Terrific piece, again am sure the Kenyan government would like to listen given the empirical nature of your submission. Eric here On 19 Mar 2007, at 16:25, Lucy Kimani wrote:
Eric and Muriuki,
I too think the issues you raise are extremely important. The CCK tendering process definately needs an overhaul! It has not worked, and issuing another tender under the same rules will bear the same results, why keep doing the same thing over and over and expect different results each time? Something is broken and it needs to be fixed...
On the 30% and I am borrowing heavily from an article I wrote for ComNews Africa -- It is no secret that foreign investors will repatriate their profits 100% of the time, and having 30 percent local stake ensures that the country at least retains some earnings in the country. Actually there is a bigger issue with the 30% that calls on or challenges the government to establish exactly what is the root cause for the local investors not coming up with their share of funds? The answer lies in the risk averse banking industry that seems unwilling and unable to take the necessary risk in order to fund telecommunications projects, thereby leaving a gap that the government could very easily fill were they to adopt the models followed by the west, and indeed even the eastern governments, whereby the government stands in as guarantors to enable enterprenieurs access funding from banking institutions. One way of doing this, would be to set up a National Small Business Office (NSBO), along the line of the Small Business Agency in the US, and the Small Business Service in the UK. In the United States, the Small Business Administration (SBA) runs several loan programs that may help a small business secure loans. In these programs, the SBA guarantees a portion of the loan to the issuing bank and thus relieves the bank of some of the risk of extending the loan to the small business,
The National Small Business Office would be an independent body and would have overall responsibility nationwide for all policies and programs relating to small businesses, including micro businesses, and start- ups, would have its own budget, and would be closely monitored by and answerable directly to the Parliament. The NSBO can be replicated at the district level. The District Small Business Office (DSBOs) would have responsibility for running national policies and programs set up by the NSBO at the national level and would also be directly answerable to parliament. A particular task appropriate for the NSBO would be in the setting up of a Kenya EXIM ***Bank that would be responsible for promotion of exporting activities amongst small businesses to make them more outward looking and more able to participate in the global marketplace.
The Americans, Japan, Germans, Canadians and the Europeans, and even the Russians all have similar programs. There are approximately 23 million small businesses in the US. These altogether employ more than 50 % of the private workforce, and generate more than half of the nation’s gross domestic product (GDP). In the European Union, small businesses are seen as largely essential for European employment. Each year, one million new small businesses set up in the European Union. Small businesses account for 99.8% of all companies and 65% of business turnover in the European Union. In the UK, it is estimated that in 1980 there were about 1.9 million firms but by 1990 this total had risen to 2.8 million. Small businesses still comprise the great majority of all businesses in the UK with well over 90 per cent of all businesses having fewer than twenty employees. At the start of 1997, there were 3.7 million businesses, with 99% of these having less than 50 employees. The Europeans having recently increased the loan guarantee amount meaning they recognize the importance of the program which includes such success stories as Anita Roddick’s body shop. Ms. Roddick opened a small beauty product store called the Body Shop in England in 1976, she had just one goal: survival. The mother of two was simply looking for a way to pay the bills with a product line of natural-based shampoos and lotions. Ms. Roddick was able to purchase her first store with a small business loan guarantee, almost 30 years later, Ms. Roddick has ushered in a revolution in the cosmetics industry with a chain of 2,000 stores around the world. This year, the L'Oreal cosmetics giant purchased the Body Shop for a little more than $1 billion.
The success of the programs above lies in the importance attached to small businesses by the governments of each country and the role they play in national economic development. In the UK, these businesses not only form the bedrock of the British economy, but they are widely accepted as the main hub of economic activity in the country. They are seen not just as job creators, but as creators of wealth. But to top it all, the UK government firmly believes that small and medium sized businesses are crucial to a successful enterprise economy and is fully committed to stimulating the creation, competitiveness and growth of new and small businesses. The UK government supports these small businesses with key policies in place to encourage and maintain a supportive economic environment.
Thinking outside the box means that the Kenyan government recognizes where the problem resides, and then address this by recognizing that the 30 percent local stake is crucial to Kenya’s continued growth and development, and it sees the hidden potential that lies within the 30 percent local stake, and recognizes that abolishing this local stake should not even be an option. Small businesses are the backbone of the any economy, and the government needs to reflect its acceptance and recognition of this, and the Government must have small business policy at the top of its agenda. The government has to ensure that it puts concrete steps in place to ensure that the local investors grow and prosper by taking an approach that includes fostering an enterprise culture that encourages innovators and risk takers; providing and maintaining a supportive economic environment; identifying and removing barriers to growth and providing high quality business support for the local investors at all stages of their development.
LK
Muriuki,
Issues well raised and am sure the government would like to listen.
