In 2023, to bolster the information and communications sector’s growth, the government, through the Communications Authority of Kenya (CA), reiterated its commitment to advancing electronic commerce (e-commerce) in the country. Aligned with Kenya’s laws, this commitment emphasised the government’s dedication to fostering the growth of online trade, both domestically and internationally.

E-commerce, defined as the trading or facilitation of trading in products or services via computer networks, particularly the Internet, holds an economic role in modern economies. It can be categorised as either domestic, occurring within a country’s borders, or cross-border, extending across international boundaries. At its core lies the essence of “trade,” encapsulating the government’s aspiration to streamline and enhance the ease of online transactions for Kenyan citizens.

The collaborative efforts of the ministries signified a concerted approach towards fostering an enabling environment for trade and commerce in Kenya. By leveraging their respective expertise and resources, they aim to overcome barriers and capitalise on opportunities to propel the nation’s economic growth and development. Through strategic partnerships and policy frameworks, the government endeavoured to empower businesses and individuals alike to harness the potential of e-commerce, thereby driving innovation, fostering entrepreneurship, and enhancing Kenya’s competitiveness on the global stage.

As the government continues to prioritise the development of e-commerce infrastructure and regulatory frameworks, its unwavering commitment underscores a forward-looking vision aimed at positioning Kenya as a hub for digital trade and commerce in the region and beyond. As of May 2024, Kenya has emerged as the third-largest e-commerce market in Africa, buoyed by a surge in internet accessibility that has attracted significant investor interest.

According to Statista, a German data and business intelligence platform, Kenya ranks third in e-commerce market penetration on the continent, with a penetration rate of 46.7 percent. This places Kenya behind Egypt, which leads with 55.4 percent, and South Africa with 49.4 percent. This growth marks a significant improvement from Kenya’s previous position as the fourth fastest-growing e-commerce economy in sub-Saharan Africa, as reported by the United Nations Conference on Trade and Development in 2020.

However, Kenya’s rising e-commerce rankings coincide with significant challenges faced by e-commerce companies, with some experiencing substantial losses leading to market exits. For instance, Jumia, which recorded cumulative losses of $87.8 million (Sh 11.5 billion) by the end of 2021, recently ceased its food delivery operations in Kenya and seven other African countries. Other players like SkyGarden and OLX have encountered similar market challenges, resulting in closures or acquisitions.

In 2020, Statista reported that Kenya led in digital revenue generation within e-commerce, accounting for 76.1% of the total estimated at $1.1 billion. The growth of e-commerce has been propelled by the implementation of the digital economy blueprint targeting the ICT sector and e-commerce activities. Additionally, the percentage of Kenyans aged above 15 with mobile money (68.7 percent) or bank accounts (50.6 percent) has steadily increased over the years.

Notably, the number of internet users in Kenya has tripled over the past decade, from 7.48 million in 2014 to 22.7 million as of January 2024. This increased connectivity has facilitated greater online transactions, aided by the widespread usage of mobile money systems like M-Pesa.

A recent report by Kepios highlighted key revenue streams within Kenya’s e-commerce sector, with electronics ($366 million), fashion ($280.3 million), toys and hobbies ($45.5 million), and furniture ($32.2 million) leading the pack. The report also outlined the percentage of Kenyan internet users engaged in e-commerce activities, with 37.6 percent purchasing products online and 15.7 percent utilising online price comparison services.

However, Kenya’s e-commerce growth faces several challenges, including regulatory frameworks such as the introduction of the digital service tax and tax on digital marketplaces with the government amending financial policies. Additionally, the lack of robust fraud detection and prevention mechanisms across many African countries hampers trust-building in marketplaces, resulting in delayed e-commerce adoption.

To foster further e-commerce growth, stakeholders must prioritise initiatives to reduce technology costs, strengthen cybersecurity measures, create favourable regulatory environments, and improve logistics infrastructure to attract more companies to invest in Kenya’s e-commerce landscape.