Kaboro's Blog

Dimension Data South Africa, a subsidiary of Japanese telco, NTT Docomo, has made a bid for Access Kenya, a Kenyan ISP listed on the Nairobi Stock Exchange. Details here (via Reuters). This is interesting for a few reasons

Access Kenya has been struggling

Safaricom has been growing their corporate data offering (after their purchase of Onecom) and have systematically gone after Access Kenya’s key market (the corporate data market). The writing was on the wall for Access Kenya (and perhaps other ISP’s) after the Kenya Bankers Association gave the interconnection contract for the cheque truncation system to Safaricom (more here).

Best Exits in EA are still through M&A’s

There has been high activity in the M&A space in East Africa, but almost no listings with only two IPO’s so far (Access Kenya & Safaricom). If the DD/AK deal goes through, we will be down to one listed tech company (Safaricom has a huge data services business) on the Nairobi Stock Exchange.

• Internet Solutions Kenya was an aquisition of Interconnect Kenya (link here).
• Internet Solutions itself is an acquisition by Dimension Data South Africa.
• Dimension Data got it’s foothold in East Africa by buying ICL East Africa (then owned by Naushad Merali Read more).
• Dimension Data Group itself was eventually bought out by NTT Docomo.
• Copy Cat got into Tanzania by buying BMTL.

Revenue is still in System Integration & Infrastructure

The system integration sector does not get too much praise in Kenya, but there is quite an amount of money to be made in that space along with traditional IT infrastructure.

• Zuku has been able to raise a further 57.5 M USD (more here).
• Safaricom is currently rolling out it’s fiber network (the Safaricom Digital City project has a budget of 10B KES more here) and has had it’s data revenues grow to 4B KES (over the first half of FY2013)
• Even with all the issues plaguing it, KDN was able to find a suitor in Liquid Telecom.
• In the system integration space, you have Copy Cat Limited which closed last fiscal with revenues hovering around 65M USD and they have a target of 100M USD in FY2013 (more here), Seven Seas Technologies now rolling out in Zambia, Ghana and Nigeria.

Interesting times

Dimension Data is not yet out of the woods. Whilst they are offering a significant premium on Access Kenya’s trading price as of Friday the 3rd of May 2013, there may be other offers for Access Kenya. Whatever the outcome, it will be interesting to watch (and possibly lucrative for current Access Kenya shareholders).

I’d like to firstly point out that this is purely subjective (has everything to do with my palette). The following are my top picks for coffee in Nairobi, in no particular order.

• Jacana Coffee - Available at the River Cafe, you have a choice on how it’s roasted (they stock green beans) and ground. So, depending on the machine you have at home (espresso coffee typically requires darker roasts, finer grinds – percolated coarser grinds and you can get away with a medium roast), you can order what you want. It helps that the beans are fantastic. I buy 1 kilo every two months from there.

• Pete’s Coffee - Available at the iHub. Pete is the de facto  barista for the tech community in Kenya. His coffee is a blend of Kenya’s finest though he refuses to disclose his sources (we demand Open Source coffee!!). This coffee is one of the best blends available in the Kenyan market for espresso based drinks. He sells whole beans and can also grind to your specifications on request.

• Gatamboya Coffee – So, I’ve had more than my fair share of coffee in this life, but this coffee blend, by Dormans, is hands down the best I’ve had out of a filter machine. Not as great when you use it for espresso based drinks, but for filter coffee or the french press, it’s divine. The beans are available from the new Dormans outlets. You will need your own grinder though, as I do not think they grind the beans for you.

• Java’s Ethiopian Gourmet – Nairobi Java House stock this. Decent for espresso. It’s the best beans they have in stock at the moment.

• Out of Africa  – They have great coffee, they just do not sell whole beans which means that the coffee does not retain it’s flavour as long as it ought to, nor do you get options with regards to the grind. I only use their medium roast coffee for filter coffee purposes. They currently have a sale though at all Nakumatt stores.

