Every time I am asked how long it takes for a great business to get established in Kenya when it has been started from scratch, I always give the ballpark figure of about 7 years. This shocks people, because a lot of foreign publications on entrepreneurship and business always talk about 2 years, 3 years at most 5 years. The reality of the market in Kenya is that it takes time. There are a lot of spaghetti problems which you will meet on your journey that nobody prepared you for, and they will have real impact on your business , sometimes even on your life (the life threatening kind). Here are some of them.
You start your business, and start making those marketing calls and visiting clients. Soon, they all start giving you the cold shoulder.You get a few small deals and suddenly you find you are struggling to get raw materials or resources that enable you to deliver quality goods and services. You dig deeper and realise there is a group of business people who have a hold on your industry and they dont like newcomers. They will do anything to kill your business from choking your supply chain to sending police or KRA to your door.
It is perplexing just how complex and slow the government can be in responding to local entrepreneurs (while laying red carpets for foreign investors, using our hard earned tax money). Getting licenses, permits and many other things that are not really necessary to your core business can be an expensive and time consuming affair. Someone should set up a business to overcome this animal called Government.
Taxes in Kenya are like calculus. And worse, they change every year when our minister reads that long speech we all pretend to listen to and only the hotshot accountants can understand what he is actually saying. Before you can afford that accountant who understands all of them and can keep you out of trouble, you get stressed trying to beat deadlines while avoiding penalties. In the meantime, your morning prayer every day is “Dear Lord please keep the taxman away from our nondescript hidden office” .Woe unto you when they walk through the office front door. This actually makes wise entrepreneurs to avoid the media until their books are all cleaned up. In the meantime, “stealth operations” are the order of the day.
Skeptical Kenyan Consumer
Kenyans are very skeptical of new products and companies. Particularly big companies. It doesnt matter that they were your clients when you were at the agency. once you jump out, you have to build your own credibility and they will not be the guinea pigs for it. You are forced to prove yourself by doing pro bono or loss making work in order to come back and say that “so and so are my clients”.
Despite paying government taxes, there are areas that have additional tax collectors in form of gangs, which operate openly and even give you receipts for the hard earned money that you pay them. It leaves you questioning whether at some point, our police force deliberately outsourced protection services to some of these territory managers.
For some reason, there are those who believe that over and above the exorbitant rent you will be paying, you need to pay them a lot more money at the beginning for them to be gracious enough to allow you to operate from their strategically located premises. This significantly reduces the period in which you can break even. Imagine having to pay 2 million shillings extra to get a space in a commercial building . Thankfully , this is reducing since we are slowly beginning have an oversupply of commercial spaces as the building boom rages on.
Kenyans tell you they like a product and would spend money on it, then they don’t buy it when you avail it. We have a culture of being polite and too afraid of speaking our minds. All people you will sell to, will always leave you at a space where you think they are buying. 6 months later you figure out they are not real buyers, just afraid of saying no to you and looking bad (or broke).
Dominant market players
Every market has 1 dominant player, few middle players and thousands of broke or unscrupulous players. Look at beverages Coke dominates, few in between, many other unknown brands try to entice you. Beer, EABL dominates, Keroche nips at their market, Kumikumis blind people all over. Advertising, Scangroup dominates, a few struggling local players, former marketing executives fight it out for the crumbs. Telecoms Safaricom Dominates……im sure you get the drift. My assessment is that other players simply try to emulate the market leader rather than carve out their own niche or unique products that sell themselves to frustrated markets.In the meantime, some dominant players can resort to legal means that guarantee you wont get business,like giving unfair incentives to your retailers or suppliers until you run out of your savings and dust your CV.
Ignorant business leaders
Many large business owners might have gotten there through political patronage, corruption or inheritance from their fathers chief gifted wealth in colonial times due to his loyalty to the system. They do not understand the value of a good product or service and getting them to spend is like pulling out their teeth without anaesthesia. Which leaves you, the value selling entrepreneur at a loss of what to do.
Broken legal system
Someone screws you over, you take them to court.They win and you pay their legal costs and they never pay you your money. You lose faith in the legal system and dust your CV(again,last time you were encouraged to stay on). Months later you see them celebrated in the entrepreneur section as a model business person for the country to laud.
They want you to do all the hard work, they want to make all the money.All because you foolishly let them put in Ksh 300,000 to be a 50% partner because you thought money would solve all your problems. You burn through it in 2 months and are back to scratch. Need I say more? Make sure you share the same Vision, and more importantly VALUES before you partner with anyone. More on this later.
Small and broke private sector
In other developed economies , the private sector is usually much larger than the Government and development sector combined. In Kenya and Africa in general , Government and NGOs form the largest spenders. And both are bureaucratic and rife grounds for corruption, enough to discourage any well meaning entrepreneur. Since every large company wont touch you with a 10 foot pole, you are left convincing your fellow broke entrepreneurs to be your clients and get into the vicious cycle of not paying each other.
By the time you navigate the above maze and survive break ins, skeptical family, debtors, homicidal employees….. time has passed. And a lot of it. Which is why when you see an honest succesful Kenyan business person, salute them and acknowledge that they are tougher and more resilient than a Kenya Army soldier (before they went into somalia that is). However I have found that the rewards to the resilient ones is usually quite large because you step into the promised land and find very few players to share the spoils with. So it pays off and next week ill talk about some of those businesses that I have come across.
The good news is, with the changes happening in the judiciary, government structure, macro economic environment (don’t worry i also can’t tell you exactly what that means but i believe the CITIZEN, NTV and KTN business news guys) its getting better and easier and eventually we will get to the place where it takes those 2 years you read about in western literature.