By Ramadhan Mohamed and Valerie Atieno
Introduction
Digital start-ups are new businesses established using technology as a tool for creating solutions to solve emerging problems in society and in business ventures. They create new ecosystems and market dynamics that lead to growth variations in the field of work.
The Bottom-up Economic Transformation Agenda through the Digital Superhighway project commits to address digital divide and enhance operational efficiency in startups to create a competitive advantage for youth employment. Further, strengthening digital startups opens opportunities for digital-enabled jobs such as software development, digital marketing, data analysis, and cybersecurity. They also drive demand for improved digital infrastructure, such as reliable Internet, electricity, and access to devices such as laptops and smartphones, further fueling innovation and economic growth.
The Kenya’s digital economy could expand to US$ 23 billion by 2025 (World Bank, 2024), potentially generating thousands of new job opportunities. This blog focuses on the nature of digital startups in Kenya, factors that can bolster growth of digital startups, emerging obstacles, opportunities in job creation and provides recommendations to maximize their role in job creation for the youth.
Status of Digital Start-Ups in Kenya
Digital start-ups and job creation
A typical start-up value chain entails several activities where jobs are created. These activities include research and development, product development, digital infrastructure management, marketing and customer acquisition, sales and distribution, customer support and engagement, monetization and revenue generation, data analytics and optimization, scaling and expansion.
Digital start-ups are a major source of employment among the youth. Approximately 300,000 people are employed in software and product development where we have the core products offered by digital start-ups. Over 50,000 jobs have been created in the digital marketing space, mainly driven by the rise in start-ups and e-commerce platforms (Kenya ICT Action Network, 2023). Further, it is estimated that about 30,000 jobs are created in customer service roles within the digital economy, including start-ups offering digital services, e-commerce and telecommunication services. Furthermore, there are approximately 15,000 jobs in sales and business development and about 10,000 professionals are employed in technology management and digital infrastructure (Kenya Private Sector Alliance, 2022).
Achievements Among Digital Start-ups Space
Digital jobs creation
Kenya’s competitiveness in the digital space is drawn from its geographic positioning, a high mobile penetration rate (131.3%), aggressive Internet penetration and electricity access (nationally 70%, urban 91% and rural 62%).
Digital startups employed 11,462 individuals, with the average headcount being 37 employees per start-up (Kenya Ecosystem Report, 2022). The financial industry accounted for 27 per cent of startups employment, where the fintech, agri-tech, and e-commerce sub-sectors combined accounted for over half of the total employment opportunities (Figure 1). Fintech remains a leading sector of job creation, followed closely by agri-tech, e-commerce and logistics with other sub sectors recording smaller shares. Fintech is a key driver of innovation, with MPesa revolutionizing mobile payments and lifting approximately 194,000 households out of poverty and enabling 185,000 women to transition from subsistence farming to retail (World Bank, 2019).
Figure1: Kenyan digital start-ups by sub-sector and employment
Source: Disrupt Africa, Kenya Ecosystem Report (2022)
Enabling policy environment
The Government’s commitment to the digital economy is evident in the Digital Economy Blueprint (2019) and the Start-Up Act (2022). These frameworks provide a supportive environment for start-ups, offering provisions for digital innovation, entrepreneurship, tax incentives, and access to funding.
Government initiatives such as the Ajira Digital Programme and the Presidential Digital Programme have trained over 70,000 youth. Their commitment is to establish 340 Constituency Innovation Hubs and employment of over 670,000 Kenyans on digital platforms. The Ministry of Information, Communications, and Digital Economy Strategic Plan (2023-2027) aims to create 3.5 million digital jobs through start-ups by expanding Internet access and digitizing government services.
Challenges and Emerging Issues for Digital Start-Ups
Limited financing for digital start-ups
Although Kenya has funding initiatives such as the Youth Enterprise Development Fund and Uwezo Fund, digital start-up financing is skewed towards the pre-seed and seed stages, limiting sustainable investment for growth. To scale up and directly contribute to job creation, start-ups require funding beyond early-stage financing.
Limited digital skills
Only 30 per cent of youth with basic digital literacy have received formal training, while 70 per cent rely on self-learning. It is estimated that by 2030, 50-55 per cent of jobs in Kenya will require digital skills, highlighting the need for advanced training programmes (World Bank, 2021).
Digital divide
Despite growing Internet penetration, access to digital resources remains low in rural areas. A 7.3 per cent increase in Internet subscriptions and improvements in bandwidth and telecommunications equipment have not fully bridged the digital divide. Additionally, cybercrimes have escalated, creating vulnerabilities for startups.
Opportunities for Digital Start-Ups
Talent nurturing for youth
Providing digital skills in data storage, analytics, and decision-making systems is essential to bridge the gap between education and the job market by promoting digital work as a viable source of income. About 84 per cent of youth benefit from digital technology, with 30 per cent using it to raise their income (Ajira Digital Program Report, 2020).
Digital infrastructure
In 2023, the broadband subscriptions in Kenya reached 1 million. Expanding digital infrastructure, particularly in rural areas, is crucial for digital start-ups to thrive. This expansion creates jobs in IT support, engineering, and network installation, contributing to inclusive digital development.
Recommendations
To strengthen digital start-ups and maximize their role in job creation:
- Expand access to funding: Enhance access to venture capital and provide low-interest loans for digital start-ups across all growth stages.
- Strengthen digital infrastructure: Improve access to affordable devices, reliable electricity, and high-speed Internet, especially in rural areas, to bridge the digital divide.
- Invest in specialized training: Enhance collaborations between tech hubs and educational institutions to develop specialized skills in software development, data science, and product design.
- Reduce skills gap: Develop programmes that focus on data storage, analytics, and decision support systems to enhance digital entrepreneurship and employability.
