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The Streets of Nairobi

How is telecommunications shaping Nairobi's economy and consumer culture?

May 30, 2005

How is telecommunications shaping Nairobi's economy and consumer culture?

Kenya’s President — Mwai Kibaki — initially moved vigorously to reduce the rampant corruption and economic interference that characterized the administration of his predecessor Daniel Arap Moi.

He also moved swiftly to add street lighting and remove street children from downtown Nairobi, sending them to training institutions, which has cut down street crime. But it is not clear that changes will be deep or lasting.

There are more rich people and more poor people. Yet the changes in downtown Nairobi are unmistakable, with shops and restaurants formerly owned by Asians slowly, but steadily, coming under African ownership, while whites are rarely seen on the streets.

The slump in tourism in Nairobi is painfully evident when a tourist walks past a souvenir shop or makes the mistake of entering the municipal market, where a crowd of vendors descends on him like a hungry family at the sight of food.

But next to shuttered souvenir shops, one new industry is booming: telecommunications. Cellular telephones are everywhere and almost every block has at least one young person with a stand selling telephone calls.

Competition is so fierce that a tourist who owns a mobile phone on the GSM system can purchase a chip (SIM) for less than $5 to make it work as a local telephone.

Internet cafes are ubiquitous as well, ranging from the struggling establishment with a few old computers to efficiently run local networks with several dozen machines and a number of knowledgeable young technicians.

More impressive even than these establishments, with their low prices (less than $1 per hour of use) and efficient management, is the demand for them. From early morning until well after dark, Kenyans of all ages sit at these rental computers preparing documents and exchanging emails.

Closely connected to the Internet cafes are international Internet telephone centers, where Internet-intermediated international calls cost less than one-tenth the price on landlines.

These accomplishments of the private sector are the more impressive when they are placed in the context of the Kenyan regulatory system. Cellular telephony is booming in spite of high rates. Cell phone calls cost the average user about $0.25 per minute. Internet connections are expensive, too.

Twenty hours of Internet use per month costs $46 in Kenya, in contrast to $27 in Ethiopia, $20 in Vietnam, and $9 in India. Yet with 12 Internet users per 1,000 people, Kenya is closer to India (16 users) than Ethiopia (one user).

Despite the many users, prices are higher, connection speeds are slow and Internet bandwidth is terrible.

The leading English language newspaper, The Nation, editorialized on the subject recently.

“…[T]his government has bungled its entire strategy for liberalizing telecommunications. When it was not too late to get off the starting blocks, it was massaging the rules to rhyme with the notes of certain players.”

“First, there was the licensing of the so-called Regional Telecommunications Operators to compete with Telkom Kenya — the fixed line state monopoly — outside Nairobi. Almost three years after the winners were named, nothing has happened on the ground.”

“In a country where [there are only 16 telephone lines per 10,000 people], while it costs Sh100 [$1.25] to make an overseas call, compared to Sh72 in South Africa, there is immense scope for improvement through greater competition.”

Not that South Africa is a paragon of virtue in telecommunications regulation. If the editorialists had chosen to compare Kenyan rates with some rates in Asia, the contrast would have been far more dramatic.

Downtown Nairobi has not yet recovered its economic vigor. Reputation has lagged reality as white residents continue to steer clear of downtown streets, while tourism in the capital has been hurt by the combination of Nairobi’s reputation for urban dangers and the larger global threat of terrorism.

More fundamentally, the jury is still out on whether the Kibaki Administration will succeed in changing the government in Kenya from a tool for enriching a narrow elite to an institution that provides the rules and enforcement that make business ventures and job creation attractive.

The good news about Kenya, as exemplified in its telecommunications sector, is that economic development is waiting in the wings.

When permitted, Kenyans respond rapidly and effectively to new opportunities, bringing technical skills to bear in providing new services and lower costs to their fellow citizens.

The bad news, unfortunately, remains too much the same: Instead of facilitating development, government policy too often stifles it in the interests of insiders. If only the government would let development happen.