Regional debate

26 - 28 NOVEMBER 2001 - NAIROBI, KENYA

E-Trade Bridge, Kick-off Meeting for Kenya

29 November 2001

Session 1: Opening

Official opening

Peter Muthoka, Chief Executive,
Kenya Export Promotion Council (EPC),
opens the e-trade bridge kick-off in Nairobi, Kenya

Peter Muthoka, Chief Executive, Kenya EPC

Peter Muthoka, Chief Executive, Kenya Export Promotion Council (EPC), started by telling the meeting: "Information, as they say is power, and information that is shared increases prosperity. We want to share our information with you as you share your information with us."

Kenya, he said, had already developed a partnership between the public and private sector because it recognized "the importance of people working together". The meeting continued this commitment to partnership. "Business strives best where there is peace and stability and cooperation," he noted.

E trade, the EPC CEO said, is "very relevant and critical to trading internationally. We in Kenya want to be in the forefront of e-commerce." Micro- and small enterprises, he added, must understand "this is the tool you will need to use now. IT is the way forward, and IT is going to be boosted by this initiative."

Jean-Denis Bélisle, Executive Director of ITC, noted that the meeting was the third segment of a series put together by ITC for Africa Trade Week in Nairobi. The first three days were extremely successful, he reported.

For this meeting, 17 key players had been invited, particularly members of the Kenyan National Task Force on E-Commerce, a major co-sponsor of this event. ITC, for its part, worked through its e-Trade Bridge Programme.

"Today is the first time it is presented anywhere," he said. "It is possible thanks to the partnership with EPC. We are absolute convinced that countries that take the time and trouble to develop e-trade to make their companies competitive are the countries that are going to win. Kenya seems to be ahead of the game. This is why we wanted to come here."

The initiative can be traced back three years to a time when many trade ministers asked ITC about e-trade admitting that they were afraid of the impact of developments and that their countries are not ready for the challenges. "Your country is much more e-literate than many others," Mr Bélisle pointed out.

A number of donor organizations, concerned with humanitarian issues, wondered why developing countries should devote resources to building up their e-structure when there were not enough schools for all children or health services. "We say, we agree, but unless a bit of time and attention is devoted to trade you are missing the opportunity to generate the revenues that will enable you to pay for more schools and health services."

The ITC e-Trade Bridge Programme was begun to contribute added value to the collective efforts to increase e-competency. "We wanted to be targeted on action. This is what ITC is about."

Thanks to the Swiss government ITC was able to invite some 30 national teams representing the public and private sector to Montreux, Switzerland, for three and half days of intense brainstorming, backed up by one year of research, on the challenges of the digital economy for developing and transition economies. This resulted in a handbook.

Other pilot projects included the first ever coffee auction on the Internet, organized from Brazil. That auction of gourmet coffee brought sellers a premium of 60-70% and everything sold within 12 hours.

ITC had also produced a book on the "secrets" of e-commerce: 100 questions that SMEs wanted to ask, with one-page answers and references

The centre had also organized business-sector round tables on IT and e-trade. These were all directed towards SMEs: " We think they are the ones who have to begin to do business differently."

The digital economy has created new business opportunities. Developing countries might find it hard to establish a place for their companies in hardware and software, "but applications are going to succeed on the basis of creativity," Mr Bélisle predicted.

The ITC Executive Director said that Kenyan entrepreneur Paul Kukubo of AfricaOnline had made an observation that struck him forcefully about the opportunities in developing countries." It used to be that big fish would eat small fish. Now we know that fast fish are eating up small fish. And fast fish are born everywhere. The more fast fish you have in this country, the better for exports."

Osman Ataç, Chief, Human Resource Development section, ITC, said that the e-Trade Bridge Programme is trying to offer support "so that developing countries can be fast in adopting new technologies that are available today".

The programme now has three components

a national platform for all stakeholders
a collection of tools and services for enterprises, particularly SMEs, and ‘multiplier’ organizations. These include a big, quite sophisticated programme of trainers
training for strategy makers

"As we move along we will expand it according to needs. We will be listening very carefully to your ideas and suggestions," he told the Kenya kick-off meeting

John Gillies, Senior Trade Training Officer, ITC, explained the background to the kick-off meeting and the work programme.

Session 2

The Kenyan e-Trade Balance Sheet

Friedrich von Kirchbach, ITC Market Analysis Section, noted three trends:

Growing internationalization of production and sales throughout the world: in 2000 it reached US$ 200,000 of world trade every second.
International marketing plays a key role for firms and countries. Globalization requires and rewards best practice in marketing.
Business processes are simplified and accelerated through electronic tools.

