KENYAN GOVERNMENT WANTS CHANGES TO EASSY PROTOCOL

Telecoms

The Kenyan Government has fundamental disagreements with the EASSy Government Protocol signed in Rwanda and it is hard to see how these disagreements will be bridged. Balancing Act’s Isabelle Gross spoke to the Permanent Secretary of the Ministry of Communications and Information, Bitange Ndemo on a visit to London last week.

According to Ndemo:” The Kenyan Government is not going to sign the Protocol unless some fundamental issues are solved before. Over the last years the Kenyan economy has gone through a liberalisation process and this includes the telecommunications sector whereby the role of the Government is to facilitate the expansion of the private sector and not to interfere with it.”

From this perspective, it fears that NEPAD may have an overbearing influence on the project:”The NEPAD protocol implies that at some stage a type of “governmental body” supervised by the NEPAD secretariat would be created to manage the project. NEPAD will have a lot of power in this project. How will it for example communicate to the Board of the SPV? We fear that the form of communication between NEPAD and the SPV would be in the form of directives”.

The Kenyan Government maintains that a regional protocol of this kind is illegal as it will override national law:” The IGA (has the power) to overrule all regulatory agreements in East and Southern Africa and therefore that would make it illegal in Kenya. We want EASSy to stay private with a shareholders agreement. NEPAD has no role in this project even when it defends the principle of open access to EASSy. At first we want the EASSy project to be out of any governmental control and later on we can discuss about the open access model. We fear that the current situation is potentially stopping foreign interests and investment”.

The Kenyan Government fears the influence of South Africa in NEPAD:” NEPAD is controlled via South Africa. We are all brothers and sisters and therefore should work together! We don’t want any control. Personally I think that the e-Africa commission is overstepping and has lost directions with what NEPAD main role and tasks are.

But the bottom line for Kenya is that it needs a cable as soon as possible if it is not to lose potential global opportunities, particularly in outsourcing:”For Kenya’s economy the cable is a matter of life or death and therefore all means are good to get it. Right now there are some outsourcing opportunities coming up. Some European companies have shown interest in outsourcing work in Kenya. These opportunities only happen once. If the EASSy project is further delayed we would need to continue to rely on expensive satellite backhaul for data and voice transmission. Further delays in the project would stop opportunities in the outsourced market”.

Ndemo feels that the Protocol is a step backwards in terms of regulatory approach:”The protocol that has been signed by the other countries needs to be domesticated in terms of its content. The protocol reflects a different stage in the regulatory environment. As it stands now it will take us back to a regulated environment (versus a liberalised environment) and what access would it be and at what cost? NEPAD has no resources to do it and who should invest with this protocol? There is already the EASSy consortium.

At this point, Ndemo’s fellow national, Telkom Kenya Managing Director Sammy Kirui (who was with the PS) chipped in:”The EASSy consortium is ready to address the issues around the SAT3 consortium. We don’t intend to go back to the monopoly of SAT3 and its blocks. The question of price can be addressed today. At that time (when the SAT3 consortium was set up) there was no regulator. Today the telecommunication sector is more open and there is a regulatory framework in place to deal with complaints/issues with regards to access. Operators are not here to keep prices high and they acknowledge that if they offered lower prices they will attract more customers.”

Ndemo cited the example of Caribbean regulators addressing similar access issues with Cable and Wireless:”Access to the cable is an issue that today can be dealt with the regulator. EASSy has come a long way from a regulatory and financing point of view. The question of (the) access model and price can be addressed too”.

So how will things move forward? According to Ndemo:“ The EASSy consortium has already contracted Alcatel for the construction of the cable. The financing is in place. At this stage Telkom SA can’t do anything. They can’t do what they did in the past when they pulled out of the Africa One project and started SAT3”.

But what does the Kenyan Government intend to do?:”Kenya will support the EASSy consortium or build a redundant cable”. But if it has to go it alone, how will it do it?:”The money will be raised on the Kenyan Stock Exchange. Bonds will be issued but there is also the possibility of a partnership with the UAE. Bonds could be convertible (to) equity after two years. (The return on investment would be)”not much, less than the banks rates. The redundant cable project could be structured around another SPV”.