Like it or not, the gig economy is expanding into Africa. How this will affect a continent with soaring youth unemployment remains to be seen, but CGAP’s recent interviews of young Kenyans offer preliminary insights into how youth are experiencing this phenomenon.
The gig economy has divided public opinion in mature markets where it is most common. In countries such as the United States, advocates point out that gig employment creates jobs, gives workers more flexibility and improves work-life balance. In these same markets, critics stress that gig employment erodes important worker benefits and protections, such as health care, minimum salary guarantees and worker’s compensation.
In Africa, there are still relatively few gig workers. A study by Research ICT Africa across seven countries showed that just 2 percent of the adult population had online work. Still, this employs 4.8 million workers, and the numbers are growing.
In October 2019, CGAP visited one of these countries — Kenya — and interviewed 34 young Kenyans between the ages of 19 and 33. This is part of CGAP’s effort to explore ways in which financial services can reduce or eliminate barriers to accessing decent gig work and assess how access to financial services can help youth trapped in low-value gig employment to transition to more productive gig employment.
So far, our findings paint a nuanced picture of gig employment. While the gig economy’s dangers are clear, so too are the benefits to young people who lack other means of income. According to 19-year-old Fridah Nyawira: “This work provides for me and for my two sons. I am able to pay for day care, food, rent and buy clothes. It also gives me something to do so that I am not idle.”
Our interviews showed that gig work gave vulnerable people a badly needed source of income. This is also evident in a recently published ODI report, where gig work ensured the sustenance needs of families. Many of the young people we spoke with came from single-parent homes, and most of the women were single parents themselves. Gig income is very important for their families’ livelihoods.
Our interviews also revealed that access to capital is a challenge for these youth. This includes both start-up capital and working capital. Some platforms offer start-up capital to enable workers to purchase the tools needed to start gig work. LYNK, which connects customers with trusted domestic workers, carpenters, mechanics and skilled blue-collar professionals, offers soft loans repaid through deductions from platform earnings. DigiFarm is a one-stop platform for farmers to access inputs, transact, learn, grow and sell their produce. It also links farmers to M-Shwari loans. However, it appears that there are not enough sources of credit to meet the demand of the youth we interviewed.
Capital is also essential for progressing to higher paying jobs within the gig economy. For instance, we talked to Erik Lubia, who works for the Sendy platform as a deliverer. He owns a motorbike for work but wants to buy a car to expand his work. “I look forward to moving from driving a motorbike. It’s challenging because of being scorched by the sun and being rained on, and that stresses me. Being rained on especially has led to me being sick and unable to work, but everything has its time.”
Notably, all the youth we interviewed use M-Pesa.
Should the gig economy be welcomed in developing countries? Should the financial inclusion community help improve availability of working capital for gig workers? It’s too early to say for certain, but for the youth we have spoken with, who actually work in the gig economy, this work is providing an essential source of income. And given the barrier of working capital, gig employment should spark serious discussion in the financial inclusion community.
CGAP will continue to research gig work in Africa, with a focus on identifying worker pain points that can be addressed by financial and other services.