Tag Archives: digital divide

Dalberg on Kenya’s Digital Economy

Dalberg has released a report titled Kenya’s Digital Economy: A People’s perspective. It finds that, in terms of digital transformation, Kenya is a lower-middle/income country that shows some characteristics of a higher middle-income economy.

The survey is based on in-depth responses from 2,456 people in Kenya’s 47 counties. It was done in 2020 to assess their perceptions on the state of the supporting ecosystems, digital infrastructure, enabling resources, applications and services.

The report differentiates between the uptake of “basic” digital services (sending money, buying airtime/data) and “advanced” digital services (e-commerce, paying for goods and services – health, education, agriculture, supporting livelihoods). It notes that some challenges to the next step of Kenya digital economy including exclusion and digital safety (fraud/harassment, cybercrime when using devices).

A stunning finding is that there is a low demand for advanced digital services, beyond mobile money, digital communication and social media. This is because non-users and 30% of current basic digital users do not find digital products or applications that are relevant.

Some of the sectors it touches on:

  • Agriculture: Kenya is one of the most advanced agri-tech markets with approximately 30% of agri-tech startups in Sub-Saharan Africa operating here and with 18% having their headquarters in the country But the awareness of landowners of digital services is low. 45% of those surveyed are not aware, while just 13% use digital services for their livelihoods – mainly to communicate with customers, suppliers and vendors while 10% use it for inputs and 15% for knowledge sharing. Half of those who do, use it as a result of assistance from field agents who are strong support factors for rural digital economies. Also half of adult female farmers face challenges in affording devices and accessing the internet which makes them hard to reach with interventions.
  • Health: There is low use of digital health services with only 15% of respondents aware, and of those, 35% use it mainly to consult health workers and pay for medicine with mobile money. The challenges cited are high costs and mistrust of doctors they can’t see while a quarter are concerned about sharing health information online.
  • Ecommerce is urban: 23% use e-commerce in urban areas compared to 9% in rural ones, and in Nairobi and the central region, uptake (24%) is twice as popular as in other counties in the rest of the country where it ranges between 1-12%.

On Financial Access:

  • Mobile Money has (+) and (-) aspects. The usage of mobile money is near-universal with 95% of lower-income and 93% of rural people using it as Kenyans have good user experiences with it, unlike some other countries. And while there have been concerns about fraud, 80% have trust in mobile money, but also 53% cite high costs as a reason not to use mobile money, more so with lower-income Kenyans.
  • Easy Credit: The report cautions that government should watch for debt traps from increase ease of digital credit in the country. Half of the respondents have had to sell assets, borrow more or reduce food & education expenditure to repay a loan – and this increases the chance of financial exclusion. Also, basic digital users lost an average of Kshs 1,470 to fraud while advanced users lost twice as much (Kshs 2,996) over the past three years. This is a risk that can grow as more unexposed people turn to advanced services and may face devastating losses that they cannot absorb.
  • Social safety nets: People with government stipends or pensions are more likely to use e-government services (such as eCitizen, iTax NHIF) than other Kenyans in general.
  • Entrepreneurs use it little: Among self-employed and business owners half use digital services and mainly for basic reasons like communicating with customers and vendors. Only 15-18% use it for advanced reasons like keeping business records, tracking stock, paying taxes, selling services and buying supplies through e-commerce platforms.

The report by Dalberg, done with support from the Omidyar Network, along with its data sets, can be downloaded here.

Digital Roadmap launched in Nairobi

The Pathways for Prosperity Commission launched a new Digital Roadmap report in Nairobi outlining steps that developing countries, especially in Africa, can follow to prepare for a future that will be vastly different thanks to rapid digital developments.

The Report outlines broad recommendations on issues like digital identity and payments while ensuring all citizens are included and have their rights protected. It emphasizes how physical infrastructure and connectivity are essential and how they are combined with continual educational processes to build flexible skills that young people can adapt to different careers of the future.

