1. Trade and Regulation in
Services in Africa: Kenya’s
Experiences – Export of Professional Services
& Education Services
Richard Gicho, Economic Consultant – Karia Capital Ltd.
Addis Ababa, 5-6 June 2013

2. The Service Elevator?
The Service Elevator: Can Poor Countries
Leapfrog Manufacturing and Grow Rich on Services? (The
Economist, 05.19.2011)
Conventional Industrial Modernization Wisdom: Countries move
from agriculture (unskilled labour), to manufacturing (semi-skilled
labour) and later to services (skilled labour). E.g. Japan, South
Korea
Traditional manufacturing exports build specialization (skilled
workers), exploit economies of scale and are exportable. Just like
modern services! E.g. call centres, data transcription, software
development etc in India
India’s IT software & services revenue ($88bn, 2011) is 2
times Kenya’s GDP ($34bn, 2011)!

3. Agenda
Examine the link between National
Development Strategies, Education Services
and Professional Services
Education Services in Kenya
“Strategy for Export Promotion of Professional
Services in Kenya”
Conclusion

4. EXPORT IN EDUCATION
SERVICES KENYA
Where do Professionals Come From?

5. National Visions for Education
To achieve national development strategies and attain
middle income country levels countries in the EAC
require more investment in education services
 Uganda Vision 2040, Kenya Vision 2030, Tanzania Vision
2025, Rwanda Vision 2020,
 Less developed nations abound with unskilled
workers but modern services require skilled workers
Kenya: Main Sectors Agriculture Manufacturing Services
Required Level of Education
Unskilled
Labour
Semi-skilled
Labour
Skilled
Labour
Sector Contribution to GDP (est.) 25% 15% 60%
% of Labour Force 75% 25%

6. Rise of the “paper engineer”
 Imbalances in skills shortages and skills
mismatching prevalent in the EAC region.
 “Political Economy Issues: ad-hoc regional centres
of excellence (60s to early 80s); Gov’t Civil works &
The Paper Engineer”
 Intuitively development of Services Sector is
inexorably linked to education services sector
“Professionals are crafted, not born that way”

7. Structure of Education Services in Kenya
• Adult Basic Education and Training (ABET)/NFE (6 years; +18)
 Increased government spend has with Free Education policies has seen an increase in
enrollments in Primary and Secondary Levels, 30% and 89% respectively (2005-2011)
 There has also been an increase in the number of public secondary and private university
education institutions, 47% and 59% respectively (2005-2011)
Educational
Institutions
No. of Years Age
No. of
Educational
Institutions
No of Students Enrolled
Pre-Primary
Not formally
integrated
-
39,500 2,370,049
Primary Schools 8 years 6 – 13+ 28,567 9,857,900
Secondary Schools 4 years 14 – 17+ 7,297 1,767,720
Technical Institutions
Flexible and
Variable.
Formally
integrated
Flexible and
Variable
629 104,173
Universities 4 years 18- 21+ 34 198,200
Total 76,027 14,298,042

8. Education the Great Equalizer:
drivers of cross border trade
 Population demographics: ages 0-24 account
for 64% of total population
 Kenya government education sector reforms
& increased expenditure
 Perceived low quality of education
 Ability to select course of choice (in private
university institutions)
 High cost of private education
 Lower regional university entry requirements
 Introduction of Broadband!

9. Education the Great Equalizer:
drivers of cross border trade
 Limited Enrolment Capacity
Number of Students Total (%)
Total KSCSE Students 2011 410,586 100%
Did NOT Attain Entry Qualification to University (C+) 290,928 70.86%
Attained Entry Qualification to University (C+) 119,658 29.14%
Available Public University Spaces 32,600 27.24%
Attained Entry Qualification to University (C+) but no space
available 87,058 72.76%
Attained Entry Qualification to University (C-) in Tanzania &
Uganda 108,810 26.50%
Total Seeking Alternative Higher Education Channels 195,868 47.70%

10. Trade in Education Services
Mode of Trade in Services Education Services Sector Kenya's Example
Mode 1
Cross-border supply: distance
education, virtual educational
institutions, education software
and corporate training through
ICT delivery
-21 universities with distance learning programs
- Kenyans with access to distance learning
programs from international universities
- Multinational institutions e.g. UNEP, conduct
continuous training of international staff through ICT
- International entry examinations e.g. TOFEL,
GMAT
Mode 2
Consumption abroad: students
studying abroad
- Catholic University of East Africa (CUEA) Masters
Education 2006/7 foreign students 41.4%, 2007/8
foreign students 34.8%
- Strathmore University CPA 2002-2007 had 18
Ugandan students, ACCA commenced 2007, 70
Tanzanian students.
- There is a large Kenyan Diaspora population in
US and UK that grew largely out of migration due
for education purposes rather than labour migration.

