Posted on

SMEs need less talk and more walk

[vc_row][vc_column width=”2/3″][vc_column_text]Achieng’s Uncle was visiting when she asked, ”Uncle, I’ve been a good girl, will you give me a thousand bob?” He looked at her fondly and said “I think you would be more successful if you asked for a hundred bob.” Achieng answered, ”Look Uncle, give me a hundred bob or give me a thousand bob, but don’t tell me how to run my business.”

The Ministry of Industrialization and Enterprise Development (MOIED) recently launched its strategic plan for transformation. I sat down in anticipation, ready to find a document that would be the road map to guide Kenya’s achievement of middle-income country status. At fourteen pages long, the document is short and crisp and spends a considerable amount of space defining the ten industries that demonstrate great potential. These have been identified as agro-processing, fisheries, textiles and apparel, leather, construction materials and services, oil, gas and mining services, Information Technology, tourism, wholesale and retail and finally small and medium enterprises. Then the document skids into two pages that quite aptly describe the challenges facing those industries backed by quantitative economic data. By this time my excitement was building up to a frenetic crescendo, the solution had to be coming round the corner by the time I got to page 13 of the 14-page document. I turned the page and slid down my seat, slack jawed and drained. There was nothing. Unless you count a 5-point strategy that uses language such as develop, create, launch and drive but does not put a single timeline or work plan around those pledges. I kid you not, if someone opens up that document in the year 2050 they would quite easily place it in the public domain and pass it off as a fresh document, since there are absolutely no time commitments or demonstrable goal driven action plans attaching. Fine, there is ONE time bound goal: “To drive ease of doing business reforms and reach top 50 by 2020”. I’m still grappling with top 50 of which beauty parade we are trying to achieve and what the “ease of doing business reforms” actually consists of. Let me latch on to that one for now.

I’ll give you the true story of an amazing female entrepreneur who is blazing the trail in her chosen industry of furniture manufacturing. Let’s call her Moraa for today, as she has been trying to meet with the Cabinet Secretary at MOIED for the last five months with no success and I don’t want to ruin her chances for that hallowed meeting when it eventually happens. Moraa started off her business about five years ago manufacturing quality furniture. She survived the first year, and the second, and the third and is now a proud employer of 28 Kenyans. Feeling that she should expand her horizons and mitigate market concentration risk, she travelled to Uganda last year and found a retailer willing to purchase her quality products. That’s where the fun and games began. ‘Carol, there is not a single place where one can get information about how to export one’s goods in Kenya,’ she told me. ‘But how did you figure it out?’ was my surprised response.

Moraa’s treacherous self taught journey to becoming an exporter was one that demonstrated tenacity, grit and a typical entrepreneurial strength of character that defines anyone doing business in Kenya.
Her first port of call was the Export Promotion Council. “Are you exporting tea? No? What about coffee? No? What about curios? No? Aii, we can’t help you!” Moraa stood there, gob smacked at the sheer lack of interest in assisting her with a basic checklist of what a Kenyan businessperson who wants to export non-tea, non-coffee and non-curio related products needs. Using her networks she discovered that she needs an export duty exemption certificate so that her goods could freely pass through the Kenyan border point of Malaba for their initial entry into Uganda, a member of the East African Community. After a few false starts she ended up standing in line at the Kenya Revenue Authority’s (KRA) imposing banking hall and paid the paltry sum of Kes 300/-. ‘Carol, it’s 300 bob per container, can you believe it? And it doesn’t matter whether it’s a 20 foot or 40 foot container!’

Moraa’s disappointment with our government is that they are bending over backwards to make life easy for foreign investors to open up shop in Kenya, but not doing enough to ensure ease of doing business for the very SME’s that form the 10th engine of economic growth in the MOIED strategic plan. She showed me a screenshot from the Invest in Kenya web page and mused how a foreign investor who was willing to start up with Kshs 200 million could get a 10 year tax holiday in the Export Processing Zone scheme. ‘I’m based here in Kenya, and KRA tells me that if I want to get a 5 year tax holiday I must put in start up capital of Kshs 250 million. How? I’m an SME!’

If you want to know where to fish, listen to the sound of the river. That is an old Irish proverb that is often used to educate business leaders on how to understand the markets in which they operate and get an emotional connection to their customers. The hard working folks over at MOIED need to put on a pair of sneakers and walk the length and breadth of Nairobi’s Industrial Area, knocking on doors and looking into the battle weary eyes of business owners today. They might discover that far from the new fangled ideas that have been cleverly written into the strategic plan, part of the answer to Kenya’s economic growth is in facilitation, education and ease of doing business in its purest form: opening new market frontiers and having a single point of information on how to do business for Moraa and her entrepreneurial kith. The entrepreneurs will do the rest: run their businesses and grow our economy.

