Power Utility Distributor Extends Internet to Homes

The fibre to the home partnership between electricity distributor Kenya power and telecommunication services providers like Safaricom is a novel approach to cost cutting efficiency and universal access. 

On cost efficiency, apparently it costs about KSh 7,000 to bury a meter of fibre optic cable, but the cost of hanging the internet cables on power poles is significantly lower.  Kenya Power also says that it will make savings by using its existing labour force to connect fibre cables to homes. 

See more here.

Linking Trade Policy to Supply Chain Constraints

Since the birth of the GATT in 1947, multilateral negotiations have focused primarily on reducing barriers to trade for specific products and sectors: tariffs, subsidies, and different types of nontariff barriers. A recent report by the World Economic Forum, in collaboration with Bain & Company and the World Bank (WEF 2013), Enabling Trade: Valuing Growth Opportunities (World Economic Forum, Bain & Co. and World Bank 2013) concludes that improving border management and transport and communications infrastructure services could increase global GDP by up to six times more than removing all import tariffs.

Reducing supply-chain barriers to attain 50% of the global best practice level – as observed in Singapore – could increase global GDP by some 4.7% and global trade by 14.5%. By contrast, the global GDP and trade gains available from complete worldwide tariff elimination amount to some 0.7% and 10.1%, respectively. The gains from reducing supply-chain barriers would also be more evenly distributed across countries than those associated with tariff elimination. A less ambitious set of reforms that moves countries halfway to regional best practice (e.g. Chile in Latin America) could increase global GDP by 2.6% and world trade by 9.4%.

A pilot project implemented by eBay shows that helping small and medium-sized enterprises navigate the regulatory regimes of importing countries could expand their volume of international sales by 60 to 80%. Given that small and medium-sized enterprises account for a large share of total economic activity, this type of targeted trade facilitation could have significant positive spillover effects on employment.

Such large increases in GDP would be associated with positive effects on unemployment, potentially adding millions of jobs to the global workforce.

What could be done to realise the large potential welfare gains from an approach to policy focussed on supply chain barriers? The World Economic Forum report makes five specific recommendations:

1. Create a national mechanism to set policy priorities for improving supply-chain efficiency based on objective performance data and feedback loops between government and firms;

Governments must work with businesses and analysts to determine the policies and procedures that will help reach key tipping points. A central component of this effort should be the creation of mechanisms to collect data on factors affecting supply-chain operations. These data can then be used to identify ‘clusters’ of policies that jointly determine key supply chain barriers, identify priorities for action, and assess progress.

2. Create a focal point within government with a mandate to coordinate and oversee all regulation that directly affects supply chain efficiency;

Given the importance of tipping points, governments need to design policy with an economy-wide vision and recognition that industry-specific supply chains are affected by different clusters of policies. Improving supply-chain performance requires coherence and coordination across many government agencies and collaboration with industry.

3. Ensure that small and medium-sized enterprises’ interests are represented in the policy prioritisation process and that solutions are designed to address specific constraints that impact disproportionately on these businesses;

Because small and medium-sized enterprises’ ability to overcome supply-chain barriers is proportionally more difficult, governments should pay special attention to the needs of smaller businesses. For example, one relatively straightforward policy identified in the report is to raise levels for customs-duty collection that are too trivial to merit serious consideration in order to facilitate small-business engagement in international markets; another is to ensure that initiatives to reduce regulatory compliance costs such as ‘trusted trader’ programmes are complemented by programs that are accessible to small and medium-sized enterprises.

4. Pursue a ‘whole of the supply chain’ approach in international trade negotiations;

Greater coherence of domestic policies is important, but a key insight derived from the case studies is that coordination across countries matters as well. Joint action will increase the overall gains from lower supply-chain barriers. International trade negotiations usually take a silo approach, addressing policy areas in isolation. Lowering supply-chain barriers requires a more comprehensive and integrated approach that spans key sectors that impact on trade logistics, including services such as transport and distribution, as well as policy areas that jointly determine supply-chain performance – in particular those related to border protection and management, product health and safety, foreign investment, and the movement of business people and service providers.

