The Kenyan tech boom underscores the importance of robust infrastructure and a clear governance structure.
By Albab Seifu | November 27, 2016
The rise of African tech
The role of ICT in minimising information asymmetry, reducing transaction costs, and increasing reach has long been recognised. In recent years, however, there has been a notable spike in the use of ICT in the delivery of public and private products and services across health, transport, education, governance, and more. Senegalese fishermen, Moroccan civil servants, and Ethiopian taxi drivers alike use IT-based devices and applications to increase efficiency in their jobs. Now, the rapid pace and wide scope of technological advances has forced emerging economies to think about how to manage and exploit technology-driven disruptions to ensure equitable and inclusive socio-economic development.
The third Industrial Revolution, which began in the late 1960s, focused primarily on the automation and digitisation of production; whereas the technology revolution that has swept across Africa over the past 15 years further leverages technology to improve processes, organisational forms, and customer satisfaction. The full impact of current technological advances on the global economy is yet to be understood or felt, but developing countries such as Kenya and Uruguay are emerging as global champions of technology as a tool to create economic value and solve socio-economic challenges.
Navigating the Next Industrial Revolution
Source: World Economic Forum, 2015
Given their more advanced infrastructure and economies, South Africa and Nigeria had been pegged as potential regional powerhouses for technological innovation. So, too, are they viewed as being best positioned to tap into the opportunities provided by a global digital economy. Between 2000 and 2011, however, it was Kenya’s ICT sector that grew by 23%; its contribution to GDP reaching 12% in 2013, with sectoral growth of 15% in 2015. This was facilitated by the government’s efforts to strengthen the country’s technology support ecosystem with a particular focus on building robust infrastructure, increasing access to affordable mobile devices, and identifying a dedicated institutional home to stimulate and oversee the development of ICT-related businesses and services.
By 2019, this “Silicon Savannah” is expected to generate $1bn in technology exports, thereby mirroring Uruguay’s vibrant technology export sector that has become a driving force of its national economy.
It is clear that IT-based devices and solutions are transforming the way businesses and governments interact with their customers, as illustrated by the fact that 31% of Kenya’s GDP is processed through the mobile payment solution and alternative finance platform M-Pesa. The demand for products that leverage localised content and promote an alternative African narrative is large and growing. In entertainment, the popular Kenyan gaming app Planet Rackus, which sends the player racing along the motorway in a rickety minibus called a matatu, has been downloaded more than 1m times.
Applications such as M-Pesa, M-Farm, and Ma3route have catalysed the growth of a vibrant ICT startup culture that is transforming the country’s landscape with a greater concentration of international capital and high-skilled labour, a shift in the skills required or sought for employment, and more direct links between service providers and seekers.
The good and bad news
The good news is that the resounding success of tech-based services such as M-Pesa highlight how development can effectively be de-coupled from resource constraints and that, in a digital age, physical barriers can be transcended. Tech-based solutions can accelerate inclusive ecological and socio-economic growth, as they often bring about participatory innovation and low carbon footprint solutions. Cultural barriers can also be broken down: The expansion of spaces such as iHub promote technology-driven entrepreneurship and talent, leading more and more Kenyans to become conversant in the universal language of coding. Kenya’s ICT sector strategy also recognises the need to equip an overwhelmingly young population with skills and mindsets that will enable them to benefit from this digital revolution.
But it is not all good news. A tech-based global economy is expected to shift 5m people out of their current jobs by 2020, with labour’s share of GDP decreasing in 42 of 59 countries, including China, Mexico and Brazil. Measures must be taken to ensure the workforce is endowed with the right skills at all levels to benefit from a lucrative digital economy, and avoid a skills-employment opportunity mismatch.
Estimated Potential Economic Impact of Technologies Across Sized Applications in 2025 ($trn, annual)
Source: McKinsey, 2013
This means private and public education institutions are at the forefront of developing the skills required for a technology-driven economy, while the government is in charge of creating an enabling environment that sustains ICT sector growth.
Kenya’s government is on the right path. Regional talent and international capital is flowing into the country to create firms at the cutting edge of disruptive technology such as big data analytics companies that focus on African policy-makers’ needs.
Overall, the Kenyan experience underscores the importance of robust infrastructure, a clear governance structure, and an up-to-date education system to transform ICT into the driver of an emerging economy while incorporating strategies to mitigate the negative impacts of the digital economy on the working population.