Can Government use flexible policy and regulation to enable economic gains for youth through the digital platform economy?

Meet Cynthia: a young person working in Zambia’s platform economy.

Cynthia is a graduate struggling to find work since she left university two years ago. Her parents own a car that is rarely used by the rest of the family. Cynthia now uses this car to provide ride sharing services on multiple ride-hailing applications. Cynthia also runs errands for people, such as document delivery and grocery shopping. She finds her customers on social media and collects payment through mobile money. With these activities, Cynthia has been able to meet her own daily needs, contribute to her family’s upkeep, and save towards future endeavours.

Cynthia is an example of a young Zambian trying to find their way into the Zambian economy, where many young people are excluded or unable to find work and earn incomes that meet their needs. But for some, this is changing through the rise of digital platforms.

Digital and information technologies have enabled the rise of the platform economy all over the world through digital platform business models, such as Uber and Airbnb, and even MSMEs that source and interact with customers on social media platforms. Platform economy businesses not only matchmake, but also facilitate transactions as they enable interactions between customers, service providers, asset owners and the public in the sharing or selling of products and services. In Zambia, more companies have emerged whose business models are built for the platform economy, with ride-share or ride-hail services, grocery and restaurant delivery services, bike messengers for delivery and distribution, individual entrepreneurs who use social media platforms to advertise their products and services. Many of these small businesses use mobile money for payments.

Why consider the platform economy?
In this two-part series UNCDF explores the ways in which policymakers and regulators can enable Zambian youth to realise financial and economic gains as they participate in the platform economy and examine how stakeholders can create a platform economy where all parties win: the economy, regulators, traditional businesses, and customers. In the first part, we discuss the existence and limitations of the platform economy in Zambia and consider implications for equitable participation, particularly for the youth. In the second part we’ll examine and propose how policies can enable more inclusivity and growth of the platform economy to enable all stakeholders to equitably benefit.

As the platform economy in Zambia grows, it is becoming an avenue through which individual entrepreneurs can establish and grow micro and small businesses which contribute to the country’s overall economic growth. This is, however, not without its challenges, such as the limited availability of affordable financing for MSMEs, limited supporting technology and infrastructure especially in rural areas, poor access to markets, and a relatively high vulnerability to economic shocks such as rapid exchange rate fluctuations and the COVID-19 pandemic. Despite of these challenges, the rise of the platform economy presents an opportunity for policymakers, regulators, and development actors such as UNCDF, to support the development of policies that better serve platform economy workers and provide them with the necessary protections or social benefits that they need to thrive in a challenging environment.

Zambian youth need a new economic agenda
Approximately 75 percent of Zambia’s population is aged below 30 years​1. With a youth unemployment rate of 26.1 percent - above the national average of 13 percent2 - Zambia’s youth need an economic agenda that creates new opportunities for employment and self-empowerment. Additionally, more than three quarters of Zambians are employed in the informal sector compared to 19.7 percent employed in the formal sector.3 The current Eighth National Development Plan places emphasis on Economic Transformation and Job Creation, with (i) an industrialised and diversified economy, and (ii) increased citizenry participation in the economy4 as key outcomes. Developing policies that enable the growth of the platform economy provide one avenue in which to realise these outcomes and diversify and transform Zambia’s economy.

The platform economy works particularly well for youth in urban and peri-urban settings and those not in formal employment. As the Government of Zambia seeks to develop and enact policies that unlock economic opportunities for the youth, it is useful to better understand the inner workings of the platform economy and how to leverage it to extend new prospects for income generation for the youth.

With the spread of internet-based technologies, the platform economy is emerging as a new and rapidly growing sector globally. A PWC report on the platform economy estimates it to be worth US$250 billion globally by 2025.5 This growth poses significant benefits to both consumers and service providers. In some ways, businesses based on the digital sharing and the peer-to-peer economy democratise service provision and enable access to services, with the only requirement being ownership of a smartphone. As the prevalence of digital platforms has grown in Zambia, a handful of options have emerged to make device ownership more affordable. These include device financing through gadget stores and financial service providers, and the recent move by the Government to zero-rate taxes on selected ICT devices. These actions hold promise, particularly for youth who are often characterised as techy-savvy and early adopters of new technologies.

