While in school we were taught that most if not all developed economies developed having started from agrarian revolution, then Industrial revolution and most recently digital revolution. Some experts have vehemently called on the Kenyan society to embrace the digital revolution in line with global trends. In my opinion Kenya has yet to experience agrarian and industrial revolution let alone digital revolution.
SMEs are the backbone of the Kenyan economy contributing to over 30% of GDP as well as employ over 35% of the population. The interesting bit is that over 70% of SMEs are family owned with a further 75% involved in trade.
The business structure of trading or trading business model of buying imported product to sell at a markup prevalent in the SME informal sector is a characteristics that leads to the high mortality of over 75% in the first three years probably due to lack of significant competitive advantage other than cost.
The recent influx of foreign nationals into Kenya underpinned on Kenya’s ease of doing business index improving position has presented a new challenge to Kenyan SMEs mostly involved in trading in areas such as Gikomba and Toy Markets as well as Electronic traders in River Road; Nyamakima. The situation is further aggravated by the ever increasing access to finance challenges with most SMEs financing through family, friends, chama groups and most recent mobile credit all which are utilized in the short term to meet recurrent expenditure according to our Access to Finance Survey 2019.
The challenge presented by the influx of foreign traders is an opportune time for reflection on our entrepreneurs’ attitude and approach to business from buying cheap and selling at a markup to building businesses through problem solving.
On the flip side we have a Kenyan society that is ‘’bewitched’’ in buying land as a way of ‘’Investment’’a situation that locks much needed capital out of the economy. C suite; highly educated and well traveled managers, Wealthy families, Chama groups all put over 80% of funds in land.
I personally know of a company CEO who successfully grew their business and received accolades with everyone expecting them to expand regionally by reinvesting back to the business or acquire smaller businesses to grow market share only for him to start buying plots at the coast and their village.
The country is at a cross road; the Nairobi Securities Exchange widely regarded as the barometer of the economy has been performing dismally over the last year, foreign investors with deep pockets are challenging our SME traders to review their business model and money isn’t not flowing to private from formal financial system.
As much as we would want to embrace the digital revolution; technology mimics existing systems and processes which if flawed we will not reap its benefits.
Kenya must figure out how to build capacity of entrepreneurs to be problem solvers while at the same time mopping funds locked in land through training and awareness creation of the opportunity presented in investing in our entrepreneurs borrowing from Kenyans of Indian descent who invest in business of young people in their community.
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