Kenya raising the bar for digital transformation in East Africa

From rapid mobile penetration to better financial inclusion, Kenya has been at the heart of digital transformation in East Africa; and the country continues to raise the tech bar in the region.

As evidenced by the 2019 Digital Economy Blueprint, Kenya has made a very deliberate effort to step up digitization in the country, and that quest has been yielding plenty of dividends.

Mobile connectivity is at a record high in Kenya. According to the Communications Authority of Kenya, mobile penetration had reached 116.1% by the end of March 2020, with about 55.2 million active mobile subscriptions in the country. 

The number of mobile subscriptions is higher than the Kenyan population because people register on multiple service providers in their quest for the best value. Between January and March, there were 1.9 million new SIM card registrations.

Perhaps a more revealing barometer is the unique mobile phone penetration, which measures the percentage of mobile phone owners relative to the total population. Based on a study published by Airtel Africa, Kenya’s unique mobile penetration stands at a very impressive 62%. By comparison, Zambia is at 54%, Nigeria is at 45%, while the unique penetration in Uganda is 42%.

The growth in the Kenyan telecoms industry has hardly been in isolation. As mobile penetration increases, so have internet connectivity and financial inclusion. As at January 2020, there were 22.86 million internet users in Kenya, an increment of 16% from 2019.

Kenya is also right at the top end of the mobile money business in Africa, with the number of mobile money subscriptions in Kenya rising to 29.1 million by the end of March. In terms of volume and value of mobile money transactions, East Africa dominates the global market. The region is No. 1 in the world, with Kenya being the most significant contributor.

Mobile money giants, M-Pesa are right at the forefront of the Kenyan revolution, owning a whopping 98.8% of the market share as at March 2020. Airtel Money is at a distant second with a meagre 1.1%. Mobile money has had such a massive impact on industries in Kenya that it is almost impossible to run a business without allowing payments via M-Pesa or any of its competitors.

One of the sectors that have benefited greatly from the digital transformation in Kenya is the controversial online gambling industry. Betting sites and the Kenyan government have not exactly been seeing eye-to-eye in the last few years, with major players like SportPesa and Betin forced out of the country due to stringent tax laws, but the East African nation remains the third largest online betting market in Africa, behind South Africa and Nigeria.

With rising unique mobile penetration, more accessible internet and convenient payment methods like M-Pesa and Airtel Money, Kenyans can easily access and deposit money on sports betting sites in the country. 

Based on a 2017 survey by GeoPoll, the frequency of sports betting in Kenya is the highest in sub-Saharan Africa. Kenyans also spend the most money on betting, with the average monthly expenditure being around $50 per month. 

The survey also showed that most Kenyan bettors (96%) bet via their mobile phones, with many of them favouring football betting. It is therefore not surprising to find many football betting sites in Kenya! 

Betting sites are not the only online operators feeling the heat from the taxman. Under the new Financial Bill, tech companies like Google, Uber and Netflix will have to pay a 1.5% tax on digital services provided from 1 January, 2021. 

The move has been criticized in many quarters, with some arguing that consumers will bear the brunt of the digital tax law by paying higher prices for services.

With ICT generating billions of dollars in revenue, it is understandable that the government would want to cash in on the industry. 

However, it is also important that Kenyan authorities find a balance between maximizing tax revenue and creating an environment that will continue to aid the growth of tech companies in the country.

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