Interview” Mike Macharia
What reforms could promote the development of the ICT sector at the start-up level?
MIKE MACHARIA: The narrative around start-ups and innovation labs has somewhat outlived its time. The conversation now is around specific scale-up opportunities for small and medium-sized enterprises (SMEs). There are IT companies that have passed proof of concept, but now need to find a method for growth. Innovation centres are already well developed, and there is now a need for growth-focused initiatives. These will have to see start-ups change to have a specific sectoral focus with a model aimed at solving emerging market problems. Several sectors, such as health care and agriculture, have inefficiencies that could benefit from innovation. Furthermore, solving a Kenyan problem in any of these sectors solves a general emerging market problem, which means the solutions are inherently scalable. The traditional entrepreneur in Kenyan start-ups is going to change from having a purely IT background to an industry-based background, as people with these backgrounds are going to look to IT solutions.
How can start-ups achieve scalability?
MACHARIA: So far, there has been a lot of focus on the large companies as well as start-ups, but little attention has been paid to those in between. One thing that can be done for this segment is to provide mentorship structures for entrepreneurs. Additionally, platforms need to be in place to offer the support needed when testing ideas without risking one’s financial situation, such as a stipend programme that allows entrepreneurs to take several months’ leave from their place of employment to see if their idea works. Access to markets is a necessity when looking to scale tech companies, and more can be done to this end. Critical data for planning is also paramount for firms to orient themselves correctly towards market needs. Part of this is cultural, and companies need to be convinced that sharing their data is in their best interests. The next thing is finance, and particularly patient capital; there is no way SMEs can grow with rates of 17-18%. This cannot be left to banks, because they have risk profiles somewhat incompatible with SMEs’ needs. Biashara Bank is being developed to focus specifically on this segment, and it will have more flexibility as it will be guaranteed by the government. With matching grants from retail banks, SMEs could receive rates as low as 8%, which would make their growth realisable. The government is the biggest buyer in the economy and needs to leverage this power.
What can be done to promote the adoption of IT systems in the SME segment?
MACHARIA: With the current offerings of cloud and software as a service, any SME can access IT solutions at a feasible cost. Kenyan companies can quickly leapfrog in the cloud space, and the onus is on Kenyan IT firms to innovate in this area. The internet of things is also set to make a big change, and technology businesses that take hold of this opportunity will naturally outperform. Not much needs to be done to promote adoption, as the IT companies that do evolve and create solutions for SMEs will rise to the top. All that is needed is the entrepreneurs that create the solutions.
How do you see the readiness of the country with respect to human capital in the IT sector?
MACHARIA: First, the curriculum must be relevant. There is still some work to be done on aligning curricula with the private sector. Second, technical schools need to see a higher share of education investment to develop industry-critical skills. Third, internships must play a crucial role. Many IT companies are offering internships, but the government should do more to incentivise them. Fourth, there needs to be more career-focused entrepreneurship courses and networking forums intended for students who have an interest in leading or investing in companies within the IT sector.
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