[email protected]
Twitter: @carolmusyoka[/vc_column_text][/vc_column][vc_column width=”1/3″][/vc_column][/vc_row]

Posted on

How American trains opened up their economy

[vc_row][vc_column width=”2/3″][vc_column_text]A large two engined train was crossing America. After they had gone some distance one of the engines broke down. “No problem,” the engineer thought, and carried on at half power. Farther on down the line, the second engine broke down, and the train slowed to a dead stop. The engineer announced:
“Ladies and gentlemen, I have some good news and some bad news. The bad news is that both engines have failed, and we will be stuck here for some time. The good news is that you decided to take the train and not fly.”

I spent a lovely summer in the village of Pewaukee, Wisconsin in the United States, which has a population of 8,236. It is part of the bigger city of Pewaukee that itself has a total population of 13,195 as at the last census in 2010. Tucked away in a corn and soya bean growing topography in central Wisconsin, the nearest large city is Milwaukee which lies about 17 miles East and Chicago which is a fast ninety minute drive to the south. The central focal point of the village is Lake Pewaukee which is about the size of our own Lake Elementaita and is surrounded by million dollar homes. The lake therefore attracts residents to its shores during the weekend and the local authorities have ensured a well maintained pier exists for the public to walk along, bring their chairs and sit, swim and generally enjoy free safe and secure access to a public asset. There are also clean public toilets and changing facilities and I once found a man in a waterproof overalls waist deep in the water cleaning out the waterfront area near the pier. Pewaukee is fairly safe and front doors are often left unlocked and the local police’s idea of excitement is catching a wayward driver doing 35 miles per hour in a 25 mile per hour zone. Enough said. The serenity is, however, often interrupted by the ear splitting warning horn of cargo trains that often traverse through the village as the railways tracks are part of the wider interstate web of railway track that opened up the United States to progress, new population settlements and vibrant trade in the 19th century.

On one lazy, languorous afternoon we sat by the lake and watched a cargo train trundle past. It took all of five minutes. But five minutes is 300 seconds of a long, rumbling iron snake carrying containers arranged in a double stack on wagons. So we did some quick back of a grease stained serviette calculations. Having lost count after about 30 wagons (the relentless heat and humidity does wear one down when conducting a mind numbing activity like counting train wagons) we figured that the train was easily carrying 200 containers. Assuming that a Kenyan truck on the nail biting treacherous Mombasa to Nairobi journey carries one 40-foot container, this particular train we were observing could easily eliminate 200 trucks from the road, just like that. It goes without saying that 200 trucks off Mombasa road would also mean far less damage to the road and, heaven be praised, less traffic on that critical East African artery. But surely I’m exhibiting bouts of insane fantasy so let me get back to reality.

The railroad system in the United States can be traced to the dawn of the 19th century and was primarily built to haul cargo and later, as more railway lines were built on the back of a rapidly developing financial system in Wall Street that provided funding options, passenger trains emerged. The railroad system thus opened up significant trade opportunities for manufacturers of goods as they could find and reach new markets in a cost effective manner. Towns soon started popping up along the railway routes as the trains needed skilled craftsmen to repair the steam locomotives which developed difficulties along the journey. It is also noteworthy that by the mid 19th Century, over 80% of farms in the Corn Belt (from Ohio to Iowa states) were within eight kilometres of a railway. Access to markets had led to the creation of many large scale farming communities.

Like any industry, the railways in the United States have gone through great highs and spectacular lows. Competition from trucks did affect the railway in the mid 20th century particularly with the rapidly developing interstate highway system. However deregulation of much of the industry in the early seventies removed the stumbling blocks that had made it economically unviable thus making the American freight railway system one of the best in the world.

Which brings me to our Chinese driven standard gauge (SGR) railway that is currently under expedited construction. I did a little research and was pleased to see that actually I wasn’t exhibiting bouts of insane fantasy. A typical freight train on Kenya’s SGR, once complete, will consist of 54 double stack flat wagons and measure 880 metres long. 54 double stack wagons converts to 108 containers. Poof! 108 trucks gone just like that off our roads, assuming of course that the wagon is carrying two 40 foot containers rather than 20 foot ones.

It bears some reflection as to what role the SGR can play in the reversal of the importation pressures placed on the shilling. Since our oil will have its own pipeline to take it to the port when it is eventually extracted, our higher capacity trains should not return to the Mombasa port empty. As American history shows, the railroads were a core component of the growth of the economic powerhouse as they were used to crisscross raw material and finished goods to domestic markets. What impact will having the faster delivery mechanism called SGR have on future production of agricultural and finished product in Kenya? I want to believe that this is being given careful consideration within the facilitative roles of Ministries of Agriculture as well as Industrialization. Otherwise both these engines of facilitation will have catastrophically failed.

[email protected]

Twitter: @carolmusyoka [/vc_column_text][/vc_column][vc_column width=”1/3″][/vc_column][/vc_row]