Digital Transformation: The Shift Is Set To Accelerate Kenya’s Economy & Future Growth

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Tagged the Silicon Savannah due to its early and fast adoption of digital payments, Kenya boasts the use of mobile money as a driver for economic growth and for poverty reduction. Evolving from a simple means of sending and receiving money, mobile money has become a mechanism of transactional services empowering Kenyans to embrace digital services. As of March 2019, mobile penetration was at 90% with an estimated 46% of citizens having access to the internet by 2018.

The value of money transferred through mobile money also increased by 9.5% from Ksh 3.6 billion in 2017, to 3.9 billion in 2018. Kenyans abroad are the biggest senders of mobile money.

But despite notable milestones in the digital transformation, including by the government through platforms such as E-citizen platform, National Integrated Identification System (NIIMS), Huduma centres (where citizens register for civil documents and drivers licenses), much more has yet to be done.

According to the 20th edition of the Kenya Economic Update, five key foundations need to be considered for the success of Kenya’s digital economy.

  1. Digital infrastructure

Digital technologies and communications are a key enabler of the Big 4 Agenda. However, even though Kenya has experienced a steady increase in internet access, there’s limited access to fibre broadband connectivity, especially in rural areas.

Compared to urban areas, rural areas have lower service reliability and lower end-user speeds due to reliance on microwave backhaul. This affects productivity and employment rate in the regions.

More importantly, data protection and cybersecurity threats remain a key factor in the success of the digital economy. The government enacted the 2018 Computer Misuse and Cyber Security ACT, which covers, the protection of critical infrastructure as well as issues related to mobile money, cybersquatting, blockchain and cryptocurrencies. Nonetheless, much needs to be done when it comes to data protection and privacy. 

Technology: We need to embrace cloud computing.

  1. Digital skills

With 10.8% average annual growth since 2016, the ICT sector in Kenya has been an important source of economic dynamism and job creation in the country. Over recent years, we have seen a wide range of digitally enabled startups and even investments by some of the leading multinational tech companies like Microsoft.

Nonetheless, a skill gap exists among the youth, hence a primary barrier to employment in the digital job sector.

World Bank research indicates that digital transformation can increase growth by nearly 2% per year and reduce poverty by 1% per year. However, there is only so much that can be done without the skills/strong investments in human capital. Microsoft launches first Africa’s Development Centre in Kenya.

Hence a question arises; how adaptive is the education system in providing would-be entrepreneurs with the digital skillset needed to be enterprise and job creators?

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  1. Digital platform and services

In the near future, digital platforms and services are expected to be the fastest-growing segment of the global service economy. Not only do they play a catalytic role in enhancing productivity and service delivery, but they also increase accessibility, connectedness, efficiency and transparency. Therefore, increased investments could help harness this potential in Kenya, boosting digital service-driven growth and job creation.

  1. Digital financial services

This widespread uptake of mobile money services has increased financial inclusion for the unbanked while promoting digital transactions across the government, private sectors and consumers. By providing a convenient platform for sending and receiving money and short-term credit mobile money has become a key mechanism for poverty reduction in Kenya.

Creating access to financial services could help Kenyans have more production and employment choices thereby helping them transition out of poverty.

Related: Women Enterprise Fund partners with KEBS to support small and medium businesses. 

  1. Digital entrepreneurship

When it comes to digital entrepreneurship, digital innovation is still in the margins as traditional industries such as manufacturing lag behind in their technology adoption and innovation absorption. In spite of this, the following challenges exist;

  • For instance, even though there’s a rapid rise of digitally-enabled startups/tech hubs, most hubs are still concentrated in Nairobi. While some tech hubs are emerging in second-tier cities, bottlenecks in the business-enabling environment, limited digital talent and the inaccessibility of appropriate growth-oriented financing, pose further challenges to the growth of digital entrepreneurship.
  • With 49 %, Kenya has the highest number of women entrepreneurs in East Africa. Nonetheless, they face significant barriers reflected in the low percentage of firms where women own a majority stake. Women lets break the glass ceiling.
  • The growing access to mobile devices, mobile money and internet penetration have provided a strong foundation for e-commerce in the country. But, despite being ranked among e-commerce and digital service leaders, Kenya has still yet to tap into this field fully as a majority of leading e-commerce platforms in the country are foreign-owned. Also, the level of trust in digital services and e-commerce remains low signifying that there’s still room for expansion.

As an early mover and leader of the digital revolution across Africa, it would be all too easy for Kenya to rest on its laurels. As the pace of technology innovation and growth of the digital economy continue to accelerate, Kenya’s citizens, businesses and predominantly the government will need to run even faster to keep pace with global markets. How close are we to vision 2030 in regards to technology?

Microsoft, EA to offer digital transformation to public sectors. 

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