Kenyan Entrepreneurs Need a Cultural Paradigm to Succeed

I was listening to an interview of an entrepreneur engaged in taxi business where he was explaining his challenges as a graduate who was unable to secure formal employment. The interview was part of a series where university graduates were sharing their plight of securing jobs in the formal labour market.

While I sympathize at the challenges and frustration a lot of graduates are facing in Kenya; what struck me was that despite the taxi driver successfully being in business for the last four years, he still looked forward to securing employment and that the taxi business was simply a transition period.

This is a telling tale of the attitude of a host of entrepreneurs in Kenya who venture into business majorly due to; inability to secure employment and the mirage of getting quick returns underpinned on the romantization of entrepreneurship and the ever-growing culture of tenderprenuership.

This phenomenon could serve as an explanation to inability of SMEs to significantly contribute to the socioeconomic development of Kenya.

SMEs make up 98 percent of all business in Kenya, contribute 33 percent of GDP and employ over 30 percent of the population but experience a very high mortality rate of over 75 percent within 3 years of inception.

The high mortality coupled with other factors such as; 79 percent of SMEs being informal, over 40 percent and 80 percent of employees not receiving stable salaries for formal and informal SMEs respectively means that the potency of SMEs to sustain job creation and contribute to the economy is curbed and not sustainable or enough to significantly eradicate poverty.

To throw a spanner to the works, due to the attitude of most entrepreneurs maybe driven by our societal perspective of entrepreneurship that plays second fiddle to formal employment ; most entrepreneurs majorly venture into wholesale-retail ( buying ready made products cheap and selling at a margin) since it requires little resource investment both in terms of money and time and one can always bail out in case an opening comes up in formal labour market.

The phenomenon is captured in our national data where wholesale-retail constitute a bulk of SMEs contributing 22.8 percent of the 33 percent SME contribution to GDP second only to manufacturing which stood at 24 percent. Despite wholesale-retail’s high contribution, they account for 73.5 percent of businesses that close within the first three years of inception.

Its time Kenya re-evaluated its approach towards supporting SMEs, through supporting a shift from wholesale-retail which lacks the ability to capture significant value in the market coupled with high a mortality hence cannot sustain economic development in the long term to supporting  manufacturing and agribusiness.