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Business Management

Kenya: Why local IT firms don't want government projects

Companies such as Craft Silicon a banking software solution provider and Seven Seas, a top enterprise ICT firm, have built great global brands that have soared beyond the borders of their Kenyan origins. But why is it that such innovations are only recognized once they are accepted internationally and not being taken advantage of by the government?

During the recent National Innovation Forum in Nairobi, government and the private sector traded accusations on why local ICT firms do not tend to work on government contracts.

Complicated procurement process

John Waibochi, the CEO of tech company VirtualCity, the maker of innovative agricultural software solution Agrimanagr, points at the problem of procurement issues in the government.

“More than 60% of our revenue is from agriculture and we project that it will grow over 70% this year. My core business is agriculture but yet in agriculture, the biggest buyer is government, but we shy away from them. Simply because we are not experts in the procurement system,” Waibochi said.

He added that he is in the innovation space and he would not want to build a procurement company. This confusion around government procurement procedures has seen major ICT projects flop due to a lack of good understanding and indeed, corruption.

Chrispine Odhiambo, Secretary at the ICT Authority, said that education on procurement procedures for companies will help to grow local innovation.

“Even if you put in newer laws on procurement, true innovators still shy away because they do not know how to work the system, it does not encourage local innovation,” Odhiambo said.

“The current procurement system is highly opaque,” he added, and he urges the government to develop a procurement platform that is understandable to ICT innovators.

The Safaricom security tender is a good example. After the government single sourced Safaricom to build a security infrastructure that includes CCTV cameras and a state of the art command centre, the whole process was shrouded in mystery, as investigations were launched to ensure that the contract was above board.

The parliament security committee had to question the government over the project and this took a long time before the project could be launched. For any company, the massive waste of time spent in doing due diligence with the government can eat into profits.

Non-compliance and corruption

“What is the role of corruption in terms of the procurement process and how it is affecting ICT?” Fred Matiang’i, the Cabinet Secretary for Information, Communication and Technology, posed. This alluded to the fact that there are some companies that do not adhere to the rules and end up taking corrupt avenues to gain tenders and procurement.

“I am not accusing anyone as it were, but let us also be candid,” Matiang’i urged. He pointed to the Anglo-Leasing corruption scandal, which has haunted the country for many years.

“I very much support the idea of looking at our procurement regime and ensure that we take a bold and deliberate effort as government to support local companies. But the private sector also needs to work with us to deal with aspects of corruption,” Matiang’i said.

Henock Kirungi of the Public Procurement Oversight Authority (PPOA) said that some local companies usually pull out of projects halfway in. He also pointed out that the local companies do not usually meet the needed requirements the government expects.

Slow government payments

Agosta Liko, the CEO of PesaPal which is also a major digital payment enabler in Kenya, said that the slow payment of government also discourages local companies from applying for tenders. Currently when companies win government tenders, they are not paid the whole amount until they complete the project.

As this is the practice in most cases, the Kenyan government might take up to three months after the project is completed to pay the service providers.

“What can we do to make sure that the government will release the money in good time, so that I don’t need to borrow from the bank?” Liko said.

Borrowing from banks eats into the contract profits and forces companies to mark up their tender amount, in the end making them not competitive.

“Scaling is about timely payments. Give me the project, find out how to measure the milestones and pay in good time, the rest will take care of itself,” Liko advocated.

But a company like JamboPay, an online payment platform, has been successful in landing public jobs. Last year, the company was awarded a tender to electronically process Nairobi County payments. This was a huge score by a local company that started small and is growing. As of November last year, the company had processed Kshs 484 million (around $5 million) since the agreement with the County of Nairobi.  

Now, as tech business grows it is surely up to public and private entities to meet in the middle to enhance local ICT firms?

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Vincent Matinde

Vincent Matinde is an international IT Journalist highlighting African innovations in the technology scene.

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