

including marketing, operations, and nancial planning.

The sector would also benet greatly rom a largenumber o techies with recognized certications suchas those oered by Microsot (e.g. MCM, MCITP), Oracle(e.g. ODCA), Cisco (e.g. CCIE and CCDE). Standardizationwould provide employers and potential customers

greater condence in the skills o the local workorce.Such certications could help advance the ICT sectormuch as prolieration o CPAs and CAs advanced theaccounting and nance proessions and businessesthat depend on these skills. In addition, there should besupport or developing a continuous education culturein which techies are supported in nding resources oronline sel-education to keep their skills and knowledgesharp and up to date (e.g., the top ten new open-sourcetools or developers).

Objectives

Produce university computer science graduates with

upgraded skills - both technical and practical, prob-lem solving skills to create business savvy technolo-gists

Fast-track industry standard certications and post-certication continuous learning opportunities

Activities

Support upgrading university computer science cur-ricula: incorporate hands-on experiential learning;include exposure to business concepts; teach projectmanagement skills

Provide broad access to industry standard training

and certication programs

Provide business skills training and business plan de-velopment support

Issues addressed:

Access to technical skills, access to business skills, andaccess to markets

Partners:

Universities (in the region and internationally recognizedleaders), governments, private sector companies,international organizations, specically

Kenya: Strathmore University in particular has a strongSME training program that ocuses on business skills as discussed in the ollowing exhibit. The programis largely underwritten by the British Council and hastrained 100 entrepreneurs in the creative industry inKenya over the past 12 months. The Dean o the Insti-tute o Continuing Education indicated that the coreset o trainings could be extended to ICT and tailoredwith input rom the industry within a 3-month time-rame.


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24

Source: Interview with Dr. Kiraka, Dean of the Institute of Continuing Education at Strathmore; http://www.strathmore.edu/sedc/

Exhibit 8: Strathmore Enterprise Development Center

Brief

overview

Located in Nairobi, Kenya

Offers practice based learning to managers of SMEs in the creative industries

(e.g., drama, theatre, writing)9 modules offered over the course of 2 months: Introduction to

Entrepreneurship, Intellectual Property, Financial Management, Product/

Service Pricing, Branding, Marketing, Negotiations and Networking, Business

Planning (Part 1 and Part 2)

Why model

worked?

Demonstrates successful business practices through case studies

Specific focus on challenges within the local/Kenyan business environment

Provides hands-on experience that participants can leverage in theirown businesses

Provides ongoing mentorship through peer networks of trainees, alumni

and educators

Impact: 100 entrepreneurs trained in 3 cohorts over course of the year; 7

trainers involved

Potential

improvements

Need to expand coursework to topics specific to ICT including

developer content

Develop leverage model to impact students in EAC outside of Kenya (e.g.,training at local universities in EAC ex-Kenya) Bolster research activity and

create a center of knowledge relevant to ICT SMEs

Design mentorship program

Provide dedicated access to finance

iHub currently hosts several events centered on the

latest trends in technology through its Mobile Mondayprogram. This could be a platorm to develop a structured

set o courses around discrete, commercially valuabletopics.

Rwanda: The RDB has been actively engaged in set-

ting standard or training and has a budget or train-ing exercises that has been under-used by the private

sector. In addition, both local academic institutionsare engaged in business incubator and technicaltraining (or example, the Kigali Institute o Science

and Technology, KIST) as well as international institu-tions (e.g., Carnegie Mellon through the ICT Center o

Excellence under development in Kigali).

Tanzania: There are myriad institutions oering busi-

ness skills development in both university and non-university settings, including the British Council, theUniversity o Dar es Salaam Entrepreneurship Center,

and the Tanzania Entrepreneurship Forum. The chal-lenge will be coordinating among these organiza-tions to ensure coverage across all key business and

technology issues.

