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Harness the power of regulation to grow Kenya’s on-demand economy

By Priscilla Muhiu | December 30th 2019 at 10:00:00 GMT +0300

The on-demand service industry and the platforms created with the surge of innovation has radically changed the world’s shopping and delivery experience. The efficiency that comes with using such apps and platforms has allowed the nascent sector to thrive as a towering beacon of hope to the economies of many countries.

In Kenya, consumers have embraced digital platforms, as they have improved the quality of their lives and brought innovation to cities and countryside alike. Different companies, both local and foreign, have set up their platforms and apps in a race to capture markets across the country and are providing a livelihood for tens of thousands of people.

A study by McKinsey estimates that the market for food delivery stands at €83 billion (Sh9 trillion) worldwide. However, this figure only represents one per cent of the total food market and only four per cent of all food sold through restaurants and fast-food chains.

The research — which was conducted in 16 countries around the globe for a period of six months — reveals the limitless potential of the on-demand delivery economy, as well as the opportunities the sector can create if well regulated.

The on-demand economy has continued to fuel the creation of digital marketplaces and further encouraged the development of technology companies. This, in turn, has helped to fulfil consumer demands by allowing faster access to goods, thus expanding choice and convenience for the masses.

Glovo, a technology company that links motorcycle riders to consumers wishing to buy and deliver products has played a pivotal role in developing Kenya’s e-commerce landscape. The Spanish startup provides an aggregator service which can be used on either an app or website, offering access to a variety of sellers using a single resource platform as their unique value proposition, thereby enhancing choice and convenience. Other players are also contributing significantly to the development of the industry in their own unique ways.

One of the challenges facing the sector is that regulation has not kept pace with the speed at which consumer needs and demands have developed, nor the technology that supports these needs. In my experience, aggregators and marketplace companies operate within the law but find that by doing so, their ability to innovate can be stifled.

They see obvious ways that legislation and regulation could be updated both to aid the work of government bodies and to ensure a clearer environment for technology companies and the tens of thousands of people who do business on these platforms. Technology companies are willing to provide guidance and input regarding international best practices on technology regulation but have not always found an open door.

Growing the sector to realize its potential will call for action from policymakers and all stakeholders to support changes in legislation and regulation that will define and regulate on-demand platforms as they strive to fulfil consumer needs and become significant contributors to the exchequer.

Diversity in the revenue generation is the solution for an economy that is pushing for exponential growth yet lacking sufficient drivers to achieve its targets. Establishing a regulatory environment that fosters productivity and innovation is imperative to harness the full impact of their benefits and to allow them to thrive. This will ensure that direct impacts, such as tax remunerations, and indirect impacts, for example, job creation, can be realised for the benefit of consumers, government, regulators, and the tens of thousands of people who make a livelihood from the digital platforms.

The sector is promising and prospects are bright. Regulatory relief will promise a bright future for entrepreneurs who are likely to venture into business in the future. The business environment of Kenya can create and support a rising tide of diverse app and software developers who will provide the infrastructure that will buttress growth of the on-demand workforce in the country.

The author, Priscilla Muhiu, is Glovo’s Regional Head of Marketing, Sub-Saharan Africa.  

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