Understanding the Nexus around Entrepreneurship & Economic Growth in Africa

joao-silas-72562Coming from a premise of factor-driven economies, Africa has not in the past explored extensively the relationship that exists around entrepreneurship, economic growth & structural transformation. However, as I highlighted in my article last week on Fusing Innovation & Entrepreneurship for Economic Growth in Africa; the tide is quickly changing, and now it’s the right time for scholars of entrepreneurship to take a deep dive on this subject matter.

Two schools of thought

Economic growth is interpreted differently by scholars subscribing to different schools of economic thought. Two distinguished economic scholars stand out of the crowd in their different propositions as to what leads to economic growth. They both however agree on the very fundamental measure of economic growth which is an increase in productivity within a given economy. Continue reading “Understanding the Nexus around Entrepreneurship & Economic Growth in Africa”

Fusing innovation & entrepreneurship for economic growth in Africa

woodrow-walden-smallThat Africa is shifting its economic growth model from being commodity based to entrepreneurship driven is a no brainer to policy makers across the continent. Following the fall in commodity prices in 2015 that led to many oil dependent countries slowing down in terms of economic growth; policy makers in most African countries are now looking at alternative models to sustain economic growth within their countries.

The Sustainable Development Goals are also bringing in a new perspective on how Africa can solve its core social-economic challenges. From being factor-driven economies, African countries are now transitioning into being efficiency-driven economies; before we can ultimately get into the ideal and most preferred innovation-driven economies status. Continue reading “Fusing innovation & entrepreneurship for economic growth in Africa”

The Art of Business Story Telling for Small Businesses

Jay 2In a world where the consumer is spoilt of choice from increasing number of substitutes; businesses are spending a huge percentage of their budgets in marketing and public relations, in order to remain relevant in a progressively competitive and dynamic global market. Globally, the advertising market is estimated to be worth about USD 500 billion annually; and the figure keeps growing each year as more businesses and products get created. The growing spend in marketing is driven by the need for businesses to tell their stories in a clear, attractive and convincing manner to their potential customers, strategic partners and investors. And this is not an option; rather t is a necessity if you are to survive amidst the thickening competition in the market.

What makes the fairy tales interesting and memorable is the same thing that makes business stories exciting and worth listening to. In business storytelling, you will need to master five key principles that will help you to communicate about your brand, products or services better. Continue reading “The Art of Business Story Telling for Small Businesses”

August 8th Elections – Risks & Mitigation Measures for your Small Business

ElectionsUncertainty increases business risk, and general elections are engulfed with a high degree of uncertainty with regard to security issues and possible change in trade and economic policies. Large corporations and small businesses alike therefore have to plan in advance and brace themselves for the unknown outcomes during any electioneering period. Prudent risk management requires that any business should be able to assess its risk exposure and take appropriate risk mitigation measures to prevent, avoid or transfer the risks they are exposed to.

Security

General elections, and especially in Kenya pose a unique challenge to small business owners. Unlike in the developed economies where there is a higher probability of peaceful elections and transition of power, in our developing economies, elections tend to be marred with pre or post-election violence of varying magnitudes. In 2008 post-election violence, most small businesses were badly affected since they had to close down their operations for a long period of time when the violence persisted; hence resulting to huge business losses. Other small businesses were vandalized, and that too was an added loss for the small business owners; who had to incur huge capital expenditure to restart their ventures when peace was restored.

Going by the political climate across the country, having learnt from the bad experiences in 2008 and borrowing from the calmness after 2013 general elections; we are unlikely to experience the kind of post-election violence we had in 2008. However, that does not fully eliminate the risk of isolated cases of violence that might erupt spontaneously and lead to stock-outs and closure of small businesses, reduced customer numbers due to security issues or vandalizing of your business assets. It is therefore advisable to be prepared for such eventualities by way of business insurance; and proper management of your cash flows so as to have enough working capital throughout the electioneering period.