Uganda: Makerere Universitys Business School pro-

vides business skills training and access to intern-

ships. In addition, the Hive Colab is starting a MobileMondays program in Kampala as well, to improvetechnical capabilities in the developer community.

Timeline (based on experience at potential partneringacademic organizations)

Phase 1: identiy potential university partners

Map out criteria or potential university partnerse.g. curricula, ICT ocus, entrepreneurship experi-ence Month 1

Indentiy potential university partners that t crite-ria across the region, develop hypothesis on whichprograms are pilotable in the near term, and se-quence potential rollouts by country Month 1

Meet with potential university partners to discuss

opportunity or partnerships, sign Memoranda oUnderstanding Month 2


Secure unding or partnership initiatives Month1-3

Develop plan or partnerships revenue share, IPownership, training etc. Month 3

Map out technology curricula o potential partners


31/98

and suggest improvements Month 3-5

Develop pilot or small group o ICT entrepreneursin most developed program: customize program-

ming or ICT, identiy SME and ICT trainers, iden-tiy mentors Month 2-4

In other geographies:

Assess existing capabilities in other partnerorganizations and work with them to develop

programming Month 4-6

In other geographies: customize programmingor ICT, identiy SME and ICT trainers, identiy

mentors Month 4-6


Sign partnership agreements with universities

Month 3-4

Launch pilot in one country, collect and continu-

ously disseminate learnings Month 5-7

Evaluate program and ne-tune operations and

programming Month 8

Begin roll-out in other geographies Month 7-9


Resource requirements: Year 1 requirementso ~USD 60,000 - 90,000 per country to train100 entrepreneurs; Year 2 o USD 100,000-USD150,000 per country; across 4 countries, single

site per country, 100 entrepreneurs trained, Year 1

at USD 250,000 USD 400,000; Year 2 at USD400,000 USD 600,000


Time rame: 6 months

People requirements: Curriculum coordinator at

East Arica level, 1 FTE; travel and marketing bud-get

Financial requirement: USD 50,000 at the region-

al level


Time rame: Annual

People requirements: Curriculum coordinator at

East Arica level, 1 FTE; travel and marketing bud-get; contracted programming to Universities (at a

rate o USD 50,000 to USD 100,000 per 100entrepreneurs trained)

Financial requirements: USD 100,000-USD

150,000 per country

Sustainability plan: Shit rom a dominant donor sub-sidy (as in the case o Strathmore University and the

British Council) to a mix o donor subsidy, businesssponsorship support and entrepreneur enrollment

ees as the program develops a reputation as strongtalent developer: 12-24 months

Metrics



Number o universities qualiying as potentialpartners

Number o university partnerships agreements

signed

Number o entrepreneurs that apply but do not

enroll rom lack o unds

Number o mentors/ trainers involved


Number o training courses held at local uni-

versities

Number on non-university students servedthrough the programming

Number o start-ups launched rom university-

private partnerships

Evaluation o skills by entrepreneurs at start

and end o program, and 6 months ater com-pletion

- Sel-evaluation

- Mentor evaluation

Percentage o businesses operated by programgraduates that survive or 1, 2, 3 years aterprogram completion (versus baseline rates)


Key risks

University setting and trainers viewed as too aca-

demic/ not relevant or cutting edge ICT sector

Economics will always depend on sponsors, do-

nors or corporates, as the lean resourcing o ICTentrepreneurs doesnt allow or a considerabletraining budget

Relevance o training is not truly known until the

entrepreneurs reach/ail to reach the next mile-stone

Mitigation tactics

Develop mix o academic and entrepreneur (ICT


32/98

26

preerred, but not necessary) trainers

Creative unding on the part o entrepreneurs eq-

uity stake, or percentage o prots ater the orga-nization has hit certain development milestones,similar to the inoDev incubator in Tanzania

Monitoring o impact o training through surveys,interviews, and mentor eedback to rapid programrenement

Program Component 3: Support Innovators

[Potential investors] dont understand ICT at allwe

need to educate the bankers and investors.

