Entrepreneurship in Kenya

For Cytonn, entrepreneurship is not some abstract theory; we are a product of entrepreneurship. Our founding team of 4 came together to form a platform that is focused on assisting investors access attractive returns in the real estate and private equity. Today the firm has created 120 jobs with employment across our 3 offices, created another 200 jobs in our on-going real estate projects, trained over 110 graduates in our internship program, we are attracting FDI into the country from global institutional investors and we are delivering high returning investment solutions to the market. Our transformative experience informed our selection of entrepreneurship development as one of the key initiatives of the Cytonn Foundation. Cytonn Entrepreneurs Forum, a quarterly engagement to development your entrepreneurs, is an initiative of the Cytonn Foundation.

Entrepreneurship is the capacity and willingness to design, develop, organize and manage a business venture along with the accompanying risks. Entrepreneurship is crucial to the growth of a country’s economy. The world’s largest economies have mainly grown as a result of a national entrepreneurial culture. An example of such a country that embraced the entrepreneurial culture is Singapore. We have picked Singapore as an example because of some similarities – both countries gained independence at about the same time, Kenya in 1963 and Singapore in 1965, and each had total GDP of about $1 billion at independence.

Entrepreneurship received attention when Singapore suffered its first recession in 1985. An economic committee was established to chart a new direction for Singapore’s economy. It identified local entrepreneurship as an important ingredient for Singapore’s continued growth. This led to the first Small and Medium-Sized Enterprise (SME) Master Plan in 1989 that introduced an entrepreneurial infrastructure to assist SMEs to grow. In addition to entrepreneurship, Singapore has focussed on other pillars of development such as good governance, and the result is that the Singaporean economy has grown rapidly to become one of the highest GDP per capita in the world.

Singapore has grown from a GDP per capita of USD 516 at independence in 1965 to a GDP per capital of USD 55,180 today, a 106.9x times multiple and a compounded annual growth of 9.5 %. Kenya’s GDP per capita at independence was around USD 104 and today is USD 1,587, compounded annual growth of 5.2%. Had Kenya’s economic growth been similar to Singapore since independence, our GDP per capita would today be USD 10,690. A higher GDP leads to a higher standard of living. A stronger entrepreneurial culture has a direct impact in our lives, our ability to pay our bills, put food on the table, send our children school and secure our retirement.

Successful entrepreneurs have different and very unique stories but there are certain shared factors that generally affect entrepreneurs. We look at these key factors and make a judgement call as to where Kenya is and what can be done.

1. Economic Factors: The main economic factors to consider are capital, labour, raw materials and markets. Of these factors, the two areas where we believe we have the greatest challenges in Kenya are capital and labour.
   1. Capital remains a challenge to most entrepreneurs because there is a specific way to engage and access investors, who want to see a business plan, a viable strategy, a strong management team and the ultimate exit plan to return their capital. The way to address this is to have relevant training on how to package a story for investors. Entrepreneurs also need to train on how to access alternative capital beyond bank debt and listed equities. Given globalization, entrepreneurs can access capital from anywhere in the globe, and some cases, it can be easier to find capital from venture and private equity investors in say, London, New York, Helsinke, etc, than in Nairobi.
   2. With regard to labour, Kenya has a very rigorous education system that produces numerate and literate graduates. However, the curriculum could improve on areas like problem solving, initiative, articulating and navigating ideas to execution. We need to produce graduates who are not looking for employment mainly for what they can get out of a company, but mainly for what they can create and share in the success.
2. Cultural & Social Factors: How we view entrepreneurs effects the number of people who pursue entrepreneurship. We believe that Kenya has two norms around entrepreneurship, one positive and another one negative
   1. On the positive side, we celebrate entrepreneurial achievements and success stories such as MPesa, Seven Seas Technology, The Nairobi Women’s Hospitals, the iHub, Craft Silicion, just to name a few, all initiatives that were started by individuals and teams to meet unique needs and they have created both wealth and impact on the formal and upper segment of the society. In the informal and lower segment of society, we also celebrate small businesses, commonly called jua kali.
   2. On the negative side, we also celebrate such as tenderprenuership and get rich quick schemes through corruption and this influences many young talented individual to seek shortcuts.
3. Political Environment & Government: Government has a huge potential to spur or deter entrepreneurial development. Stable government, reasonable taxation, reduced corruption, ease of doing business, rule of law and independent judiciary are key to a thriving entrepreneurial environment. Through entities and initiatives such as Kenya Invest, Chamber of Commerce, and Vision 2030, the environment is supportive of entrepreneurial development, but we to need address corruption in government agencies and ministries, greatly improve ease of doing business and make the judicial process more efficient.
4. Entrepreneurial Skill Set and Orientation: Despite all the above, the success of the venture ultimately depends on the entrepreneur and the entrepreneurial spirit. The ability to pick a spot in the market that is underserved, put in place the right strategy, picking the right partners and team, putting in the requisite hard work and recovering from the inevitable setbacks is the key ingredient to entrepreneurship.

As part of the developing world, Kenya stands to gain a lot by embracing a culture of entrepreneurship. It is this realization that has seen an increase in the emphasis placed on entrepreneurship, which is now part of the Kenyan education curriculum. The government has introduced efficient business registration platforms; and technological infrastructure is being upgraded, all in the aim to improve the ease of doing business and support the entrepreneurship culture that is at the heart of the Kenyan spirit. Yet a lot remains to be done.

The biggest issues we think need to be addressed are:

1. Corruption – this is a major hindrance to entrepreneurship as it alters the level playing field where entrepreneurship thrives. It also increases the level of risk, discourages foreign investors, discourages genuine entrepreneurs, and has a negative impact on innovation
2. Education & Support Environment – the Kenyan education system which is a hindrance in the sense that it is not effective in impacting competitive skills making our labour market fairly uncompetitive. An SME master plan, similar to what Singapore had, can do a lot in terms of supporting entrepreneurs and developing the necessary skills.
3. Competiveness – the global marketplace is ever changing and increasingly competitive thus making it difficult for Kenyan entrepreneurs to fully reap the benefits of entrepreneurship and attain global competitiveness. Infrastructure, cost of power, ease of doing business, Internet connectivity and cost, licensing, etc., all affect competitiveness.

We understand and live the challenges that entrepreneurs face especially in getting mentors to guide them. As wealth managers, we interact with successful entrepreneurs on a day-to-day basis and this has given us important insights that we want to pass on to those who most need it. More importantly, we want young and upcoming entrepreneurs to network by creating a platform where successful entrepreneurs can share the secrets for their success and at the same time interact in a peer environment to sharpen their entrepreneurial skills. In summary, entrepreneurship is the centre-piece of Cytonn’s CSR.

The theme for the February forum is “Starting and Thriving”. This forum will bring together a panel of distinguished entrepreneurs with the goal of sharing their perspectives on what it takes to start and grow a business successfully. We shall be holding the Forum on the 25^th of this month and hope that the Cytonn Entrepreneurs Forum, will contribute to developing and assisting more entrepreneurs in Kenya and the region.

This week Cytonn Investments will host the Cytonn Entrepreneurship Forum with the theme “Starting and Thriving”. See more details at: Cytonn Entrepreneurship Forum.

See full Cytonn Weekly Report here.