Kenya Kwanza Bottom Up Economic Transformation Agenda: Evaluation of SME and Start-up Agenda

The Kenya Kwanza coalition officially launched their manifesto dubbed the plan underpinned on the premise of bottom-up economic transformation agenda.

The focus of the article will be specifically on MSMEs, and start-ups as espoused under pillar 2 (Micro, Small and Medium Enterprise MSME economy) and 5 (Digital Superhighway and Creative)

For starters it has been said that a problem well defined is a problem half solved and that’s the case that must be as we evaluate the Kenya kwanza manifesto as well as those presented by other coalitions.

Secondly is to evaluate the manifesto’s understanding of intervention made by the current government toward SMEs and start-ups ensuring to identify policy and or implementation gaps and lastly is a critical review of the veracity of proposed solutions.

Kenyan SMEs constitute 98% of all businesses contribute 33 percent of GDP, employ over 30% of the population yet face an existential challenge leading to a high mortality rate of 75% within 3 years of inception

The report identifies two types of challenges: 10 challenges impeding growth of SMEs and reasons for closure of business by SMEs. The 10 challenges impeding growth are; lack of market, local competition, licenses, lack of collateral for credit, taxes, other government regulation, poor road and transport, poor security, interference from authorities and power interruptions. Similarly, reasons for business closure were ; shortage of funds, too few customers, stock / raw material shortage, too much competition and regulations.

The Kenya Kwanza plan under the ‘’why bottom up’’ section highlight only two challenges: lack of capital and hostile environment though it mentions Infrastructure and Capacity Building in its commitments.

Although not formally captured under Kenya economic data collection architecture, the impact of start-up led innovation (note that start-ups is a technical term identifying a venture solving a problem using innovation and has a scalable business model) is evident as a direct contributor to socio economic development as well as an enabler of other key sectors through innovation diffusion. Evidence of this can be seen through Mpesa, Twiga Foods, Mkopa solar, Sendy and many more.

Similarly global indices point towards a vibrant start-up led innovation ecosystem with Kenya ranking; 85^th globally and 3^rd in Africa in the 2021 Global Innovation Index (GII). (GII Looks more on physical infrastructure etc), 3rd in Africa in the Global Startup Ecosystem Index (GSEI) which measures ecosystems based on three metrics ie the number of start-ups (quantity), quality, and their business environment, 4^th  in attracting venture capital funding in Africa (Partech 2021) and  5^th globally on 2021 crypto adoption index.

Further, several global tech giants have set up in Kenya such as Google ( Africa Product Development Centre (ADC)),Microsoft and Amazon (cloud service), VISA (Visa opened an innovation studio in Nairobi  aimed at co-developing digital payments and commerce solutions), and  Swiss non-profit, NEAR ( partnership with local blockchain community, Sankore to launch a regional hub in Kenya dedicated to blockchain innovation, education, and talent development in Africa) among other further reinforcing the country’s potential of start-up led innovation.

The Kenya Kwanza plan similar to Azimio fails to appreciate the great potential of start-ups and further performs a myopic diagnosis underpinning unlocking the sector through; physical iICT infrastructure, Konza Technopolis and BPO

In terms of understanding of the current state of play of SME interventions by current government which is based on addressing the highlighted challenges as well as guided by vision 2030 and implemented through various medium term plans 1-3 with the latter dubbed Big 4 agenda focus has been made on the debt trap.

The manifestos fails to address SME policy and implementation gaps under post covid 19 economic recovery strategy as well as economic stimulus program especially shortcoming of; affirmative action funds that targeted youthful SMEs, credit guarantee scheme and the proposed manufacturing special economic zones (SEZ).

Finally, the manifesto proposes solutions dubbed commitments for each pillar based on their diagnosis of challenges faced.

Due to myopic diagnosis of challenges faced by SMEs and failure to reimagine a sustainable SME development the commitments fall short in terms of significantly supporting and developing Kenyan SMEs. Some solutions to consider are; immediate data collection of MSMEs in Kenya to inform incremental policy intervention, despite improved performance of ease of doing business in Kenya as per Kenya’s milestone report there is a need for the review of ease of doing business parameters to further align with SMEs , review of county business license regime and full automation (unification of business permit, review of CESS regime), linking global supply chain to SMEs housed under SEZ as well as linking credit guarantee scheme to fintech as opposed to financial institutions who continue to ignore SME despite all support ( SME portion of loan books continues to stagnate at less than 20 percent ).

To evaluate the start-up commitment its best to benchmark based on best practice. A good example is Singapore with a population of 6 million and start-up population of 3,600 estimated to contribute 2 percent of GDP by 2035, 10.9 billion USD invested in startups ranked 17th on the Global Start-up Ecosystem Index.

A better approach is focus on the following ; mainstreaming startups through establishment of startup specific business friendly environment which will have a catalytic effect of putting into play key stakeholders such as start-up investors to set up shop (low hanging fruit is pass the start-up bill already in parliament ), Kenya has several globally recognised universities with specialisations in engineering, technology and sciences including University of Nairobi, Jomo Kenyatta University of Technology, Kenyatta University, Egerton University among others. Further government has support agencies in different shape and size including; Kenya Industrial Research and Development Institute (KIRDI) , Kenya Industrial Estate (KIE), Kenya Agricultural and Livestock Research Organisation (KARLO) among others that must be aligned internally under government with the objective of supporting startups.

Deliberate effort must be made in facilitating linkages between university/government agency researchers, students, start-ups and industry. In addition, innovation and start-up challenges and incubation programs also encourage aspiring entrepreneurs to start companies in key campuses.

Finally Private sector incentives to engage startups. One of the challenges experienced by Singapore is the effectively incentivising private investors to engage with start-ups, and in general helping to build a market-driven ecosystem