Is the platform economy the key to digital economic transformation?
The Zambian Government has a firm agenda to drive digital transformation for the growth of the economy, as demonstrated in its formation of the Ministry of Technology and Science, and its subsequent mandate to develop a National Digital Strategy. One of the aims of this strategy is to enable digital entrepreneurship and innovation. Businesses, such as Cynthia’s, built on the platform economy, can benefit from deliberate and well-intentioned policies that factor in:

1. the informal and demand-driven nature of her business,
2. the need for flexible working hours given the multiple services she can offer, and
3. the inherently client-centric nature of the services she offers.

From these factors, several policy considerations emerge, which will be explored in the second part of this series:

• How can policymakers enable much needed customer protection without creating more red tape in an industry with relatively low barriers of entry?
• What role can policymakers play in creating a more stable and financially secure working environment for operators of business models built on the platform economy?
• In what ways can opportunities presented in the platform economy be extended to digitally-excluded populations, such as rural dwellers?

There appear to be three distinct pathways to economic gain for youth within the platform economy in Zambia. Firstly, as founders of platform businesses offering services centred on their customer’s convenience, secondly as individual service providers leveraging these digital platforms for sourcing and interacting with their customers, and thirdly as stores that leverage social media platforms for sourcing and interacting with customers. The first pathway is open to youth with the requisite skills and capital needed to build and scale a digital platform business, while the second is open to a broader range of individuals who have the necessary time and required skills to fulfil varied needs for their customers. The third pathway uses a combination of social media, digital payments or bike delivery services to expand their reach beyond physical stores. As the Government looks to expand entrepreneurship and employment options for the youth, it is important to consider policy and financing options for the pathways presented within the digital and platform economy. These policy and financing options will be discussed in further detail in the second part of this series.

The platform economy provides youth with a chance at financial and economic gain, which is critical in the current economy. Doris, 22, runs errands and does shopping for her customers in Lusaka. She is saving money for nursing school. “I live with my elder sister. This work is safe for me, it keeps me busy and motivated. I can help with the rent and even send some money to my parents. I don’t need to depend on anyone.” The platform economy also provides an entry point to accessing various financial services. A study by CGAP focusing on women platform economy workers noted that, “a large percentage adopted formal financial services since becoming platform workers.” 6 This has the potential to catalyse access to other products and services through digital finance solutions, expanding the potential of their businesses and their ability to become more financially secure. Products such as micro-insurance, savings, and investments become more accessible to women.

The platform economy in Zambia may be at a nascent stage, but it has the potential to offer a range of opportunities for growth and prosperity if harnessed and supported appropriately. The pathways discussed in this article are a strong starting point, with a handful of businesses being able to overcome some of the traditional constraints in Zambia’s digital economy -- bridging gaps in infrastructure, enabling access to markets, and creating opportunities for self-employment. By leveraging the power of technology and connectivity, young Zambians can unlock new avenues for economic participation and innovation. The government has a role to play in creating an enabling environment that leads to financial gain and increased income flows for its youthful population. Increased investments in digital skills at all stages of learning, creating an enabling digital infrastructure environment, making financing available for platform economy start-ups, and improving the accessibility and affordability of digital devices are some of the steps needed to ensure the growth of the platform economy is both transformative and inclusive.

The second part of this series will explore the role that policymakers can play in addressing the needs of platform economy entrepreneurs and workers, from providing necessary protections to enabling the scaling of promising digital platform business models.

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1. Zambia Statistics Agency, Zambia Demographic and Health Survey (2018): https://www.zamstats.gov.zm/publications/
2. Zambia Statistics Agency, 2020 Labour Force Survey: https://www.zamstats.gov.zm/publications/
3. Ibid
4. 8th National Development Plan, Ministry of Finance and National Development Planning: http://www.zda.org.zm/wp-content/uploads/2022/09/8th-NDP-2022-2026.pdf
5. PriceWaterhouseCooper, Sharing or Paring? Growth of the Sharing Economy: https://www.pwc.com/hu/en/kiadvanyok/assets/pdf/sharing-economy-en.pdf
6. https://www.cgap.org/research/reading-deck/women-in-platform-economy-emerging-insights