Gig economy: Why the sector is yet to pick up despite initiatives

Access to the internet, low computer ownership, and gaps in employment law regulation have been cited in a recent policy document as significant obstacles limiting the growth of the gig economy in Kenya.

Despite government efforts through initiatives such as the Ajira Digital Programme, Jitume Programme, DigiTalent or the Presidential Digital Talent Programme, the document highlights a persistent skills gap.

The Kenya Institute for Public Policy Research and Analysis (Kippra) document proposes strengthening coding programmes in schools by providing computers for learners and equipping teachers with practical coding skills.

The Kippra Policy Monitor for the January to March period notes that despite these government initiatives, significant policy gaps remain in the sector.

“For instance, access to the internet (18 per cent) and ownership of computers (8.8 per cent) by households remain low, excluding many Kenyans from accessing digital jobs,” the document states.

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It adds that Kenya has not fully implemented and operationalised the national addressing system and national public key infrastructure, which are crucial for supporting e-commerce.

Kippra indicates that a 2016 ICT Survey on enterprises showed that 39 per cent of surveyed firms had engaged in some e-commerce activities.

However, most local enterprises have not fully automated their processes due to the complexity and challenges in dealing with fee and royalty collection, copyright and intellectual property management, privacy and personal data protection, illegal downloads, piracy, counterfeiting, and rising cyber threats.

The state-backed policy research body points out that there is a significant digital skills gap in the country, and the current skill levels cannot meet the growing demand in the job market.

“It is noted that several graduates lack adequate skills for the market,” KIPPRA says.

Additionally, Kenya does not have a comprehensive policy for scaling innovations to generate digitally enabled jobs.

“There is limited entrepreneurial financing for tech startups, and high regulatory bureaucracy burden affecting the growth of digital businesses,” says the research body.

To address this, KIPPRA calls for the National Treasury, Central Bank of Kenya (CBK), Kenya Innovation Agency (KIA), and the Capital Markets Authority (CMA) to establish specialized funds or venture capital firms dedicated to investing in tech startups. These institutions should also provide grants, low-interest loans, or seed funding for early-stage startups, and the process of accessing these funds should be simplified.

Furthermore, they should offer mentorship programmes and business development support to startups to increase their chances of success.

The ICT sector contributes 6.3 percent to the country’s Gross Domestic Product (GDP) and is among the top five in wage employment.

“Interestingly, Kenya has a high number of digitally enabled jobs beyond the jobs recorded in the ICT sector,” the document states.

Global tech firms such as Microsoft, Huawei, Oracle, Google, Amazon, and IBM have set up shop in the country.

Kenya’s gig economy, largely driven by digital technologies, is valued at USD 109 million and employs over 36,000 workers in various sectors such as transport and healthcare.

Kippra quotes a 2021 World Bank report indicating that global tech giants and innovative services (ICT and finance) make up 2 percent of Kenya’s workforce, contributing about 14 percent of GDP and 19 percent of GDP growth between 2015 and 2021.

The report also notes that the ICT sector employs about 72 percent of its workforce with post-secondary qualifications such as a university degree, vocational degree, or diploma.

KIPPRA estimates that about 50 percent of jobs in Kenya will depend on digital skills by 2030, up from 25-30 percent in 2019.

“It is noted that there is inadequate data to show the total number of digitally enabled jobs, particularly new roles. Furthermore, the availability of skilled workers remains a significant challenge for firms in the knowledge-intensive ICT sector,” the policy document reads.

KIPPRA explains that the gig economy in Kenya falls into two categories: online and offline. Examples of online platforms include Uber, Airbnb, Upwork, and Lynk, while offline gig work includes part-time employment in sectors such as retail, hospitality, agriculture, transportation, and manufacturing.

While the gig economy does not offer benefits like health insurance or social security associated with formal jobs, it provides income flexibility.

“Another challenge is that gig workers are not classified by law, leaving them vulnerable to exploitation,” says the document.

KIPPRA explains that employment in Kenya is governed by the Employment Act (Cap 226 of 2007), which defines the minimum employment terms and conditions.

“However, the act fails to define gig workers, whose nature of work can neither be captured as that of an employee nor an independent contractor,” it says.

The Labour Relations Act No. 14 of 2007 also defines the employee and employer freedom of association, including the right to collective bargaining.

“However, the definition of an employee is broad and lacks specificity for gig workers,” the document reads.

Taxation is another issue burdening the sector, with the Digital Service Tax (DST) introduced in 2020 at 1.5 percent of gross transaction value being criticized.

Kippra suggests that Kenya can learn from other nations that have implemented laws and policies specifically designed to assist gig workers.

“For example, the United States is considering portable benefits programs to give gig workers access to healthcare and retirement savings, while social safety programs like maternity/paternity leave and illness benefits are now available to self-employed individuals in France,” says Kippra.