There is money or the local restaurant and or the

established business, but not or [my ICT business]

This component is designed to support the start-up andgrowth o companies that create innovative solutions

to business and development challenges in the region

and beyond. Successul innovation will improve the waypeople in the region live and work. The next generationo business and consumer services will drive economicactivity; ICT or development (ICT4D) innovations can help

solve some o the most daunting problems in healthcare,education, and income generation aced by low-income

communities. Successul local innovation also providesa halo eect increasing the credibility o the region as a

serious player on the ICT world stage.

Activities under this component would provide directsupport to promising innovative entrepreneurs,

replicating some o the qualities ound in successul

and sustained investment development environmentssuch as Silicon Valley. Depending on the needs o the

individual entrepreneur, support might include unding,introductions to investors, business plan review, training,

mentoring, capacity support or critical businessunctions, introduction to potential partners and clients,

and public relations. As regards to unding, optionsshould be tailored to meet the needs o individualentrepreneurs, and could include ellowships to support

boot-strappers or a 3-6 month sabbatical to ocus ontheir businesses; small amounts o seed capital; nancing

or capital investments; and venture unds.

ObjectivesIncrease the number o successul start-ups

Increase the number o successul rms driving in-

novation in East Arica

Activities

Provide business plan development assistance

Provide capacity building support and training tar-

geted to meet the needs o the business

Provide leadership mentoring and introductions to

support top management

Develop a menu o nancial oerings or start-upcompanies

Create and support venture unds or startups andother companies requiring less than USD 50,000

Issues addressed

Access to business skills, access to nance, access to

markets, and access to technical skills

Partners

International organizations, local training organizations,

angel investors, governments

For example, The Institute or Electrical and ElectronicsEngineers (IEEE) has been a very active organization in

Kenya. Among its activities is an annual EngineeringExhibition which targets young technology innovatorsacross East Arica. Every year IEEE careully selects 200

engineering students with innovative ideas to takepart in competitions and an exhibition, resulting in a

commercialization rate o more than 80% or exhibitedsotware ideas. A partnership with IEEE would be very

useul in identiying entrepreneurs with promise, andcould benet IEEE by extending its reach within theregion. Right now, participants rom Kenyas University o

Nairobi and Ugandas Makerere University dominate.

Kenya (and Pan-EAC): private equity rms, including

rms that have participated in the Tandaa workshops

and Midnight Sun, TBL Mirror, nd

Rwanda: the Rwandan Development Board

Mentoring interventions

In combination with the rst intervention, we see thementorship activities taking part in combination withinthe broad network development; the programming can

be launched with the location/network partners oncethey have a critical mass o attendance and events. It is

worth noting that InoDev is also developing incubators inboth Tanzania and Kenya, both slated to open in 2011.

Mentoring along with business skills were highlighted as

critical areas or development rom our conversations inthe investment community.

Financing

Given the scale o the challenge at the regional level,we propose piloting a private-donor community

partnership to successully identiy, und, mentor, andtransition entrepreneurial ventures to the next unding

and development stage. On the private sector side, an


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investment committee will need to be recruited rom acombination o successul East Arican entrepreneurs,

expatriates, and private equity proessionals. This couldbe done in conjunction with Component 1: Developing

the Fully Connected Network, providing the core omentors to sit on the board. The donor community, incombination with multi-national private organization and

oundations, can provide operational nancing as well asco-invested unds, as well as potentially subsidizing the

operating costs o the private investment committeeparticipants (e.g., smart, cost eective due diligence vs.

hiring investment consultants). Some organizations thatmay be willing to take part in this program include:

Timeline

Phase 1: criteria and unding

Develop criteria or assessing business plans ostart-ups Month 1

Develop and distribute marketing program to at-tract eligible companies Month 1-2

