The Obama we want

“We have to stop complaining & get our act together guys. We keep talking about getting an Obama, but would we even know him if he showed up!”. That’s what ngunjiri has posted on the KikuyusForChange blog.

Just last month we excitedly asked if the “generation g-pange” fest was going to be the launch of the ark that would bring about youth solidarity and leadership. Lo and behold coinciding with Obama’s inauguration “generation change” was also launched! With all these vehicles aimed at nurturing nationhood and leadership amongst young Kenyans, ngunjiri has actually brought up a very valid point.

Now that the youth are engaging in discussions on the Kenya we want, we first have to identify the criterion for the leadership we want. The reason why Kenya has inept and corrupt leaders (recently called “those rogues”) is because every election we never question what credentials aspirants have to actually better the lives of our people. We get carried away by side issues like ethnicity and promises of how we “will eat” when the aspirant gets in, that we don’t even ask ourselves serious questions on aspirants integrity and leadership record.

Why is it that we vet our business, church, PTA and all other leaders more seriously than the very people who hold our nation at stake?

Yes its time for us to quit complaining about the incompetence and scandalous actions and utterances of our leaders and set the agenda for the leader (“Obama”) we want.

Read Lets Get Our Act Together First

Zimbabwe: The war at home

Robert Mugabe’s relationship with the army has once again hit the doldrums. Soldiers have literally taken to the street and it has become incumbent on the police force to maintain the peace.

It turns out that government policy of paying the army’s top brass in American dollars whilst the rest of the population has to transact with sackfuls of trillions of Zimbabwe dollars which loose value by the hour, has dried the country’s foreign reserves.

Now the soldiers starved of real money (with value) have turned their sights on those who hold the keys to the forex bank vault. Over the weekend, the country’s Reserve Bank Governor’s farm was invaded by a contingent of soldiers who made away with a valuable booty of 175 chickens.

Yes, I said chickens. In a country facing starvation, hyper-inflation, cholera and an octogenarian self imposed president who lays blame for these and all other ills that happen in Zimbabwe squarely on the doorstep of 10 Downing Street (and sometimes also the White House depending on the audience), the kidnapped chickens are worth a princely sum of US$ 787.

It’s not just the army exhibiting such mutinous inclinations regarding the US dollar. Civil servants are also demanding their pay in foreign currency. Unfortunately all the forex seems to have been spent on satisfying and pacifying the avarice of the army generals. So even they must make do with sackfuls of trillion Zim dollars.

The chicken or the egg: an economic problem

So with 175 chickens valued at US $787 but with no one holding valuable currency to buy them, what’s an enterprising soldier to do? It’s a classic economic problem. High supply of a scarce product (food), high demand though without the required medium of exchange (forex) to satisfy the suppliers.

One answer could be to start a chicken rearing and egg enterprise, though this alternative means having to deal with sackfuls of trillion Zim dollars for goods like feed. The water and sanitation system is also compromised and avian illnesses could follow.

Alternatively the answer could be to share the chickens out and eat them… After all you can always raid Uncle Bob’s farm next.

Where your business reputation precedes you…

“He who has relatives in other people's lands should make sure that he lives in peace with other people. Otherwise he exposes his children to the wrath of the other people should he misbehave against people from those areas in whose lands his children live”. - Taban Lo Liyong, Jan. 18, 08 (Juba)

This week an article on Kenyan business in South Sudan was posted on Breaking News Kenya. The article said Kenyan entrepreneurs are taking advantage of the 2005 Comprehensive Peace Agreement and moving to Southern Sudan in large numbers to open businesses. These run the gamut of enterprise, ranging from kiosks, wholesale businesses, road repairs, cargo and insurance, amongst others. Most traders narrate tales of success and are optimistic that Sudan's economy will continue to flourish.

However, the article also goes on to say that this prosperity was not going unnoticed by the locals who though admiring Kenyan business gusto, generally see our compatriot expatriate entrepreneurs as “dishonest, greedy and plunderous”.

This perception was even discussed a year ago by the well known academic and author, Taban Lo Liyong. In a presentation reported in New Sudan Vision, (The Professor of Controversy: Taban Lo-Liyong warns South Sudanese after Kenyan violence), Prof. Liyong warned his people not to let Kenyan businessmen and women take the lead in Southern Sudan.

According to him, Kenyan business practices of dishonesty and greed were mainly culpable for promoting the obscene inequality in wealth distribution in Kenya, sowing the seeds of hatred amongst poor Kenyans against the elite which were in part responsible for the post election violence experienced early last year.

