Listen to This Article Enhance your reading experience by listening to this article.

Faith Kyoumukama @martkinel

Over the last few months, Kenyans have had to make technology a central part of their lives as they adapt to the ‘new normal’.

While many are looking at virtual events- school and work- as a new thing, others had already earlier on embraced technology and were making use of its benefits.  

As technology takes over most aspects of our lives, more and more entrepreneurs are getting creative with their business ideas.

Shopping has largely involved physically making your way to a shop and purchasing your items.

However, with the creativity Kenyans have in plenty, the phenomenon of the Instagram shop has become commonplace. 

The idea is actually fairly simple, but requires dedication to execute and turn into a success. 

Active users 

Rather than having to rely on walk-ins for sales, these businesses target consumers where they spend most of their time, social media.

They attract the attention of consumers, gain followership, and conduct their sales via direct messages (DMs) or via WhatsApp and phone calls. 

A report by datareportal indicates the number of active social media users in Kenya stands at 8.8 million people – as of January 2020.

The bulk of these users fall within the 18-34 age bracket. These are the target market for Insta-shops. 

One such business is Vintara Collections, founded by Ian Mati, who came up with the idea to produce bags with design inspired by African print.

The bags became a hit and have helped him grow the business over the years.

While he has a workshop where he designs and creates the bags, he effectively uses social media to generate traffic to the business driving sales. 

Growing business 

Once a bag is purchased, it is then delivered to the customer. The success of the business has seen him receive orders from some of Kenya’s biggest corporations. 

“Ninety per cent of our retail sales come from our social media pages. Social media has been critical for us from day one since it acts like a physical shop,” he says.

Another dynamic that comes into play, and that has helped the growth of several insta-shops is leveraging on the followership of their founder. The result is a business that steadily grows its customer base over time. 

One business that is growing through the large following enjoyed by its founder is Shoespace Africa.

Founded by Eve Maina with the aim of providing high quality footwear to the mid to low-end market, the business has steadily grown its social media footprint, with the help of its founder’s Instagram following of over 14,000. 

“When I promote the business through my personal page, it helps attract a bigger audience.

My page, therefore plays a big role in helping to grow the business,” Eve says.

These traders are among those who enjoyed increased income during the pandemic as stay-at-home rules and social distancing regulations were put in place.

Visa’s Covid-19 Central Europe, Middle East and Africa Impact Tracker says 66 per cent of Kenyans sampled have been shopping online for their fashion needs before the pandemic hit.

This number rose even further with the pandemic. However, it is a sector that might be affected by the digital tax.

Digital tax 

The advent of the digital economy has seen governments make headways in expanding their tax base to cover the digital market.

It is against this backdrop that Kenya in the Finance Act 2020 introduced the digital services tax of 1.5 per cent of the gross transactional value. The tax will take effect in January 2021. 

“This tax is meant to cover income generated from Kenya using the digital market, for example, payment services, app stores, online advertisement, and shopping services.

This tax is deducted from resident entities and branches, and is considered as an advance tax, available for set-off against the tax payable for the year of income,” says Ian Mathenge, a tax litigation advocate.

 He adds, “Besides that, the government is tightening the noose to monitor income generated through electronic transactions.

It does not make sense for the government to tax physical market and not the digital one.”

Of course, some may argue this tax is obsolete because at the end of the year businesses will pay income taxes even on income generated digitally.

Although this might be true, this tax introduces accountability measures by addressing specifically the digital market.”

Mathenge recommends that since developments on digital tax are evolving worldwide, there is a need for businesses to adapt to the new tax. 

“While the Kenya Revenue Authority is implementing this tax it must ensure that it is fair and efficient. 

It must be innovative to beat challenges such as the lack of physical presence of digital companies doing business in Kenya,” he adds.