Obtain potential source o unding to support pro-gram and unding approach (e.g., co-investment,

subsidized / preerential returns) Month 2-3

Develop network o potential experts to assist com-panies Month 3-5


Detail ways in which entrepreneurs will receive as-sistance rom program (e.g. training, unding, work-

shops) Month 2-4

Determine specic unding milestones; set up spe-cic milestones or achievement Month 2-4

Determine mentorship and skills programming tosupport the entrepreneurs; determine roles and re-sponsibilities or investment committee Month

3-4

Establish partnerships with donors or private en-

terprises to und the program Month 3-6


Enroll companies in program Month 5-9

Conduct workshops or newly enrolled companies Month 6-10


Resource requirements: Year 1 requirements o~USD 225,000; Year 2 o USD 250,000 (not

including capital budget)


Time rame: 9 months

People requirements: Investment manager, that

reports to the investment committee (secondedrom Private Equity company), travel and market-ing budget

Financial requirement: USD 100,000


Time rame: Annual

People requirements: Investment manager, that

reports to the investment committee (potentiallyseconded rom Private Equity company), travel

and marketing budget; due diligence budget

Financial requirements: USD 250,000

Capital requirements: Initial pilot und o USD1,000,000 to nance 20-40 businesses

Time to sel-sustainability/partial-sustainability:permanent donor participation on the und side

Metrics



Number o companies enrolled in program;number o impacted employees and clients

Funding amounts

Estimated improvement in valuation and eco-nomics upon nancing


Operational metrics o companies revenues,prots, EBITDA; improvement over time

Number o rms that raise a successul next

round o unding

Percentage o businesses operated by programparticipant rates that survive or 1, 2, 3 years

ater program completion (versus baselinerates)


Key risksIntervention expenditures on this topic may have abetter return in training versus direct unds

Considerable investment return risk on the unds

Inability to source quality investment committeemembers

Mitigation tactics


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Conduct a small pilot to test the concept thenumber o companies with a nancing gap is so

considerable that innovative approaches are likelyworth testing

Diversiy the risk by partnering with several orga-

nizations or adjusting return expectations

Look beyond ICT industry or entrepreneurial ex-pertise; any services entrepreneur will have aced

similar issues such as the lack o tangible assets,IP concerns and importance o product and ser-

vice design.

Program Component 4: Enable Job Creators

We need the support to get to medium stagecompanies and also to be part o their supply chains.

Enabling job creators requires support or the development

o stable companies that generate employment

opportunities or knowledge workers. These companiesocus on capturing parts o existing markets. Theywill serve as channel partners or large multinationals

(e.g., Oracle, Cisco, Microsot, Nokia, Apple andGoogle); support government and regional IT initiatives(digitalization o records, e-government, and shared

services); and provide outsourced services to domesticand international companies.

Success in this market requires business savvy, operationalexcellence and organization; companies that serve thesemarkets are generally labor intensive and create large

number o well-paying and well regarded jobs. Thesecompanies create jobs and wealth, and can change

perceptions about the skills and capacities o developingcountries, which can help drive economic integration and

growth.

This program component can help provide improvedaccess to markets, skills and nance Market access

can be acilitated by working with governmentsand large companies to explain and showcase localcompanies; helping local companies better understand

tender processes and requirements; and supportingdevelopment o pro-SME contracting practices.

Capacity support could include targeted trainingprograms, management secondments, and advisory

support. Finally, access to nance could be improvedby developing invoice nancing to support companies

with a strong pipeline o business and daunting workingcapital requirements; nancing o capital expenditure orcompanies that need to invest in equipment to related to

contract execution.

