BPOs to get Sh500m subsidy

October 17, 2008
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, NAIROBI, October 17- Companies that have been contracted to provide third party business functions will now benefit from a Sh548 million subsidy from the World Bank.

Kenya ICT Board Chief Executive Officer Mr Paul Kukubo on Friday said the money was part of the Sh8.9 billion ($114.4million) grant received from the International Development Association (IDA) to support bandwidth capacity for the operators .

“This support will ensure that Kenya is able to compete on a global scale. It will also help us build a competitive Business Process Outsourcing (BPO) industry and thus put the country on the international outsourcing map,” the CEO told reporters.

The rest of the money will go towards the Transparency and Communications Infrastructure Project (TCIP) and will support other ongoing initiatives such as digital villages.

The subsidy is expected to reduce the cost of bandwidth by 50 percent. Currently, local BPO firms pay Sh27, 405 for a megabyte of bandwidth compared to Sh15,660 and Sh7,830 paid in countries such as South Africa and India which have well-advanced outsourcing sectors.

The high cost of bandwidth in the country is attributed to Kenya’s dependency on satellite-based connectivity, which is expensive and unstable compared to that offered by the fibre optic cable.

“The objective is to bring the Internet connectivity bandwidth to a competitive level globally, to grow the number of locally bred BPO operations and also attract foreign partners to invest in the country,” he added.

Mr Kukubo said the capacity support would be in place until the undersea fibre optic cables land in the country in 2009.

The process will be done in two phases with the first stage being to give subsidies.  The second part beginning January next year will involve the purchase of bulk bandwidth to enable the operators benefit from economies of scale.  

He explained that the subsidy was open to all BPO firms (but not industry suppliers) but they would first be required to register with the ICT Board after which an appraisal would be done before disbursement is made.

“The Board will audit the companies and oversee the disbursement of the funds to the operators upon receipt of applications,” he emphasised adding that the companies would also be required to sign Memorandum of Understanding agreement with the Board.

Firms that have been in operation for more than three months as well as those that were the offering outsourcing services as from July 2007 would be among the over 30 beneficiaries. They will not be required to repay the money but one of the criteria would be their ability to enhance job creation in an attempt to develop the sector.

Mr Kukubo pledged to publish on the Board’s and the Public Procurement Oversight Authority’s websites all the contracts, which would be awarded to ensure accountability.

At the same time, the CEO announced that Kenya would be sending a high level delegation to the Silicon Valley in a bid to develop long term partnerships for the development of the ICT sector.

The delegation, which will include government officials and representatives from the private sector, would seek to change perceptions of the Silicon Valley community about Kenya.

“We want to deepen our strategic engagements with ICT companies globally in order to increase Foreign Direct Investment in the sector because we believe that this will have great impact in employment and wealth creation,” affirmed Mr Kukubo.

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