ICT entrepreneurs face a myriad of challenges. But as Zachary Ochieng finds out, it is not all doom and gloom for those who have the spirit to soldier on.The Information and Communication Technology (ICT) sector has been one of the key contributors to the impressive growth performance in Africa over the last decade. To sustain this growth momentum, it is imperative that African governments, besides fostering peace and stability, create an environment that would be conducive to the growth and development of ICT entrepreneurs and nurturing young talents similar to the Silicon Valleys in India, United States, Israel and other countries. Recognising the economic potential of ICTs for Small and Medium-Sized Enterprises (SMEs), they should be assisted in increasing their competitiveness by streamlining administrative procedures, facilitating their access to capital and enhancing their capacity to participate in ICT-related projects. An example would be to offer incentives in form of tax rebates to ICT entrepreneurs who export their goods or services out of the country, inorder to encourage export of ICT services.

Private equity always expensive

Michael Macharia, founder & Group CEO, Seven Seas Technologies (SST), the top local ICT integrator and provider of integrated business and technology solutions, says today the only source of capital is private equity or loans from commercial banks which are always expensive and hence it is time the Government invested in a pool of funds to support ICT entrepreneurs in  form of Government private equity either by teaming up with  private quity firms that are well established, who would then manage the fund and also guide and mentor the enterpreneurs in their Boards  to ensure proper deployment and utilization of the funds for growth .

“Entrepreneurs would be encouraged to develop products for export if, for instance, the Government offers them loans which can be written off later and  tax rebates on the revenues generated from exports. Countries like China and the Philippines are offering 10-year tax holidays to their IT companies. This way, Kenya can become a regional ICT hub”, Macharia says, adding: “As an ICT company, our largest overhead cost is the people element of our business in terms of salaries, travel and training. If these people develop and offer unique  products and services to the regional and international market, then we should qualify to get rebates!.. Otherwise what motivation do we have to innovate and be the next Silicon Valley beyond personal sheer determination and will?”

Access to capital remains a major constraint

While appreciating that Kenyan entrepreneurs have great ideas with more young talents waiting to be nurtured, Macharia says access to capital remains a major constraint. Arguably one of the most successful ICT entrepreneurs in the region, Macharia, 34, ventured into business at the age of 24 using his own capital, later bringing on board a venture capitalist and evenutally a leading private equity firm and has since transformed the  SST group into a billion shilling plus business.

Macharia cites the Indian ICT industry that has witnessed excellent growth in the past two decades. Capitalizing on its advantages of talent pool, lower cost of operation and the innovative remote delivery model, India has established itself as a global leader in the ICT sector.
Collaboration fostered between new innovation destinations

Today, India is clearly acknowledged as the global services hub. He adds the foremost implication of innovations in the India ICT space was the collaboration that it fostered between the new innovation destinations like US, China and Israel. Between countries, there are lots of collaborative efforts towards raising funds to invest in state-of-the-art technology companies that will benefit both the countries. This leads to the development of the entire innovation ecosystem comprising of entrepreneurs, high-tech companies, startups and possible buyers .To achieve the same they created a culture or innovation and an ecosystem to nurture and encourage entrepreneurs. The Government, industry, institutes, investors and other stakeholders came together to create such an ecosystem.

“In Kenya, if we foster and encourage a culture of innovation and entrepreneurship, we could enable global competitiveness and equitable growth a reality in the ICT industry and other related Industry sectors”, Macharia adds.

Bitange Ndemo, Kenya’s Information and Communications Permanent Secretary concurs: “The speed of technological changes always is a problem in developing countries where capital is scarce.  It is often very difficult to catch up when enterprises are undercapitalised with less returns that take far too long to achieve the pay back before technology changes.”

Ndemo agrees that partnerships are necessary in order to inject optimal resources that can assure better returns and a shorter pay back period.

“One of the challenges we face as entrepreneurs is the acceptance of your own product in the market. The other challenge is the time it takes to be accepted as a successful entrepreneur”, Macharia observes.

Not enough role models in the market

Then there are also historical challenges. According to Macharia, there are not enough role models in the market or there is little or no effort  given by the media to showcase such success stories .The enterprenuers themselves also need to make an effort to showcase their successes. 

Moses Kemibaro, Business Development Director and co-founder of Dotsavvy Limited, shares similar sentiments.

“By far the hardest challenge when getting started is funding. Most ICT entrepreneurs in Kenya and regionally normally have to start using their own savings as well as funds from friends and families. This is how we started. We also aggressively pursued business when we started to keep moving and asked for referrals all the time. Networking was also key by looking for business everywhere - you would be amazed that business is indeed everywhere if you network a lot and ask for it”, Kemibaro says.

According to him,  another challenge is that of building brand awareness and visibility for your business - being unknown and unproven makes securing business really hard.

Competitive poaching is commonplace

“There are many challenges. The beginning is the hardest! Cash flow is by far the biggest one – ensuring you get paid is absolutely essential for the business to keep running. Securing and maintaining top notch talent is another - employees leave for better pay and competitive poaching is commonplace in ICT businesses. Establishing and maintaining good business practices and processes is another. I find that lately innovation in terms of offerings to be challenging since there is so much competition and you have to stay ahead of the curve to remain relevant when competitors are trying to win your customers.” 

The full article is available in the April issue of CIO East Africamagazine. Do not miss your copy.