Category: Entrepreneurship, Innovation & Infrastructure

Category: Entrepreneurship, Innovation & Infrastructure

Kenya and World Bank launch entrepreneurship project

Kenya and the World Bank launched an initiative aimed at providing a platform for Kenyan youths to use their talents in developing innovative solutions to drive manufacturing.

Betty Maina, principal secretary for industrialization at the Ministry of Industry, Trade and Cooperatives said that Kenya Industry and Entrepreneurship Project (KIEP) will strengthen innovation ecosystem as part of the implementation of the Kenya industrial transformation program.

“The project marks an important milestone towards the ongoing digitizing and transformation initiatives for Kenya’s global competitiveness that is expected to create additional jobs for the youths,” Maina said at the launch in Nairobi.

Maina revealed that the five billion shillings (about 50 million U.S. dollar) project that is co-funded by the World Bank will also create industry platform to link startups, traditional industries and international networks in select private sector firms for the next six years.

She added that the project will also aid small and medium enterprises (SMEs) in improving their managerial and technical capabilities in order to better compete at both local and international markets.

The official said that KIEP will help enhance intra-Africa trade through increased productivity and competitiveness of Kenyan firms.

“The development of the private sector is the key to growth, job creation and youth empowerment in the developing countries,” Felipe Jaramillo, World Bank country director for Eritrea, Kenya, Rwanda and Uganda said.

Jaramillo said that SMEs are a pillar for the development of national economies and requires necessary support.

He urged the government to adopt a digital economy as a blueprint for supporting ecosystem to elevate the project to the next level.

“With proper application of innovation, productivity and digital solutions, Kenya can be the leader in Africa in trade-related matters,” Jaramillo noted.

KIEP is based on the Kenya Vision 2030 that seeks to transform Kenya into a newly industrialized, high middle-income nation. The project will benefit 33,050 individuals and 2,393 firms, including students, SMEs, and local startups.

Ministry of Industry launches project to support innovation by SMEs

World Bank and the State Department of Industrialisation have launched a $50 million fund that is focused on increasing innovation and productivity in select private sector firms.

Dubbed Kenya Industry and Entrepreneurship, the project is set to be implemented by the Ministry of Industry, Trade and Cooperatives.

Speaking during the launch of the project, World Bank Country Director, Eritrea, Kenya and Uganda Fellipe Jaramillo said Kenya has been given a period of 30 years to repay the loan used to support the project.

“The concessional credit line from the global lender will pe repaid over the next 30 years with a 2 per cent interest rate,” he said.

The global lender said it is majorly focused on supporting the Small and Medium Enterprises archive their goals since the majority struggle to get capital.

Principal Secretary, State Department of Investment and Industry Betty Maina said the credit is not for an individual SME but is focused on supporting enablers and hubs.

“We have great ambitions and it will help us benefit we want to encourage the startup and hubs to help shape the status of the activity, she said.

“I urge all beneficiaries to participate in the project to strengthen Kenya’s development space,” she added.

Program Coordinator, State Department and Industrialization Stephen Odua said the project is aligned to the government’s big four agenda.

“This project greatly supports the government’s major goals especially manufacturing and since 2017, the project piloted several innovative approaches,” he said.

Kenya Industry and Entrepreneurship Project will run for six years where it is divided into two levels, the ecosystem level where it has accelerators, boot camps and the firm level such as SME upgrading and linkages.

The ministry has now said it will focus on training innovators on how they can enhance productivity once they receive funding.

The small medium enterprises have had challenges in expanding their business due to lack of enough capital.

Last month, the government said it will set up a Sh2 billion fund which will be used to guarantee small businesses when they seek loans in banks but lack collateral.

The government will play a role similar to a Sacco where members’ contributions can be used to guarantee each other, allowing for loans up to three times the deposits.

Key factors for Kenya’s entrepreneurship

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 106.9 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.
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.
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.
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.
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
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.
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.
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.
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:
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
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.
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. I nfrastructure, cost of power, ease of doing business, Internet connectivity and cost, licensing, etc., all affect competitiveness.