Prof. Liyong (who lived in Kenya between 1968-1975) also tries to trace the roots of Kenyan business practice and attitude. In his presentation he writes that lucrative government contracts have always been the preserve of those linked to the government of the day. Tribalism has also played a key role in the monopolisation of business opportunities by the head of state’s tribe, creating “instant millionaires”.

This has led to the Kenyan expatriate entrepreneur greed and arrogant bravado in South Sudan, which in turn seems to have also been passed onto local businessmen and women. Prof. Liyong recounts an outburst in a Juba bank by a GOSS-beneficiary of government contracts instant millionaire:

“The instant-millionaire: "Give me US$ 50,000. I want to go abroad with my family for holidays?"
Bank teller: "We do not have dollars!"
Instant millionaire: "How can you have no dollars? Have I not recently brought here US$ 5,000,000 in cash?"

All this (Liyong continues) for someone whom only a short while ago did not have a bank account!”

The lack of financial control by the GOSS government in Liyong’s estimation has also promoted the impunity evidenced in business. In a predominantly cash based economy, the temptation to evade taxes has become ever more possible and appealing. The Professor accuses Kenyan entrepreneurs of showing local business people how to siphon money out of the country as well as evade company taxes by misreporting their earnings. To quote the Professor: “though Kenya has some things to show South Sudanese, Kenyan greed, callousness and bad business habits should not be copied.”

So is Prof. Liyong’s view of Kenyan business practice shared?

Unfortunately yes. Negative perceptions about Kenyan entrepreneurs and indeed Kenyan business ethics also occur within our borders. Cultural stereotypes have prevailed (even before independence) of entrepreneurial-minded communities particularly Kikuyu and Asian entrepreneurs.

“Kazi ni kazi”

In September 2007, the Mashada forum even had a debate on whether “the myth about Kikuyu's entrepreneurial genius can be debunked”. Kikuyu entrepreneurs were listed as hardworking and primarily motivated by money. They were also described as generally more focused, determined and daring in business, apart from being renowned for their opportunity recognition skills. However, some forum members also accused them of operating their business in an aggressively ambitious manner where the end justifies the means, to the detriment of all else.

In a blog post by african bullets & honey titled "The Pain Machine: The Collapse of the Gikuyu Social Contract” Kikuyu entrepreneurs were portrayed as being individualistic, grasping, conniving, driven, entrepreneurial and migratory.

Kenyan Indian entrepreneurs have been accused of preferring to keep business opportunities within their community.

Blogger kenyanentrepreneur in a post writes that the community is insular, arrogant and racist. Regarding business, Indian entrepreneurs have been especially accused of mistreating their African employees. A different Mashada forum discussion described Asian entrepreneurs as proficient at underpaying employees and overworking them plus failing to guarantee permanent employment. About their propensity to ship in Indian nationals (the so-called “rockets”) to handle sensitive dockets such as finance, kenyaentrepreneur writes “a Kenyan would never be able to open up a business in India. Never. Who is giving these people work visas?”

Another popular accusation is Asian entrepreneurs do not like competition especially when it comes from an indigenous i.e. black Kenyan and have a predilection for evading taxes (the same thing Liyong accuses Kenyan entrepreneurs of doing in South Sudan).

Regrettably such opinions seem likely to continue because for every Manu Chandaria and Aga Khan group business, there are also the Kamlesh Pattni’s, Somaia and most recently Devani (Triton) that give this community’s entrepreneurs a bad name.

The Tanzania Experience

On the foreign scene, it’s not just in south Sudan where concerns have been raised about Kenyan entrepreneurs. In 2007, as a result of a spate of bank robberies Kenyan business men and women faced the brunt of a backlash of local mistrust. Blogger ritch-kentanz posted in October 2007:

“Kenyans, in Tanzania speak, are a byword for armed robbers; illegal immigrants; conniving schemers (perpetrators of pyramid schemes and other such hair brained ideas); sticklers for diligence and industry on the job (the trump card they save for the opportune moment!); opportunists (who are out to wrench and wrest job opportunities from Tanzanians’ hands); possessors of a rude and uncouth disposition and a host many more”.

So are Kenyan entrepreneurs the only group of business people who are unpopular both at home and abroad?

China which also has vast business interests in Sudan has often been accused of only acting in its national self-interest regardless of human rights and good governance issues.

