According to Casey Torgusson, Senior Digital Specialist at the World Bank and author of the report’s special section on Advancing Kenya’s Digital Economy, “Kenya is keen to establish itself as a center for information and communication technology, e-commerce, and digital services.” To exploit the potential of the digital economy as a driver of its economic development, job creation, and service delivery while ensuring that no one is left behind, the nation must first lay solid digital foundations.
Particularly in emerging nations, the digital economy is expanding more quickly than the global economy. Information and communications technologies (ICTs) are proven to be responsible for 17% of GDP growth in emerging nations (World Bank 2016). According to UNCTAD 2015, e-commerce is expanding most quickly in the global South, and the Internet economy in poor countries is expanding at a rate of 15 to 25 percent yearly (WEF 2015). The sharing economy, gig economy, and platform economy are the economic and commercial paradigms that are influencing the contemporary digital environment (Kenya Digital Economy).
110 billion US dollars or 7.1% of Sub-Saharan Africa’s GDP was produced in 2017 by mobile technology and services. The value of the ICT industry increased by 12.9%, from Ksh 345.6 billion in 2017 to Ksh 390.2 billion in 2018, according to the Kenya National Economic Survey report for 2019. This gain was attributed to the expansion of the digital economy.
Many companies have increased their visibility on digital platforms, where they now often initiate and complete transactions. Kenya has joined the growing number of countries and regions that have recently passed tax legislation intended to tax the digital economy in response to this trend. Kenya established the Digital Service Tax and Value Added Tax on Digital Marketplace Supply in 2020, both of which are levies aimed at the digital sector (Nyambego- PwC Kenya).
Global mobility trends show how quickly rising countries and economies in transition are adopting new and emerging technology. According to statistics from the International Telecommunication Union (ITU), there are around 5.3 billion mobile users worldwide, with approximately 73% of those (3.8 billion) living in developing countries. As of December 2018, Kenya’s mobile phone service penetration rates, as determined by the number of subscribers per 100 residents, have crossed the 100 percent threshold and were at 106.2%. The possession of several SIM cards in the country is what’s responsible for the penetration level of more than 100%. (Kenya Digital Economy).
Globally, digital technologies are swiftly transforming the way we conduct business, a situation we could not have predicted only a generation ago, according to Kenyan Cabinet Secretary, Ministry of Information, Communications and Technology Joe Mucheru. We must take advantage of the huge socioeconomic prospects that digital technologies present, working in combination with our economic Blueprint, the Vision 2030, which is being expedited by the implementation of the Big Four Agenda.
Kenya’s status as a continental leader in access to digital infrastructure is confirmed by Dalberg research that was carried out in collaboration with Omidyar Network and found that 98% of individuals hold a SIM card, more than half use a smartphone, and 65% have internet access.
With an overwhelming majority of individuals (84%) saying that digital tools and services are improving their lives, it also gives new information on how much Kenyans rely on and are happy with them. However, less than a third of Kenyans, a significant minority, have seen an increase in income as a result of using digital devices and services, and 22% of people still only use basic digital services like sending and receiving money on mobile phones or topping up airtime, indicating that there is significant room for growth and deeper engagement in the use of digital services for business and livelihoods (Dalberg, 2021).
94% of Kenyans use mobile money, and 44% of them boosted their use during the Covid-19 outbreak, according to a Dalberg poll (the majority motivated by a fee waiver). Since 2006, when just 26.7% of Kenyans had access to formal financial services, the industry has advanced significantly. By 2016, that figure had tripled, partly as a result of digital financial products like M-Pesa, which allowed users to hold money on their mobile phones for use in transfers to other users, purchases for goods and services, and currency conversion. Kenya’s digital financial industry flourished and developed thanks to supportive legal conditions, ushering in a mobile banking revolution where Kenya became a pioneer in financial inclusion. Today, the nation is regarded as a hub for FinTech and Agritech innovation.
Various stakeholders, including the government, the corporate sector, academia, and civil society, are hoping to use Dalberg’s study’s results and survey datasets to gain a better knowledge of the various user groups in Kenya as the country continues to change its digital economy. With the use of these insights, stakeholders may create focused solutions that are better at tackling the underlying reasons for exclusion and can intensify current initiatives to increase Kenyans’ involvement in the digital economy.
A recent World Bank economic update notes that more has to be done to get people and companies ready for the economy, society, and jobs of the future even as Kenya’s digital economy drives the nation’s economic development. Since 2016, Kenya’s information and communications technology (ICT) industry has grown by an average of 10.8% yearly, earning the nickname “Silicon Savannah.” This sector has become a key driver of economic growth and job creation, with repercussions seen in practically all areas of the economy (World Bank, 2019).
However, even among the 44% of self-employed Kenyans and business owners who already use digital services to support their businesses, a startlingly small percentage (15–18%) use advanced digital services for business, with as many as 71% saying that concerns about digital fraud limit their usage and 30% reporting they have experienced it (Dalberg, 2021).
The main reason individuals don’t use online platforms for e-commerce, according to one online seller of real estate and household products, is distrust. “They don’t provide a platform that protects my info. If I pay something, I can never be certain that it won’t just vanish.” A student in rural Kenya shares his opinion, saying she would feel more comfortable making an internet purchase from a reputable company where there are methods of following up and aiding consumers if they are duped (Dalberg, 2002).