Such a ‘whole of the supply chain’ approach can be pursued both at the multilateral (i.e. WTO) level and in regional trade agreements. Doing so would greatly enhance the relevance of international trade cooperation for businesses and help generate the engagement that is needed for trade agreements to obtain the political support needed to be adopted by national legislatures and to be implemented by governments. As has been argued by many observers, one lesson of the failure to conclude the Doha Round is that what is on the table is not seen to make enough of a difference from an operational business perspective. A supply-chain approach has great potential to address this failure and in the process provide a low-cost economic stimulus for the world economy in the medium term.

5. Launch a global effort to pursue conversion of manual and paper-based documentation to electronic systems, using globally agreed data formats.

Many of the inefficiencies in the operation of supply chains reflect a lack of reliability due to delays and uncertainty stemming from manual paper-based documentation, redundancy in data requirements and the absence of pre-arrival clearance and risk management-based implementation of policy. A global effort to adopt common documentary and electronic data/information standards would reduce administrative costs, errors, and time associated with moving goods across borders.

To address some these challenges, it is hoped that the WTO negotiations on trade facilitation will be succesfully concluded in Bali at the end of this year, 2013.

Mobile Money Biggest Bank by Deposits

Customers’ cash deposits held by mobile phone companies in Kenya hit KSh226 billion as of December, making the telecoms firm Safaricom's MPESA money transfer service, Kenya’s biggest bank in terms of deposits.

The total deposits held in mobile money subscriber accounts by the country’s four mobile firms Safaricom, Airtel, Yu and Orange increased by 10 per cent between October and December, according to a report released by the communications regulator the Communications Authority of Kenya.

The amount surpassed the cash held by Kenya’s biggest commercial bank Kenya Commercial Bank, as measured by clients’ money whose total deposit is about Sh223 billion for its local operations.

“The mobile money transfer service continued to record tremendous growth during the period and the number of mobile money transfer subscribers grew by 9.4 per cent to 21.1 million up from 19.3 million recorded in the previous period.

Though the CCK report did not break down the amount held by each telecommunications firm, Safaricom’s M-Pesa is by far the biggest holder for the bulk of the deposits.

See full post here.

Postal Services Authority in Kenya Closes 56 Outlets

The Postal Corporation of Kenya (PCK) has shut down 56 outlets as increased Internet connectivity and widespread use of mobile phones has reduced demand for its services.

Data from the regulatory authority for the communications sector in Kenya, the Communications Commission of Kenya (CCK), shows that delivery of letters has fallen, with only 17.3 million sent in the quarter to December, compared to 19.7 million in the same period a year earlier.

This has forced PCK to reduce its outlets to 634 units in December, from 690, in response to the reduction in business that is compounded by the entry of private courier firms such as Roy Parcels, Nation Media Group, and security firm G4S.

“The postal market is on a downward trend as evidenced by the decline in postal traffic of local letters sent, and reduced number of postal outlets reported during the period,” said the CCK in a report.

The regulator said the Internet and other forms of communication like SMSs had overtaken snail mail.

The UN Central Product Classification classifies postal services into four main categories. Postal services related to: letters, parcels, counter services and other postal services which include mailbox rental services.

With regard to postal services pertaining to letters, during the period under review, communication via SMS increased significantly, an indication that the service could have consumed some of the traffic of local letters sent.

Mobile phone subscribers sent 3.6 billion short messages in the quarter, reflecting more than threefold growth on the one billion sent in a similar period a year earlier.

Increasing Internet use is hinged on the low cost of transactions, safety, and speed. As a result, instant massaging and e-mails have reduced the need for letter writing, denting PCK’s revenues further as more people turn to mobile phone-based platforms and computers to send money and information.

Internet penetration in the country stood at 41 per cent of the population in December (16.2 million users) from 22.7 per cent at the end of 2011.

International outgoing letters dropped to 1.9 million from 2.2 million, while incoming letters increased by 138 per cent to 191, 612.