11. Trade in Education Services
Mode of Trade in Services Education Services Sector Kenya's Example
Mode 3
Commercial presence or
programme or institutional
mobility: local university or
satellite campus, language
training companies, private
training companies
-Australian Studies Institute (AUSI) based in Kenya since 2000
offer degrees from Edith Cowen University, Perth and Perth
Institute of Business and Technology
- International schools providing international curriculum e.g.
French School, German School, International School of Kenya
- International language institutes: e.g. Alliance Francis
- international research institute that are part of The
Consultative Group on International Agricultural Research
(CGIAR), namely International Livestock Research Institute
(ILRI), and World Agroforestry Centre (ICRAF).
Mode 4
Presence of natural
persons: professors,
teachers, researchers
working temporarily abroad
-University exchanges and Joint research e.g. UoN & MIT
JoinAfrica Project, HBS professors lecturing at Strathmore
Business School
-Research exchanges e.g. ILRI, ICRAF, Primate Research
Centre, KARI etc
- Short Course held by international experts

12. Cross-cutting Constraints/ Opportunities
Cross-cutting Challenges
• Regional differences in education
system (8.4.4 and 7.4.2.3)
• Poorly maintained infrastructure
especially in public institutions
• Recognition of qualifications –
bridging courses required
• Access to Finance
Cross-Cutting Opportunities
• Growth in demand for regional
education services
• Potential to increase human
capacity skills base
• Potential to reduce / eliminate
current barriers (with EAC Common
Market Protocol & MRAs)
• Potential for governments to drive
demand of education services (e.g.
government sponsored study abroad
programs for civil servants)

13. EXPORT OF PROFESSIONAL
SERVICES IN KENYA

14. Kenya’s Trade in Professional Services
Kenya’s Population is 41m with a GDP in 2011 of
$34bn.
60% is accounted for by the services sector including:
Government (civil servants; education; health)
Travel & tourism (airline seats; hotels)
Transportation (movement of goods)
Telecoms (provision of calls / post)
Manual semi-skilled work (examples include: restaurant work;
construction, road building, retail and cleaning).
Professional Services accounts for less than $2bn (est.
2010) Included are those services provided on a private sector basis
where a high level of skills (usually certified) are required. (excluding
Tourism and Remittances)
Exports in Professional Services account for less than
3% (est. 2010) of total sector size

15. Kenya Service Sector Market
Structure
“Strategy for Export Promotion of Professional Services in Kenya” was
completed in 2008, with the aim of diversifying Kenya’s exports. Some findings
included:
Modest size for a country the size of Kenya, accounting for approximately
10% of the GDP
Kenyan professional service providers are considered to be the key
players in East African region
Generally dominated by a few large players, particularly in banking,
accounting, insurance and advertising sub-sectors. Many small local
players in the other sub-sectors
Based upon the UK model, with many UK influences
Highly fragmented many specialist trade bodies
Nairobi centric, followed to a much lesser extent by Mombasa.
Increased Services Exports driven by introduction of Broadband!
Exports of services private sector led

16. Selected Service Sub-sectors for Exports
Focus
Five sub-sectors were initially selected as areas of focus (Accounting; Insurance;
Non Banking financial services, BPO, & ICT/ ITES) and three thematic areas
identified. i) Professional services, ii.) Financial services and iii.) IT & IT Enabled
Services.

17. Cross-cutting Constraints/ Opportunities
Cross-cutting Challenges
• Scale
• Infrastructure
• Regional Non-Trade Barriers
• Brand Recognition
• Access to Finance
• Skills Base (shortages &
mismatch)
• Low levels of FDI
• Access to Opportunities
• IPR / Data Protection Laws
Cross-Cutting Opportunities
• Growth in demand for professional
services (regional skills shortages &
mismatches)
• Potential to reduce infrastructure &
transaction costs
• Potential to reduce / eliminate
current barriers (with EAC Common
Market Protocol)
• Potential for governments to drive
demand of professional services (e.g.
engineering services)

18. Are Services “the new boat” for
development? Services Matter for
Development
 Provide inputs to other sectors: Important inputs for other
sectors that are key for national development
 Engineering services contribute to the development of infrastructure
and are essential to the productivity of economic activities
 High skill base of professional services sectors contributes to
expansion of human capital which is a crucial pillar in growth
strategy of most African countries (e.g. education services)
 Reduce Transaction Costs: Accounting and legal services can help
reduce transaction costs which are a significant impediment to growth
in Africa
 Increase Firm-level Productivity: Average labor productivity of
Southern African firms that use (accounting, legal and engineering)
professional services is 10-45% higher than of firms that do not.
 Professional services can become an important source for
export diversification in EAC

19. Services: The wind beneath my wings!
 Services may not enable Kenya to leapfrog
manufacturing but tandem investment in both
sectors will enable faster development growth
 “Build the Concrete Engineer” Investment is
required in regional trade in education services,
professional education (especially mid-level
training),
 Kenya’s demographics show there will be
continued pressure on the education system to
produce more professionals capable of meeting
its national developmental goals

20. Thank you!
Richard Gicho
Director, Consulting & Research
*Karia Capital Limited*
Suite No B12, Branton Court,
Ndemi Lane, Nairobi, Kenya
Email: <gicho@karia-capital.com>
Tel: +254 723 996 628