I would suggest that a KICTANET meeting at which the larger framework of vertical as opposed to horizontal layering or unified licensing as opposed to Open Access of the communication system is discussed in detailed with the pros and cons. This meeting should end with some majority consensus and should have all the stakeholders so that as sector we are clear at least on the framework of our engagement going forward.
I would also submit that a seperate meeting at which the local ownership of foreign stake and the mechanism for SME uptake as well as growth path is clearly outlined so that whiles you need some big fishes now you can also create your own big fishes in the future and more so as the sector progress with time.
Eric here
On 19 Mar 2007, at 11:58, Muriuki Mureithi wrote:
It is time we reviewed the bidding system this country has adopted to remove conflict of policy interest and move this country forward. We must address ourselves to the purpose of the licence - is it to make money for the government to fill treasury gaps or to expand the telecommunications infrastructure. By demanding to have the cake and eat it, we are nowhere 5 years after starting the process of SNO and Third Cellular Operator. It is a lesson well documented in countries that Kenya copied ref Senegal and Malawi among others. At the heart of the conflict is a government stating that ICT is the driver of growth yet put barriers which cripple the operators even before they start.
The requirements of local partnership while sweet for political reasons is difficult to realise because the international partners have inadequate time to assess the right partner and hence the problems for SNO and third cellular
We need immediate action - first, scrap the requirement of 30% local owner by the time of application of licence but require that within 3 years the winner has brought on board local shareholders through the stock exchange and raise ownership to at least 49% by year 5 of operation . This has worked well for Tz - Second, the licence is not a cash cow - we need infrastructure badly now therefore that licence money should be invested to enable the new entrant to compete with the incumbents and roll out rapidly . Licence should not cost more that USD1. What the entrants should compete with is the cash they will invest in Kenya and the timeline. -finally, CCK should address the anomaly of conflicting policies it issues. In 2004, CCK issued a policy which translates to adoption of horizontal licensing regime to move away from vertical licensing regime. The SNO licence is in direct contradiction of the 2004 policy. Was the policy rescinded? The danger of the unified licence is that it denies Kenyan ICT entrepreneurs a natural growth path and condemns Kenya to permanently have few mega operators and many small operators without a path to migrate from small to big. Should the envisaged fast growing economy to vision 2030 be hinged on few mega operators whose power can sometimes rival the regulator? We need a paradigm shift towards horizontal licensing
Cheers Muriuki Mureithi
--------------------------------------- Summit Strategies Ltd - ICT Consultancy & Research in Eastern & Central African markets Contacts : Tel +254 (20) 3875824 , Cell + 254 (722) 520090, email: mureithi@summitstrategies.co.ke alternate email : muriuki.mureithi@gmail.com
-----Original Message----- From: kictanet-bounces +mureithi=summitstrategies.co.ke@kictanet.or.ke [mailto:kictanet-bounces +mureithi=summitstrategies.co.ke@kictanet.or.ke] On Behalf Of alice Sent: 19 March 2007 09:01 To: mureithi@summitstrategies.co.ke Subject: [kictanet] RELIANCE MISSES OUT ON SNO LICENCE IN KENYA
From BALANCING ACT:
RELIANCE MISSES OUT ON SNO LICENCE IN KENYA
The Communications Commission of Kenya has cancelled a tender for the second national operator (SNO) licence that it had awarded Reliance Communications, after the consortium failed to pay for the fees.
This is the second cancellation, after CCK annulled the licence it had given a consortium led by Dubai-based Vtel Holdings in January, for failing to pay the US$169 million (Sh12 billion) licence fee it had bid.
Reliance, which was the second highest bidder at US$111 million (Sh7.8 billion), was allowed to apply for the licence, but on condition that it pay Sh12 billion to match Vtel's bid. Reliance confirmed that it would take up the offer and requested for more time to prepare for the licence.
CCK said last week Reliance had a deadline of March 15. "By the expiry of the said deadline at 4.00 p.m. yesterday (Thursday) Reliance Communications had not made a formal application for the licence as required," CCK said. The Commission's director-general John Waweru said they had resolved to immediately restart the tendering process for the licence. (SOURCE: The Nation)
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Eric M.K Osiakwan Executive Secretary AfrISPA (www.afrispa.org) Tel: + 233.21.258800 ext 2031 Fax: + 233.21.258811 Cell: + 233.244.386792 Handle: eosiakwan Snail Mail: Pmb 208, Accra-North Office: BusyInternet - 42 Ring Road Central, Accra-North Blog: http://blogs.law.harvard.edu/eric/ Slang: "Tomorrow Now"
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Eric M.K Osiakwan Executive Secretary AfrISPA (www.afrispa.org) Tel: + 233.21.258800 ext 2031 Fax: + 233.21.258811 Cell: + 233.244.386792 Handle: eosiakwan Snail Mail: Pmb 208, Accra-North Office: BusyInternet - 42 Ring Road Central, Accra-North Blog: http://blogs.law.harvard.edu/eric/ Slang: "Tomorrow Now"