The Center for International Private Enterprise (CIPE) released a policy brief on micro and small enterprises’ participation in Kenya’s digital economy. It explored challenges that MSEs face in the digital economy. The study considered four categories of digital technologies; that is connectivity; digitisation and automation of processes, cloud computing, and online presence, and lastly collaboration and communication.
The study observed the following ranking of the help required for firms to go online out of the 1,280 MSME/1,231 MSE studied. digital training and skills development (31.9%); awareness campaigns about the benefits of using digital technologies (22.60%); and financing to adopt digital technologies and e-commerce (21.70%); technical assistance and support to the adoption of digital technologies (13.6%); free website/domain (5.5%) and dissemination of good practices on digital technology (4.7%).
The main challenges faced by businesses when trying to digitise their operations were ranked as follows: cybersecurity (27.40%); competition (17.40%); and costs including commission payments, transactions charges, delivery charges, internet costs (10.90%); order fulfillment (6.2%); visibility (5.9%); customer experience (5.6%); finding the right market (5.6%); employee digital technology skills (2.8%); marketing/ increasing sales (2.5%); verification of customers and suppliers (2.5%) and return/refund policy (2.2%).
CIPE recognised the difficulties MSMEs encounter while attempting to digitize operations, including competition, cost of doing business, and cyber security. The three themes combined to create a list of top-priority policy matters on which the triple helix of government, business (including civil society), and academics can act. The brief addresses some recommendations that might be made in order to address the policy challenges that prevent MSEs from engaging in Kenya’s digital economy.
1) Digital Training and Skills Development / Awareness-These are the main obstacles preventing MSEs from adopting digital tools, platforms, and services. Under this, some of the recommendations are;
Ø The government can offer MSEs digital training and skills development/awareness programs over a 60-month period using a Public Private Partnership (PPP) strategy. It should host an annual high-level roundtable of key MSE stakeholders from industry and academia to create and evaluate a National Strategy for the Digital Transformation of MSEs in Kenya.
Ø The ICT Authority should dedicate a portion of the annual Connected Kenya Summit to review challenges and promote MSE adoption of digital technologies with the participation of global actors.
Ø The State Department for Planning, in partnership with business associations supporting MSEs, should work with key sectoral ministries and committees to jointly incorporate the emerging issues in the digital economy.
Ø Ministry of Investments Trade and Industry through MSEA to host a dedicated desk focused on linking MSEs that are participating in the digital economy to the African Continental Free Trade Area (AfCFTA).
Ø Established business associations focused on the private sector in general like KEPSA, KAM and KNCCI should ensure that the MSE agenda is prioritized within broader policy dialogues that historically prioritize issues facing medium and large enterprises.
Ø MSEs should organize themselves as BAs (e.g. Jua Kali Association, SME Think Tank and ASSEK) that offer a platform for policy-focused dialogues.
2) Internet Access and Equipment Costs- the government should reduce the cost of equipment for MSEs in the Digital Economy through using taxation, subsidies, and operational efficiency.
Ø Micro and Small Enterprise Authority (MSEA) within the Ministry of Investments, Trade and Industry should promote specific programmes and projects that support local manufacturing of ICT hardware for example through tax breaks, cost reduction of power, and subsidies.
Ø In order to ensure ICT infrastructure is included in these projects the government should collaborate with ICT infrastructure providers to help reduce duplication costs that are passed on to the consumer, especially in the development of national infrastructure projects.
Ø Platform providers and internet service providers should speed up innovation in tackling connection difficulties in the last mile, for instance through custom apps and business services provided by telcos.
3) Cyber security- Government should encourage MSEs to practice good cyber hygiene in the digital economy.
Ø The National Assembly, Senate, and Judiciary should explore judicial and legislative frameworks (such as the Huduma Bill 2021) that make it possible for MSEs to access remedies when subjected to cyberattacks.
Ø The industry should create a regulatory sandbox with a Konza Technopolis base that will allow local and international innovators to create and test goods and services geared at MSEs in the digital economy.
Ø The academia with the help of international actors, educate and conduct MSE-focused research on cyber-security
All of the policy ideas are centered on bridging the gap between MSEs and the Digital Economy in order to foster business growth. MSEs deserve a place at the table, a voice, and a chance to discuss their issues and top goals as part of evidence-based policy discussions centered on the digital economy. As the MSE sectors are an important social economic driver, this also provides a venue through which the gaps that exist can be addressed.