The Internet and Business Process Outsourcing in East Africa: Value Chains and Networks of Connectivity-Based Enterprises in Kenya and Rwanda
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Internet connectivity is widely considered to be a game changer for knowledge economies of developing countries. The arrival of submarine fibre-optic underwater cables in East Africa in 2009 and 2010 is seen by many as a strong case in point. The fast evolution of the information and communication technology (ICT) landscape of Kenya and Rwanda that ensued has attracted the attention of actors from private investors, development agencies, NGOs, policymakers and many other groups. Kenya became a role model for its wide-spread adoption of mobile money services and a burgeoning ICT application development sector; Rwanda’s government became known for its explicitly ICT-oriented development agenda as well as large-scale ICT projects in government, health and education that aimed to latch onto fast-growing mobile subscription rates and 3G network roll-outs. For this report, we set out to examine the role that changing connectivity has played for a particular component of the ICT sector in Kenya and Rwanda: ICT-enabled business process outsourcing (BPO). BPO has been a priority in the national ICT strategies of both countries, so we anticipated this sector to provide a fertile ground for comparing expectations and practices of the roles that changing connectivity has played following the deployment of fibre-optic cable infrastructure. BPO is also an interesting sector because internet connectivity is at the heart of its value chain: At first glance, fast internet connections should go a long way in bridging geographical distance and enabling Kenyan and Rwandan businesses to tap into continuously growing BPO demand from all over the world. BPO is also inherently a global, or at least a widely geographically distributed, industry. Our analysis was therefore designed to shed light on the risks and opportunities of establishing connectivity-based local sectors that are bound to be exposed to international markets and competition. However, the development of ICT sectors fell short of many original hopes. Internet connectivity proved to only function as a catalyst for economic growth in combination with other enablers. Competitive advantage is always relative, and, in the case of Kenya’s and Rwanda’s BPO sectors, India and other Asian BPO destinations have maintained the edge in international markets. Despite the overall positive evolution of ICT-based subsectors in Kenya and Rwanda, the role of internet connectivity for growth in knowledge economies continues to be a complicated one, including for connectivity-based enterprises. Future opportunities might actually lie in ‘close’ (local and regional) markets, and policymakers (and indeed all economic actors) will need to continue to learn and adjust to other unexpected developments brought about by internet connectivity.