The dwindling revenues have seen PCK turn to cost-cutting drives, including layoffs and selling of assets to remain afloat. The state owned firm, with an estimated 4,100 workers, is weighed down by millions of shillings in debt to pensioners and other creditors.

The CCK reckons that the corporation should diversify into financial services, especially agency banking, to reverse its fortunes.

“Deliberate measures such as national addressing system to facilitate delivery of letters to doorsteps, diversification into financial services and wireless Internet services across postal outlets, among others, could reverse this trend and revitalise the sector as happened in most developed countries,” added CCK. 

Kenya: Safaricom’s M-Pesa goes global with Western Union

Safaricom, Kenya’s biggest mobile operator, has announced a deal with Western Union, the international money transfer company, to enable its M-Pesa mobile money service subscribers to receive direct cash transfers from Western Union agents worldwide.

Consumers can now send money directly to the mobile ‘wallets’ of Safaricom M-PESA subscribers in Kenya from 45 countries and territories,” explains Karen Jordaan, East and Southern Africa Director at Western Union.

The service taps into Africa’s huge remittances flows, which the World Bank estimates to have totalled $40bn in 2010. 

See full piece here and related posts here.

Kenya's MPESA to Spearhead Seamless Mobile Financial Transfers in the Continent

Michael Joseph, the immediate former CEO of Safaricom, has been tapped to spearhead the expansion of M-Pesa to other African countries as part of a plan to have a seamless mobile money transfer service on the continent.  M-Pesa is already successful in Kenya, and is now also available in Tanzania, Afghanistan, South Africa, while a pilot service is on in India.

But Vodafone is looking at spreading the services to other African countries such as DR Congo, Lesotho, and Mozambique with the aim of linking the market.  This will see mobile phone consumers send and receive money across borders in a move that will pile pressure on traditional money transfer service operators such as Western Union and Money Gram who have lost market share in the local market.

“M-Pesa is the most successful mobile money transfer service in the world and with Michael is a sure bet to drive its regional expansion having been behind its growth in Kenya,” said a senior executive at Safaricom who sought anonymity because he is not the firm’s spokesperson. “The rollout of the service in the new territories will not automatically enable registered Kenyan subscribers to send or receive money.

“But there is a plan to link them to these markets in coming years,” said the source. At present, Safaricom subscribers can receive money from the UK directly to their mobile phones in transactions carried out in partnership with Western Union and Vodafone. Mr Joseph retired from Safaricom in November after serving for 11 years and passed the leadership mantle to Bob Collymore.  He sits on the board of Safaricom and Johannesburg-based Vodacom, which is owned 65 per cent by the Vodafone Group — which has operations in five countries including South Africa, Tanzania, DR Congo, Lesotho and Mozambique.

It was under him that Safaricom rose to become East Africa’s largest and most successful firm in terms of earnings, and a market leader in Kenya’s mobile telephony market with a 76 per cent stake.  By 2005, Safaricom’s grip on the Kenyan mobile market had been cemented and in 2007 the company launched its mobile money transfer service M-Pesa — an innovation whose implementation was credited to Mr Joseph’s courage and which paid off handsomely winning over more than 13.5 million subscribers by September 2010.

Transactions worth Sh596.8 billion have gone through M-Pesa since its inception.  The service accounted for 11 per cent of Safaricom’s revenues or Sh5.2 billion in the six months to September this year up from Sh930 million in the same period in 2008.  Safaricom has used M-Pesa as a value added service, successfully using it to defend and attract subscribers from rival networks.

The service has driven a revolution of sorts in Kenya’s financial services where it is being used for payment of utility bills, dividend, goods at retail shops and banking services such as ATM withdrawals, deposits and cash transfers.  It is this market position that Vodafone seeks to replicate in five African countries served by Vodacom, especially DR Congo, Lesotho and Mozambique. Mr Joseph’s brief will be to shepherd the rollout of the product in the three countries and to shore up its performance in Tanzania and South Africa where the mobile money transfer service is yet to penetrate the market.