It encourages developing countries to come up with their own localized digital governance structures and not import these wholesale from developed countries. Collaboration should see all participants in government work with the private sector and civil society. Governments should break down silos, and also make rules that allow for technological innovation by not being too rigid. Also, of some relevance to Kenya, is the need to consider county governments in planning for a digital future.

“We have seen the impact of mobile money on Kenya, but in the digital ocean coming to hit Africa, mobile money is a toe in the water,” said Strive Masiyiwa (Econet) who, along with Melinda Gates (Bill & Melinda Gates Foundation), serves as a Co-Chair of the Pathway’s Commission

He added that the world was at another moment like it was at the start of the internet era, around 1995, and with artificial intelligence poised to add $16 trillion to the world economy, African countries should aim for a tenth of that and grow their continent’s GDP from its current $2.5 trillion. 

The Commission also launched a Digital Manifesto with 10 steps to transform economies. Some of the measures proposed include empowering all citizens, securing their data, developing digital identity & digital financial systems, providing social safety nets, and enabling investment environments suitable for different countries. New ways of finance include deploying pension funds as local venture capital, and nurturing patient angel capital groups such as the ones in Nigeria and South Africa that have sprung up to finance other young entrepreneurs. 

Countries also need to use technology to build resilience. One potential roadblock cited was the possibility that incumbent giants in different countries would use their governments to seek protection from new technologies.

UNCTAD report shows an unequal digital global economy

The increased use of digital platforms in everyday lives across the world is leading to a divide between under-connected nations from hyper-digitalized societies

The Digital Economy Report released by the United Nations Conference on Trade and Development (UNCTAD) shows that China and the USA have done the most to harvest the digital economy and now dominate the rest of the world and leading to an unequal state of e-commerce. The two countries host seven global “super-platform” companies – Microsoft, Apple, Amazon, Google, Facebook, Tencent and Alibaba that account for two-thirds of the total market value of the seventy largest digital platforms with Naspers as the only African company in the group.

Google and Facebook collected 65% of the $135 billion spent on internet advertising in 2017, while, in Australia, Google took 95% of the “search advertising” revenue while Facebook took 46% of the “display advertising” revenue.

Europe’s share of the digital economy is only 4% while Africa and Latin America combine for 1%.  In Africa, progress has also been uneven with four countries – Egypt, Kenya, Nigeria and South Africa accounting for 60% of digital entrepreneurship activity. They are followed by a second tier of Ghana, Morocco, Senegal, Tanzania, Tunisia and Uganda (with a combined 20%)

The Report showed that the evolving digital economy has a major impact on achieving sustainable development goals (SDG’s) and calls for governments in developing nations to focus efforts on things like:

  • Skills development & re-education e.g. consider that in the Western world, you can do a whole university degree online.
  • Revising policies on data privacy & sharing e.g. have restricted local data sharing pools and have tariffs on cross-border data.
  • Revising competition regulations e.g. curb the tendency where platform companies tend to capture/acquire young promising companies in the developing world.
  • Taxation e.g. developing country governments should seek to tax digital platform companies.
  • Employment e.g. by setting minimum wages & work conditions for gig-economy workers.
  • Break down silos: no longer think of government as being separate from academia, private sector, civil society and tech communities.
  • Also, while the US and Europe have divergent views on data protection, it cites a survey which found that Kenyans had the least concerns about data privacy (at 44%).

Speaking at an unveiling of the Report in Nairobi, Dr. Monica Kerretts-Makau said that the world is trending towards a captive society where you have to be on a platform to transact in an economy and that presents problems and opportunities in the African context.

The 2019 issue of the Report, that was previously focused on the “information economy”, can be downloaded here.

EDIT June 2020: The Kenya Revenue Authority announced the introduction of Value-Added Tax (VAT) on digital marketplace suppliers in the Finance Act 2019. Member of the public can send their views on the draft proposal  by June 15 to stakeholder.engagement@kra.go.ke.