Increased user knowledge and more effective dispute resolution procedures will be required to improve users’ protection, but regulatory improvements are already underway and are intended to give people and companies in Kenya and throughout the world better protection while using digital technology.
Users of e-commerce also object to the national address system as a hindrance to their increased use of digital services for business-related purposes, citing the difficulties they have with delivery as a result of erroneous street addresses and logistical problems. According to the survey, government initiatives to fix issues with the national addressing system provide a crucial chance for developing e-commerce.
The study also supports previously held beliefs that having access to hands-on support will be crucial in encouraging Kenyans to utilize various digital services more extensively. People have high hopes for the ecosystem of government Huduma (service) centers, and 81% of current e-commerce users have already accessed e-governance services with the help of Huduma (service) centers (Dalberg, 2021).
In contrast to other government agencies he had visited, a rural farmer who went to a Huduma Center after losing his ID found the encounter to be extremely prompt, convenient, and professional. But access is a challenge for people who don’t have Huduma centers nearby, particularly for the 68% of users who reside in less populous metropolitan regions (Dalberg, 2021).
A World Bank report suggests several crucial reforms and investments targeted at speeding Kenya’s transition to a vibrant and inclusive digital economy: Improve policy and regulation to keep up with the market’s fast change. To promote private sector investment, competition, and consumer protection, hasten the implementation of updated telecommunications legislation and give independent communications authority more power (World Bank, 2019).
Enhance the entrepreneurial environment to take advantage of the rising usage of technology and to create the businesses of the future as you go from startups to growth. Higher success rates in allowing these businesses to develop quickly are required to match Kenya’s excellent record in producing creative new startup stage digital ventures, which will have a significant influence on overall economic growth and job creation. This entails expanding entrepreneurs’ access to finance and evaluating current tax and procurement laws that are not suited to their particular start-up business models.
Build a digitally literate workforce in Kenya to take advantage of new possibilities in high-growth industries and provide more jobs for young people in the public and private sectors by investing in and developing human digital capital. To ensure that all students have the fundamental digital skills needed to participate in the digital economy and access digital services, as well as to encourage more students to pursue STEM-related courses and advanced digital skills, curricula at the basic and tertiary education levels will need to be reviewed and rewritten. As supplements to the official education system and to support lifelong learning and reskilling, innovative, quick digital skills training programs provided by the private sector should be promoted.
Close the digital gap by providing inexpensive, high-quality broadband connectivity to every person, company, and governmental organization so they may participate in the digital economy. To profit from a digital economy, women, the poor, rural communities, and other vulnerable groups must be properly supported. Serve these difficult-to-reach clients, this will require public investment as well as progressive legislative measures to stimulate private sector investment and service innovation.
Consider regional and global perspectives. The tiny market size compared to numerous rivals is a hurdle for Kenya’s digital enterprises. Kenya’s digitally equipped businesses would have a bigger client base, and Kenyan consumers would have more access to e-commerce and digital services if East Africa’s “Single Digital Market” were to grow and become more thoroughly connected, as well as worldwide. As a result of increasing competition and declining internet connection costs, it would also promote more investment in digital infrastructure.
The emergence of a digital economy presents Kenya with a chance to advance economically. Utilizing the advantages that disruptive technologies provide can help Kenya transition from a low-middle-income economy to an advanced/emerging market. Artificial intelligence (AI), robots, block chain, drones, the internet of things, big data, and software-enabled industrial platforms are among the disruptive technologies that have the greatest potential to influence economic growth (Kenya Digital Economy).
M-Pesa from Kenya has considerably boosted financial inclusion, revolutionized the banking industry, and created the potential for new business models like PayGo, digital credit, and (for better or worse) mobile betting. Kenya has to look for relevant technologies that can help disrupt whole sectors, boost economic growth, and eradicate poverty, as is seen in the country’s banking sector (Kenya Digital Economy).
To create, develop, and spread a digital economy, the government must first orchestrate the national environment, then manage important natural and financial resources, and ultimately signal the desired course to the private sector. A comprehensive government effort is needed to create a digital economy; this endeavor calls for political will, consensus, and articulation. Government has the key to decreasing operational and transactional friction in the ecosystem, enabling innovation around digital services and possibilities, and unlocking the third-party suppliers of services (Kenya Digital Economy).
A statement by Kenyan President Uhuru Kenyatta that his country is a global pioneer in promoting financial inclusion via the use of digital banking tools like M-PESA, Mula, PesaLink, and Pesapal is reiterated. Adoption of such advances is streamlining transactions and promoting commerce for big businesses, SMEs, and private citizens. This results in more effective and enhanced work settings, more accessibility, connectivity, and higher living standards. “In the same vein, my government has embraced technology that makes providing services to the public quicker and more effective.”
“In this expanding digital world of ours, we confront a future of great potential,” the President said in his closing statement. New services and technologies are appearing in the distance with each passing year. Governments, corporations, and individuals must adjust to this new reality as digital technology becomes an integral part of our everyday lives. Kenya has started its road toward digital transformation to make sure that the advantages of the digital economy become a reality for us, and we hope that the rest of Africa will follow suit.
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