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Kenya Business Sector: Making Sense of It

Updated on October 30, 2013

Kenya Business Sector: Making Sense of It

In a bid to make sense of the Kenya business sector, we will attempt to answer certain questions pertaining to it. First is the question as to who the key actors in the Kenya business sector are. Second is the question as to what the scope of the Kenya business sector is. Third is the question as to how Kenya businesses are financed. This is an important question, especially keeping in mind the often mentioned fact that if you want to understand anything, then you need to ‘follow the money trail.’

The key actors in the Kenya business sector

The key actors in the Kenya business sector can be seen as falling into two broad categories. The first category has those that are referred to as small-time businesspeople. The second category has those that are referred to as big-time businesspeople. Reading through the Kenya business news, you may be tempted to imagine that only the big-time businesspeople matter. That is because the small-time businesspeople never seem to make it to the Kenya business news. Indeed, even conducting a Kenya business name search, you may be inclined to think that the small-time businesspeople don’t matter (or perhaps that they don’t even exist). The reason as to why a Kenya business name search may lead you to that conclusion is because, for the most part, the small-time businesspeople in Kenya don’t register their enterprises formally…

But in the final analysis, the two categories of actors in the Kenya business sector (the small-time business people and the big-time businesspeople) matter a great deal. Indeed, they have some sort of a symbiotic relationship. The basis of the relationship is in the fact that the small-time businesspeople often form the distribution chains, through which the big-time businesspeople get to distribute their products. Thus, for instance, although the talk about the billions of shillings that Safaricom makes annually in profits may be impressive, the truth of the matter is that the profit is made through the chain of small-time retail shops (and M-pesa agencies), through which Safaricom is able to market its products.

Thus, when talking about the key actors in the Kenya business sector, you end up with a very huge pool of people. The directors of the companies listed at the Nairobi securities exchange, for instance, consider themselves to be key actors in the Kenya business sector. The mid-level managers in these companies (especially those that are directly involved in the business lines, like, for instance, those in marketing), also consider themselves to be key actors in the Kenya business sector. On the other end of the spectrum, the folks who operate small-time retail outlets in the villages, rural markets and in the slums also qualify to be referred to as key actors in the Kenya business sector. They may not recognize themselves as such, of course, but cumulatively, they turn out to be the folks who drive the sector: especially the distribution chain end of it.

We also have government employees who play a crucial role in the Kenya business sector. They are not directly involved in the sector, but they play a facilitative role. For instance, the cops who provide security (regardless of their effectiveness or lack of it) do, at the very least, ensure that the place doesn’t fall into total anarchy. Thus business is able to progress. The teachers provide skilled manpower, for the business sector. The doctors ensure that the human resource is ‘repaired’ when it falls ill. So, ultimately, we end up in a situation where the list of folks who play a key role in the Kenya business sector ends up being much larger than we’d initially have thought. Actually, we can say that every working person in Kenya plays a key role in the Kenya business sector: either directly, or by playing a facilitative role.

The scope of the Kenya business sector

The scope of the Kenya business sector is wide. The best way to start making sense of it is by dividing the ventures in it into two broad categories. Thus, we end up with one category being that of businesses that are involved in the production of tangible goods. The other category is that of businesses that are involved in service provision. In both categories, we have big-time businesses and small-time businesses. For instance, in the category of Kenya businesses producing tangible products, we have the likes of cement manufacturers, sugar millers, mining companies and so on being the big-time businesses. Small-time businesses in this category include those that are involved in things like small-time brewing, those that are involved in food production (right up to the food vendors operating on the roadsides), those that are involved in cloth making (right up to the village and slum tailors)… and so on. On the service provision front, the big-time businesses include those that are in the airline business, the bit-time hotel operators… and so on. Small-time businesses in this category include those that are involved in hospitality (right up to the small-time, small-town guest houses), those that are involved in entertainment… and so on.

To get a better idea of/to make sense of the scope of the Kenya business sector, you need to take a look at the number and variety of Kenya businesses online. Such a search on Kenya business online will reveal everything: from airlines, to hotel operators, to tour operators and onto teeth whitening ventures, educational ventures and so on. Ultimately, in order to make sense of the scope of Kenya business sector, you just need to gain insight into the whole range of services and tangible products Kenyans need. For each service or tangible product that is needed by Kenyans, there is an extension to the scope of the Kenya business sector. Indeed, this demand-based approach is the one that is commonly used by folks looking for Kenya business opportunities, but who happen to be lacking authentic Kenya business ideas. That is where the folks in question come to learn that the key to identifying Kenya business opportunities (for anyone lacking viable Kenya business ideas), is to be found in analyzing the demand. But this being an emerging market, one doesn’t have to focus on the demand that is already there. One always has the option of figuring out what Kenyan are likely to need, introduce it into the market, promote it (in order to create demand for it), and ultimately end up doing roaring business in Kenya.

The financing of enterprises in the Kenya business sector

The way in which businesses in Kenya are financed depends on their scale. Most of the small-time businesses are financed using their owners’ personal resources, through some sort of bootstrapping approach. That, at least, is the case initially: because the way things work in this country (and in most other places for that matter) is such that it can be very hard to get a bank, or even a microfinance institution, to give you a loan to start a brand new business. They can only finance you to fund an already existing business. But not one that is still in your mind. A good number of small-time businesses in Kenya are also financed with money (borrowed or received as a gift/donation) from the owner’s relatives or friends. You come to realize that, in most Kenyan’s opinion, the way to help a struggling relative or friend is by giving him or her capital to start a business.

Many of the big-time businesses in Kenya are, on the other hand, financed using borrowed money. Some are financed using money from shareholders (who have bought shares in the companies, and thus contributed to the companies’ capital pools). You have to take note of the key fact that the very top echelons of business in Kenya are occupied by firms with foreign (mostly western) roots. Those are the firms that often make it to the top of the Kenya business news. Those are the top Kenya businesses online. They are the firms that come on top, whenever you carry out a Kenya business name search. You look at the cement manufacturing sector, and you find Larfarge, from France, being a major actor. You look at the telecommunications sector, and you find Vodafone, from the UK, being a major actor. You look at the brewing industry, and you find Diaggeo(?) being a major actor. You look at the transport sector, and you find KLM (which is essentially Dutch), being a major actor. Not that we are critical of these foreign capitalists: because truth be told, in the absence of their capital, Kenya would probably be in the dark. And their service delivery tends to be superb, and they tend to treat their workers rather well…

Anyways, the issue was the financing of the businesses in Kenya, and the point we are making is that a substantial number of businesses in the Kenya business sector are funded with foreign capital. Of course, thanks to investment rules in the country, none of these companies in the mentioned sectors is fully owned by foreigners: their shareholding structure tend to be such that some Kenyans still get stakes in them.

As the years pas by, we should expect to see a change in the financing of Kenya businesses. We should expect to see a situation where, even with respect to the small-time businesses, the financing is done mostly using borrowed money and pooled capital from shareholders. This should be possible through programs like the Uwezo fund, launched by the government recently, through which it is possible for folks to borrow funds to set up entirely new enterprises. In any event, Kenya financial sector is undergoing what can be termed as reawakening, with more and more banks being keen to fund even upcoming enterprises, even as we see the emergence of venture capitalists. Talking of venture capitals though, the way these operate in Kenya is such that they tend to make it mandatory for the folks seeking their help to raise part of the capital by themselves, which means that many people who are starting from scratch (with just good Kenya business ideas) can’t benefit from venture capitalists’ funding.


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