How to improve the entrepreneurship culture in Kenya

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Reading, watching or listening to Kenyan media right now one gets the sense that entrepreneurship culture in Kenya is improving. It is now less perceived as a choice of last resort.

The face of entrepreneurship in Kenya are the Micro and Small Enterprises. The Micro and Small Enterprises Act describes these businesses to be those that employ less than 50 people and have turnover of less than sh.5 million. They seem small, like bees, but they are the drivers of Kenya’s economy.

Going by the Kenya Private Sector Alliance, this category of businesses contribute 98% of GDP and employ half of the workforce. There is also proportionate gender representation in the MSMEs sector, unlike top corporate leadership, with women owning half of the businesses.

But the sector is not as productive as it should be. This is how the issue of improving the entrepreneurship culture comes about. If the size of Kenya’s GDP is not enough to tell you that productivity is low then consider the characteristics of the sector. There is domination by informal businesses, there is high mortality rate of new businesses, there is high cannibalization among surviving businesses and little in the way of improving products sold or services provided.

It is these characteristics, and more, that lead to the argument that entrepreneurship is not the solution for poverty. Okay, it is true that most people will opt for low risk employment over risky entrepreneurship. It is also true that as the economy grows, entrepreneurship levels go down. But social mobility remains high in Kenya such that the payoff of starting and running a successful businesses remains a strong incentive.

As a collective, we should appreciate the payoff presented in a country with so many undeveloped markets like ours. We should then encourage entrepreneurship. Even if people ultimately do not become entrepreneurs, we can all benefit from the skills they acquire such as inventiveness.

Teach entrepreneurship

The point of teaching entrepreneurship in Kenya can be seen in cultures and communities we consider to have an entrepreneurial culture. It’s not that they are inherently better people, so what is it? Besides the fact that children take from their parents, as this argues, there is also the fact that those with a background in entrepreneurship are better informed and better able to appreciate the risk that comes with.

As a Kenyan, you are probably thinking teacher or lecturer dictating or handing out notes on entrepreneurship. That is the lamest thing. We should borrow from countries who teach this when we change our curriculum. Two examples are Germany and Switzerland.

The former has a great system where schools are connected with actual enterprises so they can learn details and specifics a classroom alone could never teach. Switzerland, on the other hand, have an old fashioned apprenticeship system that imparts skills better than our internship system.

Save money

How will Kenyans start businesses in the face of the biggest obstacle, money? It is good that the Government took note and decided to fund entrepreneurs. Even though it is not the best way to do it. To generate more money for entrepreneurs to work with the country needs to save more. You’ll still look nice in cheap clothes.

If a lot of money is saved, borrowing becomes cheap. But Kenyans who forced the Government to set an interest rate cap have lower saving rates than the African average (the lowest in the World). We are barely clearing 10% of GDP against the recommended minimum 25%. To make you feel bad, the Chinese save 50% of their money.

Saving is done by the Government, businesses and households but really only one of these players can affect the savings rate in Kenya. How the Government can encourage savings is detailed here. The summary is, the Government should bring financial inclusion close to 100% (household savings), should pay less salaries and invest in infrastructure (Govt saving). Good infrastructure will encourage businesses to save for investment. The Government should also shrink subsistence farming and the informal sector for more tax revenue and pension funds.

Equal opportunity

The Government must act on corruption if to improve the entrepreneurship culture in Kenya. If people feel the playing field is not level they will not waste time to innovate. Why must the richest people be politicians or have a background of high-profile public office? These are not feudal times. Let private sector be the place to make money and public sector be for public service.

Lastly, Kenya must incentivize innovation by legislating better idea and property protection laws. This goes hand in hand with discouraging the typical rut among big Kenyan businesses; like banks opting for Government securities.

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Web Content and stuff. You can reach me you know: editor@herbusiness.co.ke, malitrobert@gmail.com

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