MasterCard Study Illustrates Digital Divide In EA Gig Economy

Mastercard has released a white paper revealing how gig work across East Africa is helping to drive economic growth by facilitating economic opportunities, improving livelihoods, and acting as a buffer against unemployment.

However, for the gig economy – which is based on short-term, temporary and flexible independent contractors – to reach its potential and unlock prosperity for millions of people, the digital divide must be bridged through connected devices that power the digital economy, and value adds like access to capital and access to market.

Mastercard’s white paper titled The Gig Economy in East Africa: A Gateway to the Financial Mainstream, explores how digital inclusion is a prime enabler of the gig economy. Connected devices, which are already proven to be vehicles of inclusion and development in Africa, can help gig workers overcome some of the biggest challenges they face, ultimately driving financial inclusion and leading to improved economic possibilities.

Know thy gig worker and know them well

The paper, based on research from in-depth face-to-face interviews with gig workers in Kenya, shows that the gig economy is nascent, buoyant, and continues to grow, with almost two-thirds (60 per cent) of gig workers joining the gig economy between 2017 and 2019.

It describes the average gig worker as male, about 30 with a high school degree, speaking both English and Swahili, owns a smartphone that connects him to his gigs, with over two years experience doing gig work. He has learnt, through gig work, “to keep his
expenses flexible because he may earn anywhere between Kshs 10,001 and Kshs 30,000 ($100 – $300) each month.”

His wife, the white paper says, is a “nanny-cum-household help” who gets called in for chores as well. Her gig allows her to enjoy a flexible work schedule such that she can take care of their young, budding family. “If only, the couple says, there was some stability and continuity of income, they would be able to plan their lives around their work – acquire a better mobile device with a more reliable internet connection, train as a driver, perhaps obtain a car on a loan to join a gig platform.”

This, it notes, is the profile of a typical gig economy worker in Kenya in 2020. Branded jua kali, the informal sector is described as a job-creation engine. The 2019 Economic Survey by the Kenya National Bureau of Statistics discloses that it was responsible for 762,100 of the 840,600 new jobs created in 2018.

It describes the average gig worker as male, about 30 with a high school degree, speaking both English and Swahili, owns a smartphone that connects him to his gigs, with over two years experience doing gig work.

How much is the gig worth?

The gig economy powered by digital tools like mobile, is the latest addition to this sector. The report reveals that the global gig economy stands at $193 billion and growing at a projected annual rate of 17.4 per cent. By the end of 2023, it will be worth $455 billion. This digital gig economy hosts 40.7 million freelancers on digital platforms across the globe, generating $193 billion in gross volume and $127 billion in disbursements to freelancers.

Research estimates from 2019 peg the total size of the Kenyan gig economy at $19.7 billion employing 5.13 million workers in six key sectors: agriculture, manufacturing, trade and hospitality, construction, transport and communications, and community, social and personal services.

However, like much of the informal sector, uncertainty is a fact of life, with the biggest challenges being around continuity of income. More than half (55 per cent) said that not knowing when the next gig contributes to instability. And close to 60 per cent of respondents said that fluctuation in income from week to week is a cause for frustration.

Currently, the online gig economy (the portion of gig work that is attained through digital platforms), is a tiny portion of the overall gig economy. Research-based estimates in 2019 put the total size of the online gig economy in Kenya at $109 million, employing 36,573, while the offline gig economy comprises 5.1 million workers, and accounts for $19.6 billion. Despite this, online gig economy work is preferred.

More than half (55 per cent) said that not knowing when the next gig contributes to instability. And close to 60 per cent of respondents said that fluctuation in income from week to week is a cause for frustration.

Online gigs for the win

Mastercard’s report found that almost 60 per cent would prefer online gigs to offline. This is because online gig work enables end-to-end management of projects. A third (over 35 per cent) said that finding gig work was easier on a platform, and about 30 per cent said platforms made faster payments possible, helping connect to other workers.

“Gig work is present everywhere in East Africa, but now, with the growth of digital technologies and connected devices, there is a real opportunity to help gig workers quickly connect to consumers to meet their demands for services, and overcome significant pain points such as inconsistent work, financial planning challenges and late payments. If each key player in the gig economy ecosystem comes together – from the platform to the mobile industry and the payments provider – we can ensure that the end-to-end journey of the gig worker is both smooth and profitable, and realize the true potential of inclusive, sustainable growth across the continent,” said Jorn Lambert, Chief Digital Officer, Mastercard.

Some of the most common types of gig work in East Africa are in artisanal and general services, which includes welders, electricians, carpenters, and domestic workers. “Independence” is the powerful motivator behind this movement. Being self-employed with the freedom to work at an individual pace is part of why gig work is growing. It is an inclusive space where people of different social and economic backgrounds can fit in and earn a living.

Research estimates in 2019 peg the total size of the Kenyan gig economy
at $19.7 billion employing 5.13 million workers in six key sectors: agriculture, manufacturing, trade and hospitality, construction, transport and communications, and community, social and personal services. It is seen as an almost natural choice for Millennials and Gen Z when fresh out of high school.

“Research backs the fact that Millennials, and by extension Gen Z, work in a technology ecosystem that includes social networking, instant messaging, video-on-demand, blogs and wikis. The digital natives are used to instantly connecting, engaging, and collaborating with cohorts and managers seamlessly, leading to better productivity.”

With the digital economy as an enabler of greater prosperity and inclusion, gig platforms have proven to be a single touchpoint for many services and opportunities utilised by gig workers. But access to gig work opportunities is often not enough to keep a gig worker afloat.

Loans, instant payments, and benefits such as insurance, are the top three perks desired by gig workers in Kenya, and 45 per cent of respondents said they are willing to pay between $1 and $5 a month for such benefits and services.

Over 80 per cent of respondents in Mastercard’s research said instant payments when a job is finished is the most desired feature of a gig platform. And, in step with the prevalent mobile money system, about two-thirds (62 per cent) of respondents said they prefer to receive payment through mobile money such as M-PESA or Airtel Money because it is readily available, reliable, easy to manage, secure, and convenient.

in step with the prevalent mobile money system, about two-thirds (62 per cent) of respondents said they prefer to receive payment through mobile money such as M-PESA or Airtel Money because it is readily available.

Suffer ye the disadvantages of the gig economy

However, there are still barriers to internet access that need to be overcome to realize the massive opportunity that the East Africa region represents. One is the slower speed of internet data in Africa compared to other continents.

“Traditional platforms often do not adequately serve the needs of the gig worker, who is at risk from personal accident and injury, loss in revenue from any absence from work, incomplete delivery or payments, and economic volatility. However, connected devices are bridging divides between urban and rural, rich and poor, and connecting gig workers to peers, information, opportunities and services,” points out Ngozi Megwa, Senior VP, Digital Partnerships, Mastercard MEA.

“But what’s equally as critical is establishing a digital identity for gig workers across platforms,” he continues, adding that, “There are various gig platforms currently being utilised, but it is difficult for a single platform to provide the value and benefits that workers require, such as the easy collection of payments via digital channels, and access to credit, training and insurance, particularly as they tend to move from one platform to another. A collaborative approach is called for to not just create jobs, but also a gig-worker identity that provides benefits, ensuring decent working conditions and improved livelihoods,” concluded Ngozi.