Change in trade & economic policies

Another major business risk during the electioneering period that is often overlooked by small business owners is the possible change in trade and economic policies when a government changes. In the Kenyan context, the change could be dual; at the county level and at the national level. Both the national and county governments set policies that govern business operations at the national and county levels respectively.

Kenya has a presidential system of government whereby when a new president or county governor gets into the office, they bring with them a whole new administrative team starting with an overhaul of the cabinet secretaries. The new administration will also bring with them new policies that they would like to implement in order to either boost economic growth at the national or county level; or to just prove that they are different from their predecessors.

Small businesses are more sensitive to some of these policy changes which may touch on taxes, borrowing interest rates, investment in business infrastructure, minimum wages, mandatory contributions such as NHIF, NSSF and county government levies on businesses among other regulatory issues that are likely to increase your cost of doing business. Although we do not get to hear Kenyan politicians talking much about these issues in their campaign trails, the fact of the matter is that when they get into office they will in one way or the other change them.

With every change in trade or economic policy, there will be a direct effect on your business profitability; depending on whether the policy change is increasing or lowering your business costs. It is therefore very important to be keen on these issues, and get to know what politicians on either side of the divide stand for with regard to policies affecting small businesses. In addition, depending on the expected policy changes you need to put in place risk mitigation measures in advance; in order to prevent your business from shocks when either side of the political divide gets into power.

Lobby group for small businesses in Kenya?

Except for the large corporations who lobby the government on trade and economic policies through their lobby groups such as Kenya Manufacturers Association (KMA), Kenya Private Sector Alliance (KEPSA) and the Kenya National Chamber of Commerce and Industry (KNCCI); the voice of the small businesses within the policy making circles is still very weak and they are mostly left out in the cold.  As a result, policies that are particularly focused on their unique needs at their respective business growth stages are left unaddressed at the national and county levels.

Maybe it is time we had national and county level lobby groups for the small businesses in Kenya. If anything, more than 80% of employment in Kenya is in the SME & informal sector.

Originally published at Fie-Consult Perspectives

The African Entrepreneur in 2050: Perspectives & Scenarios (Part 1)

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Why 2050?

Sustainable development goals set out a clear development agenda for the world for the next 15 years until 2030. Discussing the future in 2050, which is about three and half decades away might therefore seem to be farfetched. Personally I have lived on this earth for less than three decades since I was born, and a lot have happened in my life; tremendous changes – most of which were random and unexpected. It therefore beats logic to plan for so many years ahead when the only certain thing in the future is its uncertainty.

This however does not negate the need to plan. As it is commonly known, failing to plan is planning to fail. The case for entrepreneurship in Africa is no exception in this planning agenda; hence we are allowed to immerse ourselves into the deep faculties of our creative imaginations and paint the picture of the future of entrepreneurship in Africa. Our outcome picture of the future will definitely be based on all possible scenarios of the future, that will be catalyzed by current and projected social, economic & political trends across the continent. Continue reading “The African Entrepreneur in 2050: Perspectives & Scenarios (Part 1)”

Eating is an agricultural act

Scholars argue that for afields_height_agriculture_mountains_42462_300x188ny society to experience sustainable economic development and civilization, it must first be able to feed its people. T
o meet the food demand by 2050, 70% increase in worldwide food production is required; hence SDG 2 calls for an urgent intervention from all stakeholders to provide food security for future generations.

However, Kenya faces a huge challenge of feeding its citizens in the future due to aging farmers with a growing population; projected to be 65.4 million people by 2030. The challenge is augmented across Africa with the continent importing food worth $45 billion in 2015; yet we have 60% of the uncultivated arable land globally.

To feed the future, we need to engage Kenyan youths today in agribusiness so as to capitalize on their bulging demographics and consumerism, reduce their current 17.3% unemployment rate and eventually turn them into a demographic dividend for Africa. Youths venturing into agribusiness however face several challenges including small parcels of land, land ownership and inheritance issues especially for the ladies and lack of access to capital, agricultural knowledge and markets.