ITC offered several e-based tools, including interactive TradeMaps for assessing national competitiveness on 72 product sectors, being used by South Africa, Tunisia and Côte d’Ivoire.

E-trade in Kenya

Richard Bell, SwiftGlobal, noted three stages towards e-competency.

The first step focuses on saving money by moving from paper to email, but little revenue-raising is done. It is largely driven by IT specialists who have to convince management of the benefits.

In phase two businesses use electronic communications to exchange corporate data, using the Internet as a research tool. "They have started to move up the value chain. Senior management start to buy in. This is essential for moving from phase two to phase three."

In phase three, governments deliver services to citizens electronically, businesses transact with customers and suppliers across the Internet. "Phase three is e-trade. Senior management have become committed."

Bell reported: "Kenya is somewhere between phase one and phase three. Many companies are at phase one. A few are at phase three.

Some people queried whether Kenya could meet the demands of e-competency because the the problems with international connections and regulatory constraints. "We believe that attitudes in the government and the regulator are changing. From January international communication will be fast and efficient. Access providers have the skills and experience to meet the challenge," he declared.

E-trade in Kenya

Robert Gichira, Micro and small enterprise taining technology project, Kenya, outlined the process of peapring e-balance sheets, e-maps and e-action plans using the guide and technical assistance of ITC.

Mr Ogambi from the Kenya National Chambers of Commerce and Industry, Kenya, said part of the problem was that IT specialists tend to push for changes without taking time to ensure that the business community understood what they are proposing. "They have to make sure we understand what they are proposing."

David Sanders, General Manager, TNT International, Kenya, urged businesses along the supply chain to consult with each other and discuss their common problems in IT. "Individual parts of the industry need to get together, draw up a plan in tandem and go the ministry and sell it on a cost-benefit basis." Informal SMEs represented a major sector that could be served by entrepreneurs.

Enos Sabwa, Kenya International Freight and Warehousing Association, Kenya, said businesses would love to be able to move into e-trade on a developed-country scale but companies presently lacked expertise. "We need to do some kind of training that will reach the grass roots. Capacity-building for us is very important. Where we will get funds, I don’t know." He proposed reducing duties on computers to enable as many people as possible to buy the machines.

Several speakers urged a relaxation of the regulatory restrictions on competitiveness in telecommunications.

e-Trade balance sheet – macro environment

Rosemary Amondi, EAN Kenya, said the government’s 1999 policy statement proclaimed an objective to provide 1 line per 100 people in rural areas and 20 lines per 100 people in urban areas by 2015. The current rates are 0.16 and 4 respectively. The target would therefore increase teledensity fivefold. The modesty of these targets has been questioned.

However, the present situation was characterized by unreliability of connections to the Internet and high cost of bandwidth and connectivity. It is not conductive to investment, either in infrastructure or the SME telecommunication sector.

There is currently no legislation in Kenya that governs the conduct of business over the Internet. Nor does the law provide for electronic books of accounts. No law deals with electronic fraud, and the standard of proof required for fraud cases is very high. Computer evidence may therefore not be admissible as it may be tampered with. "Kenya may have to review its laws in the light of developments in other jurisdictions. The major problem is the delay."

She added: "In addition to clear action plans for an e-trade strategy for Kenya, high-level support and championing by the Government is required for SMEs to participate productively in this new market place."

e-Trade balance sheet: enterprise and sector level

Mugure Kabugua Mugo, E-commerce Solutions, noted that Kenya has about 1.3 million MSEs, employing 24 million people. Nearly two-thirds are rural-based. There is a minimal use of marketing and promotion and the majority do not make use of technology.

Most SMEs have an exclusive orientation to the domestic market. Only 5-10% are reported to be involved in exporting, and of these very few have adequate access to ICT.

The first use of the Internet in Kenya was in 1993. At the end of 1995 the number of email accounts was estimated at 1,000. By 2000 the number was estimated at 50,000, while Internet users totalled some 150,000. The number of licensed ISPs reached 30. The main users are multinational organizations, international organizations and NGOs (50%). Government and educational institutions account for less than 5%.

The majority of Web sites are run by exporters of products or services: tours and travel (58%), hotels and restaurants (20%), arts and handicrafts (16%), agriculture (4%), manufacturing (1%) and shipping (1%), according to a survey by AfricaOnline in 1999.

The main problems for the business community in Kenya in adopting e-trade practices are: