Kenya ranks as one of the largest technology incubation and acceleration hubs in the region. The country consistently features as part of the “Big Four” in African tech metrics. While this is not exactly news, it is interesting to note that the ICT sector has the highest percentage of workers with tertiary degrees. Currently, about 72% of the workforce in this sector has attained a post-secondary qualification such as a university degree, a vocational degree, or a diploma.
This makes the sector stand out in comparison to other sectors in the country. The Financial sector has about 53% of its workers having a tertiary degree. The share of workers in the Education sector with a tertiary degree is 52% while health stands at 48%. On the low end of the chart, there is agriculture (4%), Mining (2%), and retail (9%).
ICT Sector Skills Gap
The ICT sector is knowledge-intensive; hence, a well-qualified workforce is crucial. However, the availability of skilled workers remains a critical challenge for firms. Approximately 48% of employers in the ICT sector indicate that graduates from the Kenyan education system do not meet their skill requirements. This means graduates are leaving schools with a skills gap. This fact was acknowledged recently by Safaricom, a leading employer in the sector. To try and address this, the company launched a student apprenticeship program.
This skills gap and the lack of work experience has its effects on the sector. To begin with, it greatly diminishes the country’s competitive edge in global markets. Kenyan ICT firms reveal that they mainly compete with foreign firms based on price rather than quality. Only 34% of the interviewed ICT companies consider themselves “strongly” competitive with foreign firms in terms of quality. As such, ICT companies in Kenya have to offer much lower prices, earning far less than their global counterparts. Approximately 59 per cent of ICT firms report having lower prices than their foreign competitors.
Education Sector Crucial Role
The availability of a qualified workforce, particularly graduates with STEM degrees, is essential. Overall Tertiary enrolment in Kenya stands at 10%, slightly above the SSA average but below South Africa (24%) and Ghana (17 %), as well as other regions like South Asia, East Asia and the Pacific.
The education sector in Kenya has to play a pivotal role in addressing the increasing demand for skilled labour in ICT jobs. Among enrolled students in tertiary education, the percentage pursuing science and engineering-related degrees is relatively low. Only 17% of tertiary graduates earn degrees in science and engineering, matching the SSA average but falling behind certain countries in East Asia, such as Vietnam, the Philippines, and Malaysia.
A growth in the number of STEM graduates is important for the country. The ICT sector predominantly offers high-skilled employment with wages substantially higher than other subsectors. In recent years, this sector has been outperforming other sectors in terms of growth. They also display of high resilience during the COVID-19 pandemic period given the sector experienced growth. This was while other sectors witnessed stagnation or decline.
We have also seen global tech giants set up shop in Kenya, poaching tech talent from local companies. This further underlines the need to nurture more people through the education system into the tech sector while narrowing the skills gap.
Importance of ICT Sector to the Economy
While Global Innovator Services (ICT & Finance) only employ 2% of Kenya’s workforce, they contribute to roughly 14 per cent of GDP and 19 per cent of GDP growth between 2015 and 2021. Over the past 15 years, Kenya’s digital services exports have grown at an annual average rate of 15 percent, now representing about one-third of Kenya’s services exports, a notable increase from just over 10 per cent in 2005. This makes Kenya the second-largest exporter of digitally-delivered services in sub-Saharan Africa.
According to the World Bank’s global database on digital businesses, Kenya boasts one of the most extensive digital business landscapes worldwide. Kenya’s digital businesses have attracted approximately US$4.8 billion in investments.
The mean investment for digital businesses headquartered in Kenya is around US$17 million, although skewed by some very large transactions. For example, KES 25 billion (US$170 million) investment for Twiga Foods accounted for a quarter of the funds raised by AgriTech companies in Kenya.
The median investment stands at about US$0.3 million, surpassing that of South Africa but falling below Nigeria (US$0.2 million) and Ghana (US$0.1 million). FinTech and e-commerce receive the lion’s share of the funding, accounting for nearly 50 per cent of the total. While the tech sector is small, it is driving change and making an outsize contribution to Kenya’s economic growth.