According to Stephanie Hanson’s in a Council on Foreign Relations article “China, Africa, and Oil”, Chinese companies see Africa as both an excellent market for their low-cost consumer goods, and a burgeoning economic opportunity. However, concerns about Chinese companies have been voiced with them being accused of underbidding local firms and not hiring Africans (Chinese infrastructure deals often stipulate that up to 70% of the labour must be Chinese).

Chinese immigrants have also been accused of forcing local entrepreneurs out of business in both Kenya and Lesotho. Transparency International the anti-corruption watchdog has also investigated the way expatriate Chinese entrepreneurs do business—particularly their willingness to pay bribes.

So, what lessons can we learn here?

Probably most important, is that stereotypes are a sticky phenomenon, which as seen by the Kikuyu and Indian entrepreneur experience locally will probably take generations to change.

As growth oriented as the South Sudan economy seems to be, Kenyan entrepreneurs should take Prof. Liyong’s words seriously. The Tanzania experience has vividly shown how devastating to business and personal security, negative beliefs about Kenyan business practices can be.

Finally, we need to face reality. Kenya is not like China – there are not many countries opening their arms wide to welcome our small business entrepreneurs. This means that our expatriate entrepreneurs must ensure their business practices show the best of what Kenyan entrepreneurship is: hard work, passion for innovation, and of course a (healthy) regard for money!

When an enabling business environment means more than easier and cheaper credit

Even though credit is critical for commerce, it’s not just in Kenya where entrepreneurs are not jumping with joy over announcements of easier and cheaper credit. In India, according to Ragini Verma writing in an article titled “Easy loan access fails to enthuse SMEs”: the Indian micro, small and medium enterprises sector has given an average rating to the easy and cheaper credit announcement by the public sector banks, saying it was not enough to boost growth.

Today’s business owner is more concerned with macro factors, in light of the financial slowdown. Even though the media keeps bombarding us with ads on the youth and women’s funds, a prudent startup owner not only wants to ascertain how they will pay back the loan, but also ensure that the business environment allows their enterprise to thrive.

In this severe economic climate, it is now more imperative than ever that the macro environment allows these small businesses to trade their way out of the downturn. This means addressing barriers to trade, of which probably the level of taxation is high priority.

Just like Dehli entrepreneurs are saying, these extra credit facilities would have more impact on the economy if they came matched with fiscal concessions. VAT at 16% for instance already outprices goods and services, making local goods less competitive compared with imports.

Another way of making these funds more attractive would be to allow flexibility regarding the loan amount and duration. The ability to reinvest the principal into the enterprise and accrue more profit would probably act as a further incentive for entrepreneurs to seek the funds.

Kenya Youth Enterprise Fund: Show us the money - "tusiharibu wakati bure!"

Yesterday the youth fund management and leading banks were at State House launching their three year strategic plan and signing partnership agreements. This event has been covered in the media, however the story on the nation online carries a very interesting comment. A reader called “ronns” posts: “hey, is this for real? if anyone has received this funding please let us know tusiharibu wakati bure”.

And ronn’s comments belies the real controversy over the effectiveness of the youth (as well as the women’s enterprise) development funds. How many people have actually received this funding?

This is not the first time this issue is being raised. In an earlier blog, we actually wrote about the failings of both funds, in that they were not equipped to reach as many Kenyan youth and women entrepreneurs as possible. The blog “Youth Fund: It is not enough just to open the gates of opportunity” posted in October this year decried the fact that it seems that there is so much money available (yesterday the youth fund received another injection of Kshs. 1.75 billion shillings ($22 million) from the government) but the means of accessing it remain remote. So it is not surprising that people such as ronn are asking the fund managers to show them the money. It’s no use getting our hopes up and wasting valuable time.

Youth entrepreneurs have already managed to fight the odds. Still engaging in enterprise despite facing multitudes of negative stereotypical and patronising attitudes as well as a perceived lack of credibility, particularly from formal finance institutions. These young innovators have without recourse to bank loans managed to grow businesses on bootstraps. Relying on their wits and sheer fortitude, they have become adept at sharing and sub-letting even the smallest amounts of space, using innovative and cheap marketing techniques, outsourcing work for which they don’t have specific technical expertise, amongst other resourceful means of operating their businesses.

Of course they would appreciate the chance to borrow money to startup new ventures as well as expand existing ones; but the model of the youth fund distribution also acts as a deterrent to their accessing finance.

Firstly the number of intermediaries particularly in rural areas are few, though it was commendable to hear that First Community Bank has at least taken up the mantle to ensure that as many youth in Northern Kenya can get access to the youth fund.