If you think I have left out any great sources, please feel free to comment and we can add to the list. There are other sources but I have left them out as they are not as reliable (quality-wise)/easy to find/accessible etc.

It’s been a while since I wrote anything on this blog (close to one year to be precise). I’d like to say that it’s been because I was busy, but the truth of the matter is that I was rather lazy. I was also trying to find my North. My career has changed, now working in Media after previously working in ICT Infrastructure. At the end of the day, it was a simple decision as to whether to follow the tried and tested career path I had ahead of me or to follow what to me is an unknown path – the results remain to be seen. Robert Frost best sums up my thoughts on the matter.

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;

Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.

I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I–
I took the one less traveled by,
And that has made all the difference.

To the unknown

Kenya has made great strides in ICT in the last eight odd year.  We have moved from being what can only be considered 19th Century living (poor electricity supply, no internet connectivity, barely any telephone access etc), to being one of the regional ICT innovation hubs, with companies like Safaricom (Kenya’s telecommunication juggernaut, which is one of 4 companies in Kenya to have revenue of USD 1B + [KenolKobil, KPLC & Kenya Airways being the others], they are behind M-Pesa.), Ushahidi (who build crisis mapping software), the iHub, multiple incubators and more co-creation facilities. We have the capacity to innovate. We have a great developer base in Kenya. We have all it takes to be successful…

Software development is still not lucrative

Given the state of the market, this seems counterintuitive, but observe the numbers…. Which are our largest system integration outfits?

1. Seven Seas Technologies -  One of the largest indigenous System Integrators. Revenue? As of 2010, 24 Million USD (with today’s exchange rate, 2.14 Billion KES, read more).
2. The Copy Cat Limited -The oldest local System Integrator, they have revenues of over 50 Million USD (according to their website), with the current exchange rate, 4.45 Billion Kenyan shillings).
3. Dimension Data East Africa  – Though it’s not Kenyan, strictly speaking, it is of Kenyan heritage and still partly owned by the Sameer Group. They went over the 1B KES revenue mark a few years ago.

Now, these are very well run companies, the developer community would do well to learn from them, however, my issue is with the government.

The government is the single largest customer for ICT products and services in the country (for a while the telco’s were ahead though, but given the recent USD 117.9M grant (with the current SDR Conversion rate) which translates to roughly 10.5 B KES, given the current USD/KES conversion rate). The governments policys should look internally for services and products to use before looking externally, especially in manufacture. This is because the government has a greater responsibility that transcends the need to increase uptake of ICT. The government has a duty to ensure that:

This is the Wikipedia entry for the definition of a Banana Republic. The only modifications are in square parenthesis and italics, for the Kenyan context…
In political science, the pejorative term Banana Republic denotes a politically unstable country [every general election from the advent of multi party democracy has had violence, last case being 2007, be the judge] dependent upon limited primary productions(e.g. bananas [coffee, tea and flowers are the back-bone of our 'economy']), which is ruled by a plutocracy, a small, self-elected, wealthy group who exploit the country by means of a politico-economicoligarchy [the same names have dominated the political scene for the last 50 years, Kenyatta, Kibaki, Odinga, Moi. Uhuru, the richest man in Kenya, Deputy Prime Minister and Minister for Finance, is running for President in next year's General Election]. The term banana republic originally denoted the fictional “Republic of Anchuria”, a “servile dictatorship” that abetted (or supported for kickbacks) the exploitation of large-scale plantation agriculture, especially banana cultivation[Maize scandal, anyone?]. In U.S. politics, the termbanana republic was a political descriptor first used by the American writer O. Henry in Cabbages and Kings (1904), a book of thematically related short stories derived from his 1896–97 residence in Honduras, where he was hiding from U.S. law for bank embezzlement.
In practice, a banana republic is a country operated as a commercial enterprise for private profit, effected by the collusion between the State and favoured monopolies [Think the CMC Saga that's unfolding before our eyes at the moment

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