Africa’s Internet Woe’s….
Send this article to Twitter!
There’s an interesting article here (Rwanda Trying to get connected) about an American entrepreneur who tried to start an internet cable company in Rwanda. The article highlights some of the difficulties he’s encountered. He was hired after the Rwandese minister met him at a wedding party in Boston!
Bottom line: Africa has to lay the fibre optic cable under the sea, otherwise, it’ll be left behind once again.
I don’t understand what’s taking so long. These countries get loans for just about everything. Why can’t they all sit down and apply for a joint loan that will pay for this under-sea cable? what’s the problem?
LOL… while you “ban” Indian firms from Kenya… the Rwandese will steal a march on us…
I say… let an Indian firm like Reliance or Infosys or Wipro open a BPO center in Kenya & they will lay their own fibre!!!
The fibre to India was a private venture not government aided… if they waited for the Indian govt… well, they would still be waiting & missed out on the IT boom!
CT:
Are you sure the fibre cable in India was totally a private venture? The telecommunications industry is heavily regulated by governments, even in America (re: The FCC)
Yes… the “primary” impetus for internationalising/globalising India’s IT backbone was due to Reliance’s purchase of Global Crossing’s assets…
Regulation is DIFFERENT from laying fibre… And the FCC does NOT lay or pay for fibre… neither should or does the CCK…
CT:
Yes – but remember in 1991, India started opening up it’s economy and as part of that effort, the private and public sectors made a concerted effort to develop this infrastructure.
I work for US’s premier fiber-optic amenity company & totally agree with CT’s comment that FCC neither lays nor pays for fibre optic cable.
As a company , we design, build and operate the most advanced telecommunication networks thus we consider ourselves to be in the “construction industry” and not telecom industry ….which is highly regulated and taxed.
FCC regulates telecom providers of products/services like radio, television, wire, satellite and cable.
ME:
Since your in the industry, what do you think it will take for Kenya to get going with it’s under sea fibre optic cable plan.
Okay CT – you win!
KE – Oh, you don’t say??? (Ebu, I dance a jig…)
ME – Yeah, please help us get our arms around this… I wish Kenya (or a Kenyan) company would just lay undersea fibre but I think there are financial constraints!
What i’ve read on Kenya’s sea fibre optic plans is not consistent. I first heard that it was entirely World Bank funded. I then read that GOK is seeking to raise Ksh 6 Billion and it has committed Ksh 1 Billion. Then again there’s the Seacom project which is approx. to cost $300M (Approx Ksh 4.5B).
All in all, its a capital intensive venture, even in the US. Was talking to our CEO and they had a hard time getting both bank and VC funding. The company was funded by an INDIVIDUAL and he paid CASH…..yeah, there are bowlers in the US
.
If we open the Kenyan mkt to international players, they will definately come in and lay the fibre optic. Internet in Kenya is pathetic esp for the business environmt. For this reason, GOK has to create an enabling environment if it expects to create wealth, reduce poverty etc.
CT says that private sector should do it but it is a very expensive undertaking for the local private ventures. How many BPOs are in Kenya? I’ve only heard of Kencall and Sasanet. My bf is in Kenya trying to set up one and he is paying Ksh 110,000 per month for pathetic speeds…not to mention that he has to deal with power black outs etc.. The cost of an industrial generator is Ksh 400, 000. He is paid in $$$ so he can afford it but what happens to the ordinary business man who cant afford this?
Do wazungus have to be the ones to come in and make all the money? GOK has to help create a level playing field or else that nonsense of 500, 000 jobs per year is nothing but that…nonesense !!!
Sorry to blog on your blog but i’m tired of empty promises by GOK.
To answer your question, Kenya needs action. Either GOK lets other players come or it gets funding from WB or other agencies
Disclaimer : Before anyone lashes out at me for attacking GOK….i, me, myself am a Kenyan na Najivuni Kuwa Mkenya here in the US of A
.
ME – The comments “discussion” between KE & I was about having “others” (read foreigners) starting BPOs in Kenya…
I support anyone opening up a BPO in Kenya even if 100% foreign-owned. I believe these BPOs will eventually lay/fund or encourage others to lay fibre.
I wish the GOK were to assign/commit 20% of Safaricom’s proceeds into laying undersea fibre… IF no private players step up. For the private sector it is a chicken or egg situation. They have done so locally i.e. between major towns e.g. KDN.
I think given the right “environment”, the private firms will step up. The CMA is a hindrance coz a “private equity” venture is NOT allowed to raise funds from the public.
