Let’s call it the prepaid economy, I told Michael in our regular weekly call the other day. We were exploring the emergence of commercial activity on digital platforms in Kenya, and debating whether it could still be considered as an element of the existing informal economic ecosystem, or, was it something wholly novel and different?
What is emerging is not simply the digital version of the existing informal economy, its a novel hybrid that deserves consideration in its own right. Yet, calling it simply the digital or the app economy would conflate it together with the developed world’s version, overlooking the unique characteristics that distinguish it as very African.
For one, the vast majority of African mobile phone users were on prepaid or pay as you go plans, regardless of their income level. That is, when more than 95% of Kenyans are prepaid mobile subscribers, their digital behaviours, internet browsing, and media consumption habits are naturally going to be shaped by their preferred approach to managing costs, and, in turn, this dominant business model would influence the payment plans and business models of digital services delivered over the mobile platform.
And two, the African digital economy is not only mobile first, but mobile only for the most part. And, in 2019, we are talking about an operating environment that embraced mobile telephony wholeheartedly for more than a decade and a half; transforming social and commercial behaviours in both rural and urban contexts in big ways, and small, so much so that the disruption of how things work, and are made to happen has occurred, going almost unnoticed since it was not an overnight change as disruptions are assumed to be.
The past 15 years have nevertheless seen Kenya (and much of sub Saharan Africa) transform in response to the information and communications technology now ubiquitously and affordably in every pocket. Everybody has heard of mPesa, and everybody wants to launch their latest app or solution in Kenya.
This digital economic ecosystem bridges the formal, or “modern” economy, as the Kenyan statisticians measure it, and the informal sectors that dominate the commercial and employment opportunities. It is not unrecorded or invisible, like the traditional informal economy – in fact, Kenya is the leading destination for a plethora of instant mobile credit and loans companies all the way from Silicon Valley, able to assess your creditworthiness with the number crunching power of their technology. Yet it still operates outside of much of the institutional boundaries of the formal sector, empowering people to make their own decisions and relationships with services and solutions provided on demand, in a decentralized manner.
Look at the itinerant street vendor in the photograph Michael took in Nairobi with a mPesa merchant till number hanging on his back. Even as an individual, the gentleman concerned needs to show one week of daily receipts as part of his application – this implies record keeping. Which in turn, blurs the boundaries of our conventional thinking of the ad hoc nature of “informal” business. Here, I will just say that word informal is the problem since in English it implies a lack of organization or structure.
Back to our hawker of goods with his mobile money till number hanging on his back, offering digital (recorded) transactions as any merchant would. He explodes our assumptions of hawkers as marginalized and vulnerable economic actors with low skills and education. He exemplifies the changes that have transformed the Kenyan commercial environment, and, the emergent digital economy on the mobile platform.
He bridges the informality expected of a wandering street vendor with the documentation and record keeping of the cashless transaction completed on your smartphone.
The prepaid business model bridged this gap between the structures and documentation of the formal or modern economy and the necessary flexibility and negotiability of the informal’s unpredictable and often unknown, income streams by putting control over time and money in the hands of the customer rather than the service provider. This empowers people to manage the volatility and uncertainty we deem inherent in the context of developing countries with variability in service delivery systems and inadequate or missing infrastructure.
Therefore, it seems, that as a working label, to distinguish the informal economy from the digital one, we’re going with the oft used label of “prepaid economy” as it includes people with formal sector wage employment as well as implies the mobile platform and the digital record keeping for the informal sector’s hawkers or traders. It’s a whole new space to play in.