12 .
KENYA
Kenya ’ s power sector ‘ trilemma ’: diversification , affordability and transmission
MAY 2017
Kenya ’ s current dry weather is putting pressure on water resources used for hydropower generation . The prospect of severe drought during the hot season will necessitate greater reliance on thermal power generation , a more expensive source of power . In the recent past , over 350MW of geothermal energy has been added to the national grid . This should alleviate the pain of the increase in power tariffs during this dry weather period . Kenya ’ s energy strategy has prioritized 5,000 + MW of additional capacity through a diversified mix of sources such as geothermal , wind , solar , hydro and thermal . Kenya , like most countries in PwC ’ s recent Global Power & Utilities survey , is on a path to its own distinctive kind of energy transformation . Technological progress and product innovations , digital customer management and pricing / margin improvement will also influence our country ’ s path to energy transformation . We are on the right track with our new auction system which should improve accountability and bring costs down through an open system for wouldbe power producers to compete for power generation contracts . The PwC global survey participants also anticipate growth of interconnectedness and greater trading integration among neighboring countries . This rings true for us in East Africa , where we already have two-way buy-sell arrangements with Uganda and Tanzania and a growing demand for power in Rwanda . Kenyans should reap the benefits of the energy transformation and increase in geothermal energy but drought throws a serious wrench in the works and so does an election year . In the early part of 2017 , I expect most policy statements to be wananchi-related and focused on growing the economy and positioning Kenya as a favourable investment destination . I hope that policymakers will address some energyrelated areas like industrialization and agro-processing that will add value , create jobs and drive demand for power and infrastructure improvements . The prospect of severe drought , coupled with election year expectations , could be an opportunity to step back and reassess our national energy strategy . In my view , there should be more policy focus on transmission and distribution of electricity . A weak transmission and distribution network leads to overloaded lines which escalate the risk of line tripping thereby increasing losses . The government ’ s plan to raise the rate of electrification in the country calls for an increase in investment in the transmission and distribution network . While the national government has emphasized the generation of 5,000 + MW of additional capacity of electricity , it also needs to come up with ways of encouraging investment in the development of transmission and distribution infrastructure . One way of attracting investment in transmission and distribution would be through providing tax incentives .
A geothermal drilling rig sits at the Menengai geothermal site in Kenya ’ s Rift Valley . Photo source : Reuters Foundation .
Currently , the government provides withholding tax exemption on interest paid on foreign sourced loans used for infrastructure development . This goes a long way in relieving the financing pressure of the transmission and distribution network . The government could also introduce other incentives similar to what is already offered for the construction of power plants . For instance , materials used in the construction of power generating plants to supply electricity to the national grid are exempt from VAT . A similar exemption could be extended to the transmission and distribution infrastructure . The national budget process commences early this year and provides an opportunity to connect public policies ( like transmission and distribution network improvement ) with progressive tax policies and regional and county development , but an election year tends to magnify and politicize every change even when those changes make sense . Let ’ s hope that election promises of ‘ cheap power ’ don ’ t obscure the underlying issues with transmission and distribution and that the drought remains a forecast and not a foregone conclusion .
Edna Gitachu is a Senior Manager of Tax Consulting and Services at PwC Kenya .
