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Transcript of 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
iv
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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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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
What is not working? Implications
What is working? Implications
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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?
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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
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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
What is working? Implications
What is not working? Implications
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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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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
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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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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
Phase 2: develop specic action plans
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
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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
Phase 3: execute implementation plan
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
Phase 4: monitor and track progress (on-going)
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
Initial ramp-up requirements
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
On-going requirements
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
Monitoring and evaluation
Input metrics and leading indicators
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
Output and result metrics
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)
Risks and mitigation tactics
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
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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
Phase 2: develop specic action plans
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
Phase 3: execute implementation plan
Enroll companies in program Month 5-9
Conduct workshops or newly enrolled companies Month 6-10
Phase 4: monitor and track progress (on-going)
Resource requirements: Year 1 requirements o~USD 225,000; Year 2 o USD 250,000 (not
including capital budget)
Initial ramp-up requirements
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
On-going requirements
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
Monitoring and evaluation
Input metrics and leading indicators
Number o companies enrolled in program;number o impacted employees and clients
Funding amounts
Estimated improvement in valuation and eco-nomics upon nancing
Output and result metrics
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)
Risks and mitigation tactics
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
Phase 2: develop specic action plans
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
Phase 3: execute implementation plan
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
Phase 4: monitor and track progress (on-going)
Resource requirements: Year 1 requirements oUSD 100,000; Year 2 o USD 50,000
Initial ramp-up requirements
Time rame: 6 Months
People requirements: Program manager (1 FTE)
Financial requirement: USD 50,000 or sta andmarketing/ travel budget
On-going requirements
Time rame: Annual
People requirements: Administrative manager totrack results (1 FTE)
Financial requirements: USD 50,000 or 1 FTEand marketing and travel budget
Metrics
Monitoring and evaluation
Input metrics and leading indicators
- Number o companies participating in program
- Comparison o participants product oeringversus the government / large corporates spendmix
Output and result metrics
- 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
Risks and mitigation tactics
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