January 21, 2021

Fostering new business models in the digital economy - what role does policy have to play?

By Patrick Ndegwa, SEACOM East Africa Business Sales Lead

The digital economy is changing our lives and the way we do business. It's driven by data and information, and we’re starting to see more startups exploit digitally enabled opportunities, giving large established enterprises a run for their money.

Locally, we have a lot to gain from the digital economy, but before we can harness its potential, we need to build ecosystems that facilitate digital transactions nationally, regionally, and globally. According to the 2019 Digital Economy Blueprint, Kenya’s digital economy will be focused on “the provision of universal broadband access that will drive digitally enabled services for a digital people and economy.”

Countries that can harness digital technologies also need the right digital infrastructure, skills, platforms, and entrepreneurship to support their digital ecosystems. Digital-first policies and their underlying frameworks are essential for countries that want to transform their overall economic outlook.

Policies that foster new age business models

If we are to create vibrant, innovative digital ecosystems, we first need to assess whether the systems are sufficiently responsive and agile, and whether new policies should be considered. For Kenya to keep pace with technological innovation, we will need stronger digital foundations, which may include new regulations and policy guidelines.

The World Bank reports that in rural areas in Kenya, connectivity is less reliable, prices are higher and, in many cases, the fibre network does not reach them. Thus, a significant digital divide, as well as widespread gaps in basic digital skills, still exists. To include these difficult-to-reach consumers will take public investment, fast and affordable Internet, and progressive policy measures to encourage digital inclusion.

Investment aimed at accelerating a dynamic and inclusive digital economy for Kenya, combined with policies that work alongside business objectives and rapid digital market evolution, are critical for our country. An example of this is the crowdsourcing platform mentioned in the Digital Economy Blueprint; it’s a collaborative and innovation-focused approach where governments openly work with citizens, companies, other government organisations, or NGOs. In this approach, government serves as an orchestrator or hub for ecosystem collaboration, but with largely undefined roles for participants. These types of digital exchange platforms allow real-time data to be used to enable a country to transform, improve decision making, and initiate policy changes.

One of the fundamental policies needed to nurture digital businesses is a national ICT policy that considers modern, digital requirements - which are very different to what we needed just 10 years ago. This policy should align with the national priorities of the country and provide a measurable plan to enable everyone to participate in the digital economy and reap its benefits.

Areas of transformation

The digital economy has encouraged an entrepreneurial ecosystem that capitalises on technological adoption, builds companies of the future, and enables enterprises that will increase economic growth and job creation. To nurture this, access to capital for startups needs to be improved while existing taxation and procurement policies not tailored for unique startup business models will require revision.

Innovation requires a combination of different competencies as digital elements are added to traditional products. Networks and platforms are becoming more important, in turn enabling companies to provide ecommerce and digital services to Kenyan consumers. This should increase competition, decrease prices, and encourage local and international investment in digital infrastructure.

The current trend where governments impose heavy taxes on digital infrastructure equipment, digital devices, and telecommunication services leads to excessive prices and decreased adoption. Instead, we need a responsive approach that considers the current landscape to drive digital business. Only then can these policies support new business models, future-proofing the Kenyan economy and ensuring that it thrives in a digital world. Until then, SEACOM will continue to provide businesses with connectivity solutions to help them benefit from our digital ecosystem.