In pursuit of healthcare delivery
With a compound annual population growth rate of about 3 % Kenya ’ s population is predicted to reach 65.4 million in 2030 and 95.5 million in 2050 . Interestingly , adults are the fastest-growing group in the population and are expected to almost triple in size from 21 million to 60 million by 2050 . While this is indicative of animproved quality of life and increased life expectancy , a largely dependent population and increased chronic and lifestyle diseases prevalence will significantly increase Kenya ’ s health care burden and total dependency ratios . Despite our physician and hospital to patient ratios being way below the World Health Organization recommendations , we have experienced numerous strikes by medics . These industrial actions always paralyze service delivery as we depend heavily on face-to-face human interaction . Kenya therefore needs to develop and sustain a reliable , accessible and affordable healthcare system and going digital is a viable option . Embracing digital healthcare provisions afford an opportunity to address some of these key healthcare demands in a cost-effective way while addressing key concerns like patient safety and return on investment . Kenya ’ s internet penetration rate in 2015 stood at 69.6 %, outdoing the global and Africa ’ s rates of 48.6 % and 28.1 % respectively . A third of the population ( 16 million people ) have access to at least one mobile device . Despite these outstanding statistics , healthcare is yet to capitalize on the possibilities offered by technology as explained further below . This sector has been outdone by financial services and recently , mass transportation segments in adoption of digital technologies and channels , through innovations such as Tala mobile based loan platforms and Uber . Mobile will create new care delivery models by connecting patients to the care network and facilitating continuity of care anywhere , anytime . It will allow consultations between patients and care givers through video and chat as well as ensure preventive care through fitness and monitoring applications . By addressing accessibility and affordability , mHealth is already changing how people seek health information , save on healthcare costs and manage their own health . Mobile health is complementing hospital visits currently and will replace physical interactions going forward , helping to ease congestion in health facilities and bridging limitations of geographical barriers . Kenya already has witnessed several mHealth products including Daktari , medAfrica and Sema Doc but there is room for more players especially in preventive healthcare , fitness and healthcare finance solutions . It is interesting to note that the existing products largely trace their roots to mobile service providers , insurance firms and even banks . Collaboration platforms will support real-time contact between patients and providers , anduse of patient data for learning and diagnosis . Solutions like telemedicine and remote monitoring by use of sensors and wearable devices will facilitate the paradigm shift towards home and self-care . Telemedicine allows
doctors to perform initial diagnosis , treat and monitor patients from afar and could help reduce trips to foreign facilities . It will cut costs for patients on travel , reduce the strain on hospital facilities by diverting traffic and increase revenues for hospitals which provide remote consultancy services . It is just a matter of time before the “ Uber bug ” bites healthcare and hospitals must prepare for digital disruption early enough . Hospitals should also leverage the power and presence of social media which is becoming an increasingly critical marketing avenue , feedback mechanism , and potential clinical tool . Facebook alone has over 1.71 billion active users globally making it the largest “ nation ” ahead of China ’ s 1.38 billion people , while Twitter has over 320 million users . This is the captive audience that healthcare providers must exploit . Analytics and mining patient data generated by digital channels will enhance clinical decision support to improve the quality of care . Analytics will also give insights into patient flows and care pathways allowing providers to perform targeted marketing , deliver personalized care , and monitor wellbeing . This information , subject to privacy policies , would also be valuable to insurance providers who can then develop customized or discounted solutions for various segments of the population . All players must position themselves early to reap the benefits of digital disruption or risk being rendered redundant . Today ’ s patient is transitioning from a passive healthcare recipient to an active value-seeking consumer and care providers must redesign their patient care journeys to accommodate this shift from curative to preventative and personalized healthcare . The Kenya healthcare space will undergo unprecedented changes attributed to increased competition , foreign entrants and changing customer expectations . Digital transformation will be at the heart of these changes . Enhancing digital capabilities in hospitals goes beyond implementing new technology alone and calls for strategic digital transformation road maps , forward thinking , and an agile IT environment . Technology driven digital transformation will steer hospitals into ubiquitous healthcare providers not limited by geographical or physical presence . The trend from inpatient care to outpatient services will create opportunities for mobile healthcare and collaboration platforms . In conclusion , the digital transformation should not be viewed in isolation . Healthcare providers should adopt concepts like lean management and Six Sigma to boost efficiency without sacrificing quality of care and financial returns . With an older population , increased non-communicable disease incidences and rising road traffic accidents and injuries , Kenya requires a healthcare system accessible everywhere , anytime and digital transformation is a sure bet to address current deficiencies .
Jackson Nginya is a Consultant with PwC Kenya ’ s Advisory Technology Practice