Internet to add Sh786b to Kenya economy this year
The internet economy, also called dot-com economy, will contribute an estimated $7.2 billion (Sh786 billion) to Kenya’s gross domestic product (GDP) in 2020, representing 7.70 per cent increase from the previous year.
It is also projected that, the Internet of Things, or IoT, will drive up to 12.84 per cent of GDP in the next five years and up to 15.17 per cent of GDP by 2050, a new report by IFC and Google says.
The expected growth has been made possible by the Information and Communications Technology (ICT) sector which has been growing at an average of 10.8 per cent annually since 2016, making it a significant source of economic development and job creation with knock-on effects in almost every sector of the economy.
For instance, the report says that financial inclusion driven by Safaricom’s M-Pesa lifted “two per cent of Kenyan households out of poverty by increasing per-capita consumption”.
It notes that fintech products that address infrastructure challenges in Africa include Kenya’s M-Pesa, Fawry in Egypt, and Paystack62 in Nigeria.
M-Pesa which is Kenya’s leading brand had 23.6 million active customers in 2019 and the numbers are increasing monthly to hit 35 million in March 2020, according to latest data from the regulator.
“Savings and lending, through services like M-Shwari, Fuliza, and KCB M-Pesa, grew at more than 100 per cent annually. International remittances through M-Pesa grew at 44.6 per cent year-on-year, and payments at 11 per cent year-on-year, of which consumer-to-business rose 30.6 per cent,” reads the report in part.
The Internet economy is broadly defined as the economic activities that either support the Internet or are fundamentally dependent on the Internet’s existence.
Expected to grow
In Africa, the internet economy has the potential to hit $180 billion (Sh19.6 trillion) by 2025.“Currently, it contributes nearly $115 billion (Sh12.5 trillion) to the continent and is expected to grow to $712 billion ( Sh77.7 trillion) by 2050.”
On the back of Covid-19, however, the report says that over the next five years, a delayed growth is expected both in Africa as well as in the rest of the world.
“However, despite these headwinds, Accenture’s analysis suggests that by 2025, the Internet economy has the potential to reach 5.2 per cent of the GDP in Africa, contributing almost $180 billion to Africa’s total GDP.”
Crucially, the potential depends on the usage intensity of digital technologies by businesses and the right mix of policy actions.
The good news is that Kenya leads all African countries in iGDP potential - which is the contribution of the internet economy to GDP – meaning it has a bright future in the sector.
Funding to the sector has increased with African firms closing in the first quarter of 2020 with up to $350 million (Sh39 billion) total funding, according to a study by Briter Bridge, with South Africa ($112 million), Nigeria ($74 million), Kenya ($62 million), and Egypt ($51 million) leading the way as the top funding destinations.
For Kenya, Google’s accelerator has supported promising startups like Twiga Foods, which raised $30 million in Series B venture funding in 2019, the country’s largest known financing round for that year.