What Kenya should do to reap benefits of ICT fully

Kenya is ranked among the top three in Africa with an NRI of 3.8. Mauritius leads with an NRI of 4.4. [iStockphoto]

Kenya has a diversified economy.

Apart from its traditional sectors that include agriculture, fishing, mining, manufacturing and tourism, the country now hinges its growth on Information and Communications Technology (ICT). The Kenya Vision 2030 recognises ICT as a key enabler for socio-economic growth and development.

Network Readiness Index (NRI) is a metric that measures the environment for ICT offered by a country. Kenya is ranked among the top three in Africa with an NRI of 3.8. Mauritius leads with an NRI of 4.4. Kenya has leveraged on regional proximity, high quality workforce and high-speed broadband connectivity.

Kenya's geographical position, at the centre of the continent, endows it with a natural advantage. Kenya has utilised that advantage to become the regional fintech core. Kenyan banks are now in multiple regional countries. This ties in with a recent advisory firm KPMG survey that reveal the fintech sector as one of as attractants of Foreign Direct Investment (FDI).

Government initiatives that make Kenya attractive for FDI include an advanced ICT regulatory environment. The government has also subsidised broadband to Business Process Outsourcing (BPO) companies to reduce the cost of the internet. BPO is the low-hanging fruit of ICT investment. It is the outsourcing of business processes by a company to another external company. This enables the company to focus on core functions.

Most BPOs focus on call centres, content moderation and annotation. Call centres handle the customer service function of large organisations through phone calls. Content moderation involves detection of obscene, illegal, harmful or insulting posts on websites that invite users to post comments. In Kenya, there are BPOs that have set up camp.

However, Kenya faces some challenges that must be overcome to continue with its ICT ascendancy. The first is that these are new frontiers. Therefore, the legal and legislative framework for new jobs, future of work and BPO has not been properly underpinned by the country's labour laws. There are cases in court that may help in the development of that framework. Some of them involve content moderators who have supposedly suffered mental illnesses from their work. Others include the unionisation of "traumatsed" moderators. Still, others include the liability of platforms that have been accused of "helping to fan" war in other countries.

The second is a predictable tax regime. Predictability is important for investors because it takes away any cost uncertainty that would result from a review of tax rates. The Finance Act 2023 has seen a lot of changes with increases in the rates of items like VAT on petroleum products. The zero-rating on other items has been removed. Further, there is also the thorny issue of multiple taxation at national level and country level.

That Kenya is governed by the rule of law is a big advantage in the attraction of FDI. But balance is needful to obviate the deleterious reputation of a highly litigious country. Countries in the region are moving fast to attract FDI. Kenya should not be bogged down by abstractions that can be avoided.

-Mr Khafafa is a public policy analyst