Low cost

The service was launched in South Africa in September and Tanzania in April 2008.  Nearly half (47 per cent) of all money transfers in Kenya now take place through the mobile phone, according to a survey by Financial Sector Deepening, a research firm that conducted the survey for the Central Bank of Kenya.

This has seen traditional money transfer service operators lose their grip on the market as more Kenyans turn to mobile phone-based platforms.  Popularity of the service is mainly hinged on the low cost of transaction, safety, and speed. Mr Joseph succeeded Mr Grieves-Cook who had served as the KTB chairman for two consecutive terms since his first appointment in November 2004.  Under his chairmanship, KTB managed to put up aggressive marketing campaigns targeting domestic and international tourists.

In addition, the organisation partnered with international travel and leisure groups as well as the media and airlines to build a strong image for Kenya as a niche tourist destination.

Nation Media

Programme for Infrastructure Development in Africa (PIDA)

The Programme for Infrastructure Development in Africa (PIDA) was launched on 24 July 2010 in Kampala, Uganda, along the sidelines of the 15th African Union Heads of State and Government Summit.  PIDA is a continent-wide program to develop vision, policies, strategies and programs for the development of priority regional and continental infrastructure projects in transport, energy, trans-boundary water and the ICT sectors.

PIDA is a joint initiative of the African Union Commission (AUC), the New Partnership for Africa’s Development (NEPAD) Secretariat and the African Development Bank (AfDB) Group. PIDA's program scope is quite broad in coverage. It covers transport (air, sea, river and lake, lagoon, rail and road), energy (electricity, gas, petroleum products and renewable energy), ICT, and transboundary water resources (primarily irrigation, hydropower, and lake and rivers transport), and deals with the regional and continental aspects of these sectors. 

The motivation for this initiative is rooted in Africa's infrastructure deficiencies which continue to hamper the continents growth and economic development. Infrastructure deficiencies also lead to increased production and transaction costs which result in decreased competitiveness for businesses and thereby also hinder the implementation of social and economic development policies.  The 3 institutions further recognize that in Africa:

• There is access to electricity for only 30% of the population compared to rates ranging from 70 to 90% for other major geographical zones of the developing world (Asia, Central America and the Caribbean, Middle-East and Latin America)
• Transboundary water resources constitute approximately 80% of Africa’s freshwater resources. However, current levels of water withdrawal are low with 3.8% of water resources developed for water supply, irrigation and hydropower use, and with only about 18% of the irrigation potential being exploited.
• A telecommunications penetration rate of about 6% compared to an average of 40% for the other geographical zones, and a very low penetration rate for broadband services and fixed lines.
• A road access rate of 34% compared to 50% for the other geographical zones.
• The global competitiveness indices calculated by the World Economic Forum indicate that for Africa these indices are lower than those of other regions of the developing world and infrastructure appears to be the underlying factor that contributes most significantly to Africa's relatively low competitiveness.  In fact the 2009 Africa Competitiveness Report concluded that Infrastructure remains one of the top constraints to businesses in Africa.

Other issues to be addressed by PIDA will include: the need to fill information gaps on infrastructure deficits, causal analysis, development of prioritized strategic frameworks, establishment of infrastructure investment programs around RECs strategic priorities and improved implementation strategies for these programs.  All national aspects (including, without exception, physical infrastructure, national policies, institutional and regulatory frameworks, technical standards and benchmarks) will only be considered if they have an impact on, or could be affected by, the regional and continental aspects.

The PIDA initiative requires a total amount of USD 11,391,527, which includes the cost of an independent advisory panel of experts (supported by DFID), regional and sector consultative workshops (supported by NTCF and EU) and implementation of an infrastructure database (supported by the EU). The Sector Studies component alone requires a total amount of USD 7,552,343, with the ADF providing 25.6%; the African Water Facility (AWF) with 24.6%, the Islamic Development Bank (IsDB) with 23.3%, and the NEPAD-IPPF USD 2.0 million grant representing 26.5% of the cost.  

Sources can be accessed here.