The push to grow manufacturing and raise tourism numbers notwithstanding, the two sectors are among the lowest adopters of technology, a new study shows.
Kenya targets to grow the manufacturing sector to 20 per cent of GDP, and raise the country’s tourism numbers to five million
A Kenya Institute for Public Policy Research and Analysis study shows low adoption of digital technology among Micro, Small, and Medium Enterprises (MSMEs) in Kenya, particularly within the manufacturing and food and accommodation sectors.
According to KIPPRA, as businesses across industries increasingly leverage digital transformations to enhance operations and improve efficiency, these sectors have been slower to integrate technological innovations into their daily processes.
KIPPRA researcher and policy analyst Anne Gitonga says that despite being priority sectors in the Kenya Vision 2023 plan, these industries lag behind in digital integration.
“Manufacturing sector, which has been a focus area in terms of policy as established in the Kenya Vision 2023 and BETA, is not among the sectors that have a likelihood to adopting digital technology,” said Gitonga.
Similarly, the food and accommodation sector, which forms a significant portion of Kenyan MSMEs, have not widely adopted digital tools.
MSMEs in the services sector are the adopters of digital technologies.
Other than agriculture the other top sectors that use digital technologies include construction; wholesale and retail trade; repair of motor vehicles and motorcycles; transport and storage; information and communication (ICT).
Finance and insurance activities, real estate activities; professional services; administrative and support services; education and human health and social work have also adopted technology use.
“The use of digital technology in the trade sector is essential to ensure effective implementation of a single window system to facilitate electronic transactions in trade,” the report says
The study further shows distinct trends regarding gender and formality in MSMEs.
Female-owned businesses, whether formal or informal, are less likely to adopt digital technology.
Specifically, formal female-owned MSMEs show a 0.277 decrease in digital technology usage compared to their male counterparts, while informal female-owned MSMEs exhibit a 0.424 decrease.
On the other hand, larger firms, businesses with linkages, and those undertaking product innovations show a higher likelihood of using digital technology.
Interestingly, informal MSMEs are more inclined to adopt digital tools across various service sectors than formal businesses.
These informal enterprises often leverage technology more intensively, possibly to market their services.
“MSMEs operating in kiosk, exhibition, jua kali shed is associated with a 0.255 decrease in the use digital technology compared to MSMEs operating in open markets. This is likely because this type of worksite often lacks ICT complementary infrastructure such as electricity,” the report says.
MSMEs that undertake product innovation are associated with 0.50 increase in use in digital technologies while MSMEs that undertake process innovation are associated with a 0.17 increase in use of digital technology.
Being part of a business association or group, such as a merry-go-round or rotating savings and credit association (ROSCAs), leads to more use of digital technology.
For business associations, the increase is 0.29, and for other groups, it’s 0.061.
These connections provide MSMEs with financial support, training, and information, with greater benefits seen in business associations.
KIPPRA says that addressing these barriers, particularly in digital technology adoption, could unlock significant potential for MSMEs, especially in priority sectors like manufacturing and hospitality.
