App Economics role in Kenya becoming Africa’s 9th largest economy

Posted on October 1, 2014 12:02 am

The mobile telecommunications industry contributes substantially to the Kenyan economy with the country yesterday rebasing its GDP figures that included industry’s mobile money sector. The East African country is now the fourth biggest economy in sub-Saharan African after Nigeria, South Africa and Angola and ninth in Africa.The”application economy” refers to the marketing, development and sales of IT applications.Kenyan businesses are embracing the application economy, especially those being in a position to do so, according to various studies. Local business feels ready to tap into the “application economy” and most of the SMEs in Kenya are doing between two to five application releases per month.A study of Nairobi based companies by an American research company revealed that businesses are really thriving in the application economy and really critical given that the application economy in Kenya is largely driven by driven by release cycle. Interestingly, compared to South Africa and Nigeria, Kenyan businesses have managed to reduce costs in development of apps.At the iHub, the country’s finest app developers converge has enabled security and an environment where the business and customers have come together through applications.

In addition to its direct contributions, it drives productivity gains throughout the Kenyan economy according to the World bank Economics report which was conducted to analyse telecommunication industry’s economic contribution and significance of the mobile telecommunications industry in Kenya.The last decade has seen continued growth in the use of mobile phones in Kenya.The total number of mobile phone subscribers reached over 31 million at the end of 2013, which implies a penetration rate of over 70 per cent.Kenyan businesses are doing applications and joining the bandwagon of application economy which even the government consider as strategically important. Therefore, the number of mobile phones in service in Kenya was greater than the adult population as at 30 June 2011.According to a research company that was involved in refining statistics used in rebasing Kenyan GDP, Telecommunication industry surveys pointed to increasing substitution away from fixed line voice services to mobile phone services.

This increase in market penetration has been coupled with technological developments in the functionality of mobile phones, including most recently a trend towards data applications, such as email, that were traditionally the domain of personal computers.Associated with these developments, is the increasing importance of the mobile telecommunications industry in Kenya in both the size of the industry itself, and its indirect footprint on the Kenyan economy. The latter occurs in terms of streamlining business processes, reducing costs and increasing the productivity of workers, no longer constrained to the fixed environment to undertake regular business functions. Key challenges faced by the industry in Kenya include the regulatory settings and their ability to keep pace with rapidly emerging technologies. However, the “application economy” in Kenya starting with M-Pesa is a revolution as the delivery of business value is increasingly taking place through the digital interactions facilitated by applications. Thus, it is a fundamental business shift that needs to be on every Kenyan agenda.

The Kenyan application economy is estimated to be worth US$18m in 2013 and is projected to grow to US$33m in 2016. This phenomenal growth potential will also impact Kenya where the mobile penetration rate has reached over 90% with smartphone usage reaching slightly over 20% by the end of this year.Safaricom, the leading network operator has more than 2 million smartphone users. For businesses, getting it right in the application economy will be the difference between growth and decline. Nevertheless, to survive if not thrive in the application economy, businesses in Kenya need to do more than just invest into and create the right applications. They should also look at enabling a holistic IT ecosystem that supports multiple applications from different platforms.  IT leaders in Kenyan who want to ensure their businesses’s success in the application economy must therefore completely rethink their application strategy and this can be done by focusing on the right infrastructure management solutions.

Contador Harrison