Kenya aims to take on India in outsourcing

Monday, July 6, 2009

NAIROBI - Kenya is eagerly awaiting the imminent switch-on of its first fibre-optic cable, which many hope will spark an explosion in high-tech business and boost the East African nation’s struggling economy.

While many business are yet to work out how best to take advantage of the bandwidth surge, one company is primed to ride the digital wave and steal a slice of India’s call-centre market.

Horizon Contact Centres sits on the edge of the traffic-choked road that links the capital Nairobi to the airport and the coast. On the other side of the highway sit the open plains of Nairobi National Park, where wealthy tourists watch the wildlife. Only a few kilometres away lies Kibera, one of Africa’s largest slums, where an estimated one million people live in shacks amid rivers of sewage.

The contrast between these faces of Africa and Horizon Contact Centres could not be more stark.

The building is a glistening temple to technology, with biometric entry systems, an array of electronic backups designed to ensure 24-hour operation and chill-out zones for stressed staff.

Chief Executive Officer Dave Stewart persuaded a consortium of global investors to pump $6 million into the company, which he is convinced will open up a vital new income stream for Kenya.

Call centres are already well-established in South Africa, while some French-speaking countries in North and West Africa service their former colonial masters. In between, there has been only a void.

The key to the new market is the impending arrival of several fibre-optic cables, which will replace the current satellite technology, not only jacking up Internet speeds but slashing costs in East Africa.

“The fibre-optic cable is vital,” says Stewart. “Satellite is five or six more times expensive and it is unreliable.”

The government-backed TEAMS undersea cable is due to be operational in a few months, followed closely by the Seacom and EASSy cables.

Such is the expectation around the switch-on that President Mwai Kibaki compared it to the completion of the Kenya-Uganda railway line over 100 years ago.

“The economies of the last century were driven by railway connections, the economies of today are largely driven by the Internet and other ICT (Information and Communication Technology) links,” Kibaki said at a ceremony to mark the arrival of the TEAMS cable in the coastal town of Mombasa in mid-June.

While suspicions abound that the launch was a publicity stunt and that the TEAMS cable has not yet arrived, the excitement over the potential benefits is very real.

The government has an ambitious - many say unrealistic - plan to grow the economy by an average 10 percent each year.

While analysts feel much needs to be done in terms of productivity and the regulatory environment to unlock the full potential of the fibre-optic cables, they see outsourcing as a way to drive the economy forward.

“This industry would be another good foundation for the economy,” says Robert Shaw, a Nairobi-based economic analyst. “I would think as it gathers momentum … we will see an explosion in business.”

Kenya is in need of a leg-up. The economy is East Africa’s largest, but the country has one of the worst income disparities in the world.

The double whammy of the violence that followed the disputed 2007 presidential elections and the global recession has not helped.

Kenya’s economy - driven by manufacturing, tourism and agriculture - maintained strong growth of around 5.5 percent annually until 2008, when it dropped to 2.3 percent. The World Bank estimates growth will be 2-3 percent in 2009, hit by reduced exports, foreign inflows and remittances.

Stewart, however, believes the global recession can work in Kenya’s favour as companies look to cut costs.

“People realized India was cheaper, but there was a backlash,” he says. “Companies took their business back. Now things have changed.”

Kenya has all the ingredients of an outsourcing destination. The Kenya National Bureau of Statistics puts the average salary in the formal sector at $407 per month, English is a lingua franca and there is a highly skilled workforce to call on.

According to Stewart, the company received 6,000 applications within a few days of first advertising in February. Most of the company’s employees have university or college degrees.

Horizon Contact Centres began servicing its first customer - a British financial services company - on Monday and at the moment only employs 80 staff. But Stewart plans to employ 1,200 by mid-2010 and, if things take off, an extra 1,500 in an adjoining building after that.

He believes it won’t be long before a major call-centre industry is operational in Nairobi.

“We need competitors, a critical mass, to become successful,” he admits. “I think it will begin to happen over the next year.”

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