Driving Kenya's Economic Growth Through Digitalization

This article was originally published on GT Perspectives.

In a press release announcing the publication of a report focusing on the drivers behind the digital transformation of Kenya's economy, the GSMA, a UK-based organization that aims to unify the mobile ecosystem to discover, develop and deliver innovation foundational to positive business environments and societal change, said: "Kenya's digital economy will contribute KSH 662 billion to GDP by 2028. This growth, driven by strategic policy reforms, will accelerate digitalization in critical sectors such as agriculture, manufacturing, transport, and trade. In addition to these advancements, the report forecasts the creation of 300,000 new jobs and an increase in tax revenues by KSH 150 billion."

What is more, "To sustain its economic momentum, diversify the economy, boost productivity, and create high-quality jobs – particularly for young and rural populations – Kenya is focusing on digitalization as a key driver of economic growth, government revenue, and socio-economic development."

Below are the report's key messages:

• "The digitalization of the economy is a key driver?of economic growth and government revenue, as well as supporting socio-economic development and offering a path towards shared prosperity.?By leveraging digitalization opportunities, the Government of Kenya can achieve sustainable economic growth and structural change."
• "Adoption of digital technologies across both public and private sectors has been observed to positively impact economic growth. It increases productivity in agriculture, improves access to global value chains (GVCs) and improves the efficiency and transparency of government and public services. Moreover, access to emerging technologies such as mobile money, Artificial Intelligence (AI) and cloud computing are desirable as drivers of digital and financial inclusion which in turn supports human development."
• "This study identifies opportunities and quantifies the economic value of adopting digital technologies across selected sectors of Kenya's economy. It identifies how these opportunities can be unlocked through policy reforms, particularly focusing on the key role that the mobile telecoms sector plays in supporting the process of digitalization."
• "Kenya is a regional leader in mobile connectivity and Mobile Financial Services (MFS). It pioneered the use of mobile money, making huge strides in financial inclusion of the unbanked, and has retained its position as a global leader in this area. Further extending its reach as the enabler of electronic payments across the digital economy, as well as traditional sectors, can propel digitalization and growth for many more Kenyans and achieve increased?resilience and revenue for the Government."

The report also "identifies a series of policy recommendations that, if implemented, will close the internet usage gap from the current level of over 64% of the population to 51% in 2028. This would result in 49% of the population of Kenya being connected to the Internet, equivalent to over 10 million additional people." The four priority policy reforms are:

1. Tax restructuring in the telecommunication industry to purposefully drive usage.

2. Implementing policies and programs to improve device affordability.

3. Ensuring a sustainable and predictable investment environment. This includes:

• Supporting financial sustainability through tax deductions against spectrum payments,
• Reducing the cost of energy to power infrastructure,
• Adopting a favorable spectrum pricing model, and
• Accelerating the license renewal process.

4. Supporting productive use of digital technologies by businesses across economic sectors, with targeted policies to improve digital skills and human capital, support MSMEs and start-ups and prioritize context-appropriate technologies and local needs.

The report's authors importantly point out that "These policy reforms have the potential to make a significant contribution to Kenya's economic objectives, including economic transformation across important sectors such as agriculture and manufacturing." The potential macroeconomic impacts are summarized in the image below:

Kenya has firmly positioned itself as a leader in mobile financial services and digital innovation. Following the development of information and communications technology sector in Sub-Saharan Africa for over 30 years, I appreciate how GSMA's?study outlines the economic benefits of expanding digital adoption and provides a roadmap for maximizing these gains through targeted policy actions.

What are your recommendations for how Kenya can drive economic growth through digitalization?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.