Objectives

Increase the number o local companies that serve as

channel partners or major IT multinationals

Increase the number o local companies that imple-

ment government IT initiatives

Increase the number o local BPO, contact centersand system implementation companies that serve thedomestic private sector

Become an o-shoring destination o choice

Activities

Provide capacity building support and training target-ed to meet the needs o government clients (digitali-zation, e-government, shared services)

Provide capacity building support and training target-ed to meet the needs o the domestic private sector

Provide business development support (e.g., consul-tants to support tender process; create orum or pre-sentations to buyers)

Create a und to support companies pursuing existingmarkets

Support the BPO and contact center segment in pur-suing international clients

The activities under this program component shouldbe sequential. The experience o the Kenya ICT Boardin promoting the BPO and contact center segment isinstructive. First, companies should attract governmentand local clients. These contracts provide much neededexperience and credibility. In courting internationalclients, potential targets can be wary o companieslacking public or private sector clients in their homemarkets. Thereore, i a government entity is to supportpromotion o a sector, it is important they demonstratetheir condence in that sector by using its services. Atthe same time, the sector should pursue local clients anddemonstrate their ability to deliver high quality services.Only then, will they have the track records internationalcompanies are oten looking or.

Partners:

International organizations, the EAC, governments,private sector companies

Government procurement arms such as the Public

Procurement Oversight Authority in Kenya, Rwanda PublicProcurement Authority, Public Procurement RegulatoryAuthority in Tanzania, and Public Procurement andDisposal o Public Assets Authority in Uganda.

Timeline

Phase 1: setup and design o program

Identiy and hire the program manager; work withpartner companies; conduct surveys o locally


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outsourced business to understand market size Month 1-3

Identiy potential partner companies or second-ments Month 1-3

Structure partnership with local governments Month 3-5


Develop training program or participating compa-nies (e.g. how to secure BPO work with interna-tional clients) Month 4-6

Develop plans or working with government toshowcase local successul companies, e.g., gov-ernment procurement conerence and training,sponsored by central government procurementarms) Month 4-6


Enroll companies in program Month 3-6Work with government and large corporates to de-velop programming and lead the sessions (i.e., gettrained by the potential client)

Conduct training programs Month 5-7


Resource requirements: Year 1 requirements oUSD 100,000; Year 2 o USD 50,000


Time rame: 6 Months

People requirements: Program manager (1 FTE)

Financial requirement: USD 50,000 or sta andmarketing/ travel budget


Time rame: Annual

People requirements: Administrative manager totrack results (1 FTE)

Financial requirements: USD 50,000 or 1 FTEand marketing and travel budget

Metrics



- Number o companies participating in program

- Comparison o participants product oeringversus the government / large corporates spendmix


- Number o people employed by partner compa-nies

- Government spend allocated to SMEs through

the program

Satisaction survey ocused on improved competitive-ness or SMEs


Key risks

Governments and private organizations may pushback on SME set asides

Plan assumes government and corporates will

participate or ree; resources required increase itrainers are hired

Mitigation tactics

Donors can collaborate with EAC and national ICTministries to gain buy- in with various public and

private stakeholders, or both procurement andskills development

Program Component 5: Upgrade the Business

Environment

Getting an SMS short code [rom the telecoms

authority] is very hard or a small business and it takesvery long. It creates a major delay to test and launch a

product.

Improve business conditions in tangible ways thatenable citizens and international investors to build

strong ICT businesses in the region. A challengingbusiness environment is a drag on the entire economy.

Large companies may have the resources to workaround major obstacles, though oten at signicantcost. Smaller companies may be prevented rom ever

truly taking o. Business environment challenges maybe created by government policies, regulations, and

processes, business culture, or poor inrastructure. Whilesome changes require long term investment, there are

a ew interventions, such as those listed below, whichcan be implemented in the short-to medium term. Theimpact would be to signicantly improve the business

environment and chances o success or ICT SMEs.

Rwandas business establishment process has been

heralded as a regional and continental champion on theease o setting up a business.

Objectives

Make starting and registering a business simple and

speedy

Enhance industry credibility and transparency


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Established in 2004

Mission is to simplify the process of investing in Rwanda

infodev east africa ict review

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