Solutions to the challenges above lie at the confluence of technology and our local cultural land inheritance systems. Equipped with agri-technologies such as drip irrigation, micro-mechanization, biological pest control and shade netting, youths should use the contract farming model to lease idle land from owners and have the owners buy the produce for value addition and marketing. Alternatively, under the joint venture model, youths can contribute technology and labor while the land owners provide the resources needed; then later have a revenue share. Forming regional small-holder out-grower networks will also help the youths to acquire quality farm inputs and trainings at affordable prices.

Moving up the value chain, youths should consider being retailers and wholesalers both online and offline, provide logistics & warehousing services and adopt micro-manufacturing using locally available equipment & technology in order to fetch higher returns from their agribusinesses.

To finance the above opportunities, youths need to consider a mix of funding sources including use of grant & government funding for new ventures, then transition to mainstream financing from SACCOs, MFIs and banks after creating tangible traction. Youths in farming should consider joint-ventures with land owners while those in high-return agri-processing should tap into venture capital too.

Collective selling will enhance access to local markets and help youths lobby authorities to streamline export processes in order to expose the small-holder farmers to global markets. Youth farmer groups should also lobby the government to develop policy frameworks that facilitate easy access to farm inputs & extension services, develop model-farms in sub-counties for agricultural training, develop infrastructure for ease of market access, as well as create tax and other regulatory benefits for youths in agribusiness along the whole value chain.

When all is said and done, “The ultimate goal of farming is not the growing of crops, but the cultivation and perfection of human beings.” – Masanobu Fukuoka, The One-Straw Revolution.

Is “Start-Up Fund KE” a cool idea?

download (1)Big brother asked for our suggestions to the Kenya national budget as a way of ensuring there is public participation in the budgetary process for the financial year 2017/2018. Not very many people got to see the call for tips and suggestions; but thanks to a friend of mine, I got the wind and went ahead to exercise my democratic right as a citizen of this beloved country of ours, we call Kenya.

Coming from an entrepreneurship background, I figured out I should share my two cents on what needs to be done within the entrepreneurship ecosystem in Kenya. The major challenge quoted by most entrepreneurs is lack of capital. However, even with the capital provided by Uwezo fund and the Youth Fund, not much has been achieved due to the short-termism nature of the projects funded. The other short-coming of the current funding model for youth entrepreneurship is lack of requisite skills to start and run a sustainable and scalable business. The young brilliant entrepreneurial brains in Kenya need to be trained and be equipped with business skills before they are funded.

In a nutshell, this is what I proposed as a way to create job opportunities and stimulate economic growth and development in Kenya:

“We need to allocate a significant budget to support youth entrepreneurship through collaboration with the private sector and international development partners in building capacity for the youths to start and run their own businesses. First get the youths trained on entrepreneurship and then fund their business ideas/existing ventures based on thorough vetting by qualified financial/investment analysts working within the entrepreneurship ecosystem in Kenya.

A perfect model would be the government to be a guarantor to early stage business investors (especially local venture capitalists, private equity firms etc) who then select the businesses to invest in based on the sustainability, scalability and the social impact the business will have in our economy. That way we shall have more success stories of youth entrepreneurship contributing to job creation and to national economic development. This is as a result of the investors having an in-depth consideration of commercial viability of the projects to be funded; as compared to the government that might be inclined more into the social benefits. Having a balance between social and economic gains ensures that only scalable businesses thrive hence creating employment to large number of Kenyans over time.

In summary, let the government set aside a significant budget for the “Start-up Fund Kenya” to finance youth entrepreneurship in every county within the country. However, instead of the government investing directly in the start-ups and SMEs, let the “Start-up Fund Kenya” be used to provide a guarantee to local investors (venture capitalists, angel investors, private equity firms etc), who will then invest directly in the start-ups with a business and growth mindset from the beginning.”