Kenya BPO yet to overcome bottlenecks

A weak legal and institutional framework, insufficient investment, a dearth of tax incentives and lack of skilled labor are some of the challenges facing Kenya's business process outsourcing (BPO) industry, according to a recent study.

A study conducted in India, South Africa and Mauritius has found that Kenya is yet to catch up with popular BPO destinations such as Mauritius, South Africa, Ghana and India. The study was funded by the Canadian International Development Research Council and was aimed at informing policy decisions regarding the BPO industry in Kenya.

"For Kenya, the research found a widespread perception that it lacked an effective and focused marketing as a BPO destination; it is viewed as a country with challenged infrastructure, poor work culture/ethics and constraining socio-economic environment," said Tim Waema, a lecturer from the University of Nairobi and the research team leader.

The study indicted the role of the Kenya ICT Board, which was formed two years ago to market Kenya as a BPO destination and to expose the local industry to international markets and standards.

"We don't disagree with the research findings; the board can do better, but marketing the country is research-intensive and takes time," said Paul Kukubo, CEO of Kenya's ICT Board.

One of the most deep-rooted problems is in the level of training and exposure to the needs of outsourcing markets. Kenya does not have details about graduates and their qualifications, compared to India, which has a skills registry used by the industry for recruitment purposes.

"India introduces children to science and technology at a very early age and it has a National Skills Registry and in Mauritius, the national association works with the government to create an ICT academy to train for the industry," noted the report.

The study noted that South Africa does not have tax incentives but offers investment, training, skills support and funding, while Mauritius had abolished tax incentives except for a 15 percent corporate tax.

The study found that the key drivers in outsourcing and offshoring in both U.S. and U.K. are similar. The major industries looking to outsource include banking, investment management, insurance, legal, supply chain, logistics, transportation and health care.

No African country featured in the top 10 preferred outsourcing destinations for U.S. companies, while in the U.K., only Egypt was in the top three perceived best destinations.

The study contends that Kenya has key strengths, including a highly skilled and competitive pool of labor, neutral English accent, strategic location as a regional hub for communication and finance, and the generally warm and welcoming disposition that has allowed the country to thrive in tourism and hospitality industries.

The lack of data protection laws and a BPO sector policy in the country's medium-term timeframe for its Vision 2030 development plan has dimmed Kenya's hopes in outsourcing, as many countries are concerned about privacy issues and bad business practices.

Earlier this year, the ICT board paid McKinsey & Company US$500,000 to conduct an in-depth study about the BPO industry, and industry players are recommending that the report should be merged with these research findings to create an informed strategy for the BPO sector in Kenya.

The McKinsey study recommends strengthening the monitoring and evaluation functions of the ICT board as well as existing laws to provide a legal framework for ICT-BPO in the short term. Long term, the study recommends that the government should develop separate legislation for the ICT-BPO sector that is compliant with relevant international laws.