Computer Global Market
Insights and Opportunities
Overview: The computer and peripherals industry has for several years been one of the fastest growing business sectors in Kenya. Kenya imports 100% of its computers and peripherals, with a very small amount of total knock down (TKD) assembly done locally. The figures above reflect the estimated documented (i.e., formal) market only – when the informal economy is included, both the overall figures for Kenya‘s economy and the U.S. role in it expand considerably. Although U.S.- built computers are available with brands such as Dell, HP and Apple being visible, a substantial number of personal computers are imported by affiliates of European-based U.S. firms. These imports are not reflected in the above statistics as U.S. exports to Kenya, thus further distorting downward the actual U.S. share of the total market. The U.S. is, in fact, popularly regarded as the leading source of computers and peripherals used in Kenya, accounting for as much as 60% of the market.
The market for used computers is also significant with U.S. brands being brought into the country through Dubai. This makes statistics of exports from U.S. inaccurate, however evidence on the ground would show that the major brands in Kenya are HP and DELL (both new and used markets), both of which are U.S. manufactured.
The entry of submarine fiber cables was hoped to result in a significant leap in access and utilization of IP services, however the growth is attributed more to mobile telephony that now enjoys fiber speeds. Industry growth is still hoped to be in the 20–30% range once the market stabilizes owing mainly to the complete removal of duties on computer peripherals in June 2006 as well as recent removal of duties on computer printers and ICT equipment. Enhanced GOK procurements related to its e-government projects (including the recent introduction of online tax returns) are also expected to fuel growth.
The main competition for U.S. exports in this industry is Acer which has had aggressive pricing in the market, and carved a niche with the Acer Aspire One net books. The market for Asian clones or bare-bones has significantly reduced since full specification computers became affordable at Kshs. 20,000 to Kshs. 50,000 (USD 266 to 670). Market share for used computers may be up to 40%, with the major end-users being primary and secondary schools, colleges, internet cafes, and households. However that is bound to decrease as new computers have become more affordable, and the return of a 25% Excise duty on used computers is bound to keep new computers on the shelf longer.
Opportunities: The Kenyan market preference for desktop computer systems is largely skewed towards Duo Core systems. The basic specifications are as follows: RAM – 1-3 GB; Hard Disk Drive – 80/120/160 GB; 17-inch monitor (LCD); USB Keyboard/Mouse; Onboard processor – 1.8 GHZ Duo Core and above;
Onboard modem; Full multimedia (FMM); Media Card Reader; and DVD/CDRW.
Import and excise duties for NEW digital processing machines (comprising at least a central processing unit and an input and output unit, HTS code: 8471.41.00) and peripherals were effectively zero-rated (16% VAT removed) in June 2006.
The ongoing Kenyan government and the World Bank initiated Kenya Transparency and Communication Infrastructure Project (KTCIP) continues to spur creation of digital villages in rural and urban areas, facilitating connectivity for the country's emerging business process outsourcing (BPO) industry, and accelerate e-government services. Other project initiatives that are being supported under the KTCIP include:
a) The Digital Villages Project - e-centers that provide a suite of services to the public via computers connected to the Internet, digital cameras, printers, fax machines, and other ICT equipment. This initiative is expected to support the development of at least 300 digital villages over the next 3 years.
b) E-government and Mobile Communications Project - this will entail the acquisition, deployment and maintenance of robust applications to be used for e-government initiatives, the government information portal, and support the development of SMS and IVR e-services.
c) E-government Applications - Phase I will involve digitization of the pension administration system, driver's license registration, and wealth declaration. Phase II will involve the digitization of the High Court Registrar's office, Registrar of Companies, while Phase III will support an Integrated Population Registration System (IPRS) and Land Information and Land Registration System.
Government Information Portal - aimed at strengthening the provision of information on the existing portal developed by the Ministry of Information and Communication (www.information.go.ke) through the development of information services and web content over the next 3 years. This will entail financing the purchase of web servers, internet bandwidth, computers and software.
SMS and Interactive Voice Recognition (IVR) - entails the development of innovative communication and information applications deployed on mobile phones via SMS and IVR technologies. Potential applications on the mobile telephony include early warning systems, data monitoring (e.g. weather station readings) and the provision of agricultural extension services.
Electronic tax collection (ETC) initiatives are well underway with the majority of large companies in Kenya‘s formal sector (i.e., major retailers, hotels, etc.) already compliant. However, given the size and diversity of Kenya‘s informal economy, tax collection at point-of-sale in Kenya has grown significantly with introduction of Electronic Tax Registers. Most formal establishments risk severe penalties if found not to utilize ETRs. In January 2008, the government launched the system that will enable workers to file income tax returns online, has been piloting the project. Online tax returns for corporations are already ongoing and available.