Can Kenya Replicate The Silicon Valley Model?

Can Kenya Replicate The Silicon Valley Model?

By Frank Mutulu

In fewer than 20 years, Kenya plans to convert 5,000 acres of savannah into a technopolis already being dubbed Africa’s Silicon Savannah.

The ambitious $7 billion Konza Technology City is expected to catapult the East African country to the forefront of a technology renaissance.

In an interview with AFK Insider, Ada Mwangola, Kenya Vision 2030 assistant director, said the term Silicon Savannah is aspirational – Kenya hopes it will bear great similarity to Silicon Valley in California.

“‘Silicon’ is synonymous with our aspiration of innovation in (information computer technology) worldwide,” Mwangola said. “For instance, the Silicon Valley in California and the Bangalore Valley in India – Konza happens to be in the savannah and the only one in Africa, hence the term.”

Located 37 miles south of Nairobi, Konza is expected to create employment for 20,000 information technology professionals by 2015 and 200,000 jobs by 2030.

Nicholas Kitonyi, a financial analyst and contributor to Motley Fool and Seeking Alpha, talked to AFK Insider about the viability of the project.

“The 200,000 figure is expectation by the time the project is completed, and thus cannot be used to evaluate project viability, that is, by the year 2030,” he said. “However, this does not mean that more jobs will not be created from then onwards.”

The project, which designers liken in scale to creating another Manhattan, central London or inner-city Beijing, will be carried out in four five-year phases, with the first expected to be completed by 2017.

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While pundits say the project is not achievable, Mwangola differs.

“I think it is achievable. We need to be positive. Like all Vision 2030 flagship projects, they are ambitious and the intention is to have everyone contributing and participating. Konza is a public private partnership and hence private investments will be a major driver towards its achievement,” she said.

Phase one, which began shortly after retired President Mwai Kibaki broke ground for construction in January 2013, will be implemented concurrently with infrastructure development estimated to cost $300 million. In this phase, the government intends to inject $210 million for the basics – roads, sewer, energy and water – hoping that the private sector will invest heavily.

Infrastructure development will occur across the four phases towards realization of the Silicon Savannah. Such infrastructure will include an airport strip, general telecommunications hardware, railway line, transport corridor, primary, secondary and local routes.

The initial phase valued at $3 billion includes setting up business process outsourcing and information technology services structures, a university, community support services, a financial district among other civic amenities and infrastructure.

According to the master plan, phase two will include residential housing. Phase three includes installing a sewage treatment plant and water supply. The final phase is dedicated to the completion of residential and commercial structures.

Top Kenyan companies have expressed interest in the techno city including Safaricom, Kenya’s leading cell phone service provider which runs the M-PESA service – a mobile money transfer service with options to pay utility bills and transacts 27 percent of the nation’s gross domestic product.

Other local outfits interested in the Konza deal include Jomo Kenyatta University of Agriculture and Technology, Kenya Medical Research Institute, Wananchi Online, University of Nairobi, Nairobi Hospital and the Kenya Agricultural Research Institute.

Foreign investors have expressed interest in Konza Technology City, according to the Kenya daily newspaper “The Daily Nation.” These include: Google (U.S.), Research in Motion (Canada), Samsung (Korea), Huawei Technologies (China), Shapoorji Pallonji Group (India), Telemac (U.S.) and Telemax Technology Corporation of Taiwan.

Interest from such players has boosted chances of Konza’s success and is a positive sign for Kenya which hopes to become an information and communications technology powerhouse in the region.

The time it will take investors to start seeing returns will depend on where and when the money was invested, Kitonyi said.

“All these mini projects have different development life spans,” he said. “You could take each mini project and evaluate it independently, and determine its viability depending on investor requirements.”

Kitonyi expects those investing in residential and business blocks to start reaping the benefits just about the same time. It will take longer for those who invest in stadiums and schools, he said. “Late developers are likely to start gaining returns quicker than early developers, as they would find nearly everything (infrastructure) set for a successful business environment.”

Kenya is moving towards becoming a middle income economy, what analysts term as a “sub-emerging market.”

Post-election violence five years ago sent Kenya’s economic growth to negative territory. However, the country has recovered, posting average annual growth of about 4.7 percent. While the Silicon Savanna may play a role in moving the country toward a middle level economy, Kitonyi says there are other factors to be considered.

“Political stability and fight against corruption will be key. Without these two, Konza could end up being another white elephant,” he said. “The smooth (recent) election process and a calm environment re-affirmed the country’s positioning towards becoming a middle level economy.”