Columnists

Pillars Kenya needs for firming up its digital economy

ai

Summary

  • Kenya is witnessing a tremendous growth in digital technologies which have, arguably, continued to spread even more rapidly than previous waves of technological innovation.
  • This transformation includes emergence of the digital economy, which has been defined as that part of economic output resulting solely or largely from digital technologies with a business model based on digital goods and/or services.
  • According to the Economic Survey 2019, the value of ICT sector expanded by 12.9 percent from Sh345.6 billion in 2017 to Sh390.2 billion in 2018 driven by mobile telephony, uptake of e-commerce and penetration of internet.

Kenya is witnessing a tremendous growth in digital technologies which have, arguably, continued to spread even more rapidly than previous waves of technological innovation. This transformation includes emergence of the digital economy, which has been defined as that part of economic output resulting solely or largely from digital technologies with a business model based on digital goods and/or services.

According to the Economic Survey 2019, the value of ICT sector expanded by 12.9 percent from Sh345.6 billion in 2017 to Sh390.2 billion in 2018 driven by mobile telephony, uptake of e-commerce and penetration of internet.

This impressive growth is re-shaping business models and sectors in Kenya. The digital economy has enabled fast revenue growth for business. It has promoted the shift from tangible flows of physical goods to intangible flows of data and information. Through technology, firms in developing countries like Kenya are now able to connect across borders and engage with a broader community of customers.

Digital economy businesses have disrupted the old order across a wide range of sectors, with models that are platform-centred, which have proven successful.

Disruptions have occurred in information search and sharing such as Facebook, Twitter, Google, and Pinterest; personal services such as Uber, Safeboda and Bolt, which was known as Taxify; entertainment online like YouTube, Netflix, and iTunes; and shopping like Jumia, eBay, Amazon, and Alibaba.

Additionally, a number of labour market platforms have emerged that have enabled clients to find services, and workers to find jobs across different countries like LinkedIn and Monster; or to engage in gig work (short term employment) like Freelancer, Upwork, Samasource, and TaskRabbit.

The opportunities presented by ICTs are giving developing countries like Kenya a reason to hold high aspirations for the future role of their digital economies in delivering economic growth and other development goals.

However, this potential is inhibited by a number of challenges such us inadequate technological infrastructure, digital exclusion that exists between and within countries.

The digital economy depends on the state of a country’s digital infrastructure; but for a developing country like Kenya, these are more often lagging behind global standards.

For the country to exploit, improve and sustain its emerging digital economy, efforts must be put in place to ensure that the country’s digital economy ecosystem remains strong.

The digital economy ecosystem requires an infrastructure that goes beyond the technical. This includes human capital as well as capable institutions. Institutional infrastructure will include policy, which is largely lacking in developing countries.

The country should also ready itself for the disbenefits that emerge from engagement with the digital economy such as digital harms relating to breaches of security and privacy.

To such, policy and regulatory frameworks solutions are required.