If all we need is KShs 6bn (of which part can be funded by bank loans) then I feel there are enough Kenyans (& East Africans) who would buy into this venture.
Apart from individuals, there are many firms e.g. AccessKenya, KQ, HomeGrown & EABL who would benefit from cheaper internet access as they expand their global footprint… They would be another source of funds.
Finally, there is Safaricom & Celtel who would/could use the cheaper access to bypass Telkom entirely. KShs 6bn is chump change to SafCon!
Me.
Kindly send me an email ….
I ran a BPO / Software Development house in Kenya serving business in the US and would love to learn more about what it takes to lay fiber
I have felt the pain while working in Kenya – VOIP quality is poor and remote server connections pretty poor and inconsistent
Thanks
KE, to answer your question, the international development industry does not give loans or grants to finance large scale infrastructure projects. For a myriad of reasons they just don’t hence the reason why the solution HAS ALWAYS BEEN AND WILL ALWAYS BE public private partnerships.
ME, to add another layer to your observations, I believe the perennial dilemma that countries face in this realm is lack of or insufficient positive sentiment on Return on Investment, as you’ve said it is very, very expensive and too risky a gamble for the faint hearted, and two, ColdTusker you hit the nail on the head=poor financing vehicles!!!!! I’d bet the last hair on my head that investments of this scale by either the government or the private sector requires BOND financing, isn’t that how all the industrialized nations have done it?
Seems to me like the major delays in the numerous fiber optic projects are 1) maintaining the liquidity to offset the huge capital outlays especially when there is still uncertainty over ‘ownership’ of the infrastructure e.g. quarrels with SA etc 2) the multi-jurisdictional layers of the project i.e. dealing with many state bureacracies.
Anyway guys we may be getting ahead of ourselves because it appears that Kenya might actually face a ‘glut’ of bandwidth when the dust finally settles, I even think this may be adding to investor anxieties i.e. too many cooks spoiling the broth!
Hi,
I couldn’t find an email address so I thought I’d post on your blog. Our site has currently launched a section called: African Accounts: Sustainable Development Through Entrepreneurship, and we’re interested in featuring you as an expert author and promoting your blog.
If you could get in touch with me, I can give you more details.
Thanks so much. Great blog!
Stefanie
I have alot to say about this topic in addition to countering some comments made by both CT and Sijui.
I hope to do this by the weekend bcoz kazi hapa ni mob.
My company has a very unique business model and its a small wonder why we are no. 1 in this industry. Since i signed an NDA there’s very little i can disclose. I actually need to find out what info is proprietary and what is free-for-all. I will be back.
v1, what is ur email address?
To add on to Sijui’s remarks, I think that bond financing would be the only viable option by GOK. Private Equity financing would be marred by regulatory red tape, but groups like the G29 or Kenya capital partners could establish a consortium and raise funds from their investors.
Private sector financing bottlenecked by firms that would look at the investment from a net present value aspect as oposed to the the future value creation opportunities that the project will generate….. whilst we have some rich folks around, they pale in comparison to the Americans who can drop hundreds of millions in cold hard cash to fund an undertaking of that magnitude!
On the issue of bandwith, its been reported that we are only using about 2 gigabits and Seacom alone is expected to add 640! what to do with all the extra glut?
Stevo… bond financing can also be done locally… I say find the cheapest money so if its foreign cash then so be it…
Now… as to the Private Equity facing “regulatory hurdles”… well, that is exactly my point… the GOK should NOT impede these ventures but encourage them…
As far as the “glut”… let market forces take care of the glut… All the “excess” fibre laid in the 1990s has been absorbed. Why? New media e.g. videos & better quality at that! There was no Youtube… now there is…
The 640 Gigs will be inadequate once more Kenyans get on the web!!!
People did you read today’s article in the Standard? It confirms that total cost of the project (TEAMS one) is in the $100-110 million range; GOK will own 40%, Etilisat Communications of UAE will hold 20% and the balance 40% will be held by a consortia or single company that wins the bid for laying the cable.
Is 40% ownership a big enough inducement? Or in other words is holding a 40% stake in the risk economically attractive for the private equity players?
CT, seems to me that if the GOK is allowing SEACOM and the others to race to the finish there are no regulatory bottlenecks…..seems like an open playing field to me.
I find it hard to believe that the GOK cannot come up with $100 million dollars (that is really not a lot of money)
I also fiind it hard to believe that local wealthy Kenyans cannot come up with that money privately (think of all the billions that have been stolen over the years). So, what’s the problem? when people steal money, they are either afraid to re-invest it or they don’t know how to re-invest it. And I think this is part of the problem in Kenya (those private individuals who could fund this project are sitting on their money like hens because they don’t know what to do with it)
This is part of the CULTURAL problem that Africa as a whole faces when it comes to trying to generate private funds.