However, the second issue that we have previously posed was that banks as intermediaries for the fund act as a disincentive. For youth entrepreneurs who may have previously been denied credit by these same institutions, there is a marked hesitancy to approach these banks again, despite the ongoing advertising campaign by the Ministry of Youth Affairs. Being denied a loan for your business is preety much on the same scale as being denied a visa to the US or Europe. An entrepreneur who has tied up all their own resources and financial future in their enterprise takes it as an affront to their business vision, and hence themselves. Trying to convince that same entrepreneur to go to a bank to access the youth funds is a bit like pulling teeth without forceps.

Thirdly, even if you can get the young entrepreneur to go to the bank to apply for the funds, they will find a banking culture that is based on assessing whether the loan can be repaid, not on the actual viability of the startup. As we wrote in our previous post, without any culture change in the banking fraternity, you can still expect the loan officer in the bank to be more focussed on when the youth entrepreneur will pay back the loan rather than on the business profitability.

Finally we suggest that the youth enterprise fund should place more emphasis on its social impact rather than the number of loan beneficiaries. Yes, it is good to hear that loan repayments are in the 90% range. However, what has been the actual impact of growth on the 55,000 funded youth enterprises, the livelihoods of the youth who received the loans and the wider community?

For instance regarding the over 200,000 new jobs which the youth fund say have been established over the last two years: What proportion of these are the founding entrepreneurs and specifically how many people have been employed to work in these ventures? If there is to have been a significant impact on society, how much money in salaries and wages do the employees in these youth owned ventures earn?

The first two can be measured almost immediately by the youth fund whilst we do agree the wider societal impact would take longer. However, these indicators are what will truly measure the success of the enterprise fund rather than how many youth groups repaid their loans.

During yesterday’s event, President Kibaki also said that the youth had proven that they could “be trusted with any amount of money”. Isn’t it time that the youth fund starts lending money to individual entrepreneurs rather than groups?

The Youth Fund’s three-year strategic plan seeks to boost the Fund to Sh7.2 billion by 2011. As it is youth entrepreneurs are busy enough, most being the sole operators of their businesses. They lose money when they have to close shop to go seeking these funds, only to come face to face with a system riddled with obstacles and negative attitudes towards youth business. So please Youth Enterprise Fund managers don’t waste their time, in ronn’s words, tusiharibu wakati bure!

Will a true leader emerge from the “Jipange Generation”?

Check out this great blog by Marvin Tumbo on what it means to be a youth in Kenya. He laments having graduated with an economics degree but facing unemployment. Unlike other countries where the youth are drivers of change, Marvin tells us of the deterioration of youth leadership, particularly at our universities.

Saying that the youth leaders we voted into parliament “have turned out to be Mugabes’ in Obama’s skin, he wonders whether the “Jipange generation” this time have what it takes to form a veritable youth movement.

Read “Still Proud to be Kenyan” >>>

HIV/AIDS affects more than just the bottom line

A UNAIDS study in the year 2000 on the impact of HIV/AIDS on the Kenya predicted that the scourge would leave the Kenyan economy one-sixth smaller than it would have been in the absence of HIV/AIDS. Well, the pandemic has wreaked more havoc both on the economy as well as business.

Not only has the scourge adversely affected productivity and costs, but HIV/AIDS continues to have an invidious effect that is unquantifiable but yet profoundly impacts on enterprise.

Absenteeism is usually the first and most common impact on business productivity. The number of days an employee reports to work can be measured, but this can also be a trigger for discord in labour relations when other healthy workers have to shoulder the responsibilities of the absentee.

The next impact is usually a loss of vital skills, which in turn makes entrepreneurs hesitant in investing in training their employees. Most times, when a small business owner sponsors an employee to training they also expect that this employee will act as some sort of champion of the newly learnt skills or knowledge spreading it amongst the other employees. Thus the loss caused by AIDS doesn’t just end with the illness or death of that employee.

Finally there is the emergence of a loss of morale amongst the other staff members. What else can you expect when attending funerals of colleagues and their family members becomes a common event.

On World AIDS Day, the National AIDS Control Council should salute small businesses that take measures to protect their workers who are uninfected, whilst offering appropriate support and services to those who are infected. These are the entrepreneurs who are on the front-line fighting the scourge that threatens to shrink and sink the economy.

The government on its part could also provide incentives to small business entrepreneurs by introducing tax incentives for greater involvement in AIDS prevention.