Kenya’s Tech Regulation Conundrum

A lack of regulation, or at least a more relaxed regulatory environment, have been directly responsible for Kenya becoming a hub of innovation, specifically in the mobile payments and banking space.

The gorilla in Kenya’s room is Safaricom. The posted a Ksh 21billion pre-tax profit yesterday, citing growth and profits in almost all areas, including 137% growth in data services, which they see as the next big cash cow.

Safaricom has directly benefited from this environment and their savvy marketing and business moves have left others in the dust. Businesses should be allowed to make profits and smart strategic decisions rewarded by profit and market position should be expected and encouraged – else why do they do it?

A couple of weeks ago new regulations, put together last year by the CCK, were floated by the Monopolies and Prices Commission. These rules were intended to curtail the massive growth of firms like Safaricom and the ScanGroup, to the detriment of competitors and the market as a whole. Naturally, the only firms upset with these rules were the incumbents.

Just yesterday, Dr. Ndemo, the permanent secretary for information and communications decided that Kenyan professionals who drafted these new rules weren’t professional enough and called in consultants from the United States to review them. While it is true that the Monopolies and Prices Commission is weak in ability to fulfill its mandate, this move comes off as an appeasement by Dr. Ndemo to Safaricom as it came out on the same day that Safaricom was having it’s annual shareholder’s meeting. It makes you wonder who dances to whose tune.

Both sides have good points. Smaller firms do have an uphill battle, not only due to their size, but also due to the unfair practices that larger firms tend to busy themselves with in Kenya to keep the competition at bay. However, large firms also have point. If they are playing fair, should they be punished for being better than everyone else?

Too much regulation in a sector can cripple a country’s innovative business growth, especially technology (see South Africa’s banking rules…). Dominant players have the same effect.

Maybe, instead of adding unnecessary regulations, governments should look to truly and strongly punishing unfair and dirty practices that are already on the books. A 200,000 Ksh ($2,500) fine is the most that Kenya’s monopoly commission can do, and it’s laughable at best.

4 thoughts on “Kenya’s Tech Regulation Conundrum

  1. I think Ghana has a similar problem where incubents ‘abuse’ their position with unfair practices and usually go unpunished. This week Glo through unofficial channels complained about sabotage and other unfair trade paractices in the telecom market in Ghana.

    So far both the NCA and the communication minsitry seem to be more concerned about not looking bad rather than trying to investigate and punish any culprits involved. In fact I believe if conclusive evidence shows no sabotage but just Glo’s own inabaility to execute quickly enough to launch, then they should be the ones punsihed as their comments hurt Ghana.

    I am sure Kenyan and Ghanaian professionals in a lot of sectors will fill up pages trading ‘war stories’ about unfair paractices by incumbents in all sectors.

    Sadly regulators usually dance to the tune of these large incumbents. Its time for regulators around Africa to show who is BOSS!!!

  2. the past 2 days the newspapers in kenya have been like Safaricom informercials. But what really strikes me is that the same PS who is cancelled the rules was there at the AGM of Safaricom, the PORK was at Safaricom’s recent product launch then few days later the new rules were recinded.

    So at the end of the day who is supposed to look out for the consumer if the PORK himself and he’s ministers and and permanent secretary are beneficiaries of Safaricoms largese.

    I’m not suggesting money is changing hands but im just saying if Safaricom calls you to sit at there product launch and you are the PORK or the permanent secretary clearly you have at that moment in time everything else is secondary in importance. So clearly Safaricom is benefitting from undue influence.

    http://www.nation.co.ke/News/Banking%20via%20phone%20made%20possible%20/-/1056/920928/-/egk5rtz/-/index.html

  3. Business are out to make profits. When you make profits due to your innovative products and marketing, you should not be punished. Celtel (the parent Zain company) beagan operations earlier than Safaricom and for the first few months it had more customers but were swloly edged out. So where was the dominance issue not coming up then?

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