Question:
Why can’t the GOK borrow the money from a bank like Barclays or Standard Chartered?
Sijui – I was replying to ME about “private equity facing regulatory barriers”… I do not know if there are any in Kenya… if there are, then GOK needs to get the heck out of the way!
KE – GOK does borrow from banks e.g. as T-Bonds & T-Bills… but there are borrowing limits. They could also borrow on specific projects but unless the “loan” is guaranteed by the GOK, the banks look at security & collateral.
Kenyan banks can’t lend to/for specific projects without meeting regulatory requirements e.g. collateral, cashflow, etc. If they do lend then their risk profile increases. KShs 7bn is a lot of money, even for Barclays. That is almost 6% of BBK’s assets let alone the smaller banks.
A project of this sort is considered cashflow negative for at least 2 years… and if there is a default… well, you own glass rods on the ocean floor!!!
KE, I completely agree $110 million is not a lot of money, and that the culture of kleptocracy and risk aversion hamstrings us badly when it should not! That being said we are where we are…….this will be a good indicator of whether Kenya has the ability to finance the massive infrastructure projects it needs using many avenues.
Sijui & KE – $110mn is not a lot of money in the USA but for Kenya, it is…
http://bankelele.blogspot.com/.....-2006.html
Barclays(K) is Kenya’s largest bank had assets of KShs 118bn so KShs 7.5bn is a lot of money!
Fast growing Equity was only KShs 20bn!
CT:
I guess it it, but then what? How the heck are they going to fund this cable? it looks like the only option is foreign investment/ownership.
They should borrow the money from China ($100 million is pocket change to them)
Better late than never….
KE, Cold Tusker, Sijui…is anybody home….:) ?
From the article, i cant believe the Govt of Rwanda can give a guy a contract after a meet-up in a wedding party. I soooo beleive in networking but what happened to a competitive bidding process?
ColdTusker…..
-I agree with you about ANYONE laying the fibre. However, since you mentioned a BPO that is 100% foreign owned, i thought there was a local cap on that in Kenya???
-I agree with you that GOK should commit some of Safcons proceeds into this project.
-You mentioned some of the companies that would benefit from the fibre. I say VERY MANY consumers both as individuals and businesses would benefit. I live in the US, fibre optic cable is the way to go.
-You’re all taling about BOND financing. Why isnt anyone talking about a syndicated loan?
Sijui….
-I do believe the Intl Devt Industry DOES fund such projects. I’ll do my research and give you examples.
However what they prefer to do is subsidize the interest rates. I heard that WB did so for Kencall. Then why is God’s green earth cant Kencall pay their employees ????
(My pal, a senior employee, quit coz he wasnt paid for months!!!!!!!!!!!!!!!!!!)
-The ROI on fibre optic cable is a guaranteed. However, as earlier said, this is not a venture for the faint hearted. The company has to maintain liquidity for a very long while. In my company we have still not began making profit but when we do the Investor will be smiling all the way to the bank.
-Risky? Oh YES! My company mitigates this by buying the easements where fibre is laid. For this reason, we also consider ourselves a “Real Estate Company”.
Since Kenya’s fibre will be laid under sea i do not know if easements can be purchased.
Stevo…….
What to do with all the extra bandwith?
As CT said, let the market forces deal with it.
Its always needful to expand capacity to unforseen magnitude. Case in point….Katrina and now the Brigde at Minnesota.
KE…..
$100 Million is ALOT of money for a project in Africa.
However, i STRONGLY believe the cost will be WAAAAAAAAAAAAAY more than that. Payroll alone is so significant coz you are talking about Engineers etc
Whoever is funding this project better be prepared with some “fat” contingency coz if not, i see it being stalled.
As Sijui said, there’s need to maintain liquidity to offset the capital outlay and this could happen for years.
casinò slot machines online…
colds pinched Dominic needle milker breathtaking …
off track betting california sports pavilion…
Oslo!locations projectile Shantung …
new jersey state and small business health insurance…
bowdlerizes restricts pinching.troublesomely …
7 card…
valence,Guenther ramblings instantly,…
world wide vegas online…
Constantinople exploited ceasing …
apply credit card bad credit…
embracing femur congressional fingerings …
gratis poker texas holdem…
Esposito.propounding masquerade?pigeon …
from home insurance agent…
truthful electricity!Noah:gratuitous consequents stoned …