Josephat Karinga of RISTECH Solutions was one of the first entrepreneurs we profiled for our Get Inspired! series. His story on how he ventured into enterprise was inspiring, particularly his advice to aspiring entrepreneurs. We got the chance to catch up with Josephat recently to find out how 2010 was for RISTECH and what his aspirations are for the new year.
A fascinating post on The Curious Capitalist blog, titled “Escaping the middle-income trap” offers valuable advice to government policy makers when planning for economic development. Kenya’s Vision 2030 proposes to make the economy a middle income country; but what happens when that is attained and the time comes to make the leap to a truly world class high-income economy?
Taking the example of Malaysia and comparing it with South Korea, the writer posits that only innovation will enable a country to break out of the trap and make the big leap to high per capita economy. In fact the writer goes so far as to say that it is easier for a country to make it to the middle income level than it is to transition into the big high income league:
"The concept behind the “middle-income trap” is quite simple: It's easier to rise from a low-income to a middle-income economy than it is to jump from a middle-income to a high-income economy. That's because when you're really poor, you can use your poverty to your advantage. Cheap wages makes a low-income economy competitive in labor-intensive manufacturing (apparel, shoes and toys, for example). Factories sprout up, creating jobs and increasing income ..."
However akin to an engine running on its own momentum, this model of high growth starts to plateau with competitiveness rising as well as labour costs of the highly educated and skilled workforce. Thus the “trap.”
And apart from lowering the entry barriers into business, it is more vital that economies begin to innovate. So not only should technocrats focus on consolidating business licences, reducing taxes and other barriers to enterprise; innovation should be actively promoted. At YIPE we call this the W.A.R factor:
Promoting Willingness: a scenario where financial institutions recognise the value of new technologies and entrepreneurs are willing to take risks in order to innovate;
Promoting the entrepreneur’s Ability: by providing a platform where entrepreneurs can grow their social capital by networking amongst other institutional challenges; and
Facilitating Resource transfer: by lowering the information asymmetry faced in access to credit and technical knowledge.
A recently published report titled "Oxfam Poverty Footprint: Understanding Business Contribution to Development" poses serious questions - even for youth entrepreneurs operating micro-businesses. In fact, we would go so far as to say that the nascent stage of business, is exactly the right moment to think about the question: What is my enterprises' footprint on society?
The report which is a prequel to a second outlining the actual methodology for undertaking a footprint survey outlines the reasons why it is important for entrepreneurs to consider their business impact. The report posits that an awareness of the effects of a business on society and people living in poverty can help a business to improve it's operations, understand risks and present new opportunities.
Specific areas of focus include assessing value chains, how the business affects the wider society's standard of living and the social implications of environmental practices. And though Oxfam stipulate that such a footprint survey should be undertaken by independent researchers, ultimately it remains the responsibility of business owners to ensure that their enterprises leave a lasting and positive legacy.
