Small enterprises are key pillars of economic growth

Entrepreneurs are naturally risk averse. Photo/File

What you need to know:

  • It is expected that the number of people of working age youth entering the labour market will increase for at least the next 15 years. After this the survey indicates that the numbers will taper off due to a decline in fertility.

The World Bank Report on the state of our economy released in March starts rather curiously with a heart-warming tale about a determined young entrepreneur.

Instead of a hard macro-economic lesson delivered through a procession of abbreviations we get a story that perfectly captures where we are at as a country.

Ms Laetitia Mukungu from Western Kenya, a top student in her primary school, is unable to raise the money required to proceed with her education.

She searches online for a business she can engage in and identifies a niche she can fill; Kenya is developing a taste for white meat. The demand in urban areas is higher than the market can supply.

She convinces her former school to loan her Sh50,000 and starts a rabbit-keeping business. She ends up employing 15 women in her business.

It doesn’t end there. She begins diversifying her business into grow maize and sukuma wiki.

Thanks to her unparalleled and intriguing story Ms Laetitia gains acceptance into the African Leadership academy in South Africa.

Her story highlights the best of the youth and what can happen when young people are given a chance to better themselves.

Our growing mass of youth need not be viewed with trepidation but should be seen as an opportunity. More than half our population is below the age of 19, according to the most recent demographic and health survey.

Decline in fertility

It is expected that the number of people of working age youth entering the labour market will increase for at least the next 15 years. After this the survey indicates that the numbers will taper off due to a decline in fertility.

We should be thinking of ingenious ways to cash in on the demographic dividend rather than write off an entire generation.

Kenyan youth are bubbling with ideas and are eager to capitalise on opportunities and all they need is a supportive environment to achieve their goals; all we need is a leg up and an even playing field.

The World Bank Country Economic Memorandum notes that Kenyans are starting businesses in record numbers compared to countries that are our peers. However, the main hurdle for start-ups is the lack of funds. Too many good ideas never get off the ground due to inability to access loans.

The various funds created by the government to give loans and to train entrepreneurs have been slow to discharge their mandate.
Kenyan banks often hold too much risk-free government securities rather than lending to entrepreneurs. This is unfortunate given that credit is the lifeblood of business. Needless to say, lending to entrepreneurs spurs growth.

We must make it worthwhile for entrepreneurs to get into businesses and expand them. We must as a country allow more hard workers to keep more of their earnings to reinvest into their business.

When more people start businesses and more entrepreneurs are given a conducive environment to scale up their businesses it will result in increased revenue for the taxman which in turn allows rolling out of more social programmes that improves lives of the people.

For example the highest rate of tax in Kenya kicks in too soon. A teacher earning Sh40,000 a month and a CEO on Sh10 million cannot both in any properly designed system pay the top rate of tax as is the case.

The government has set the bar for the top rate of tax too low denying many potential entrepreneurs and those already in business the chance to build capital.

A good business environment is essential to increasing the number of successful businesses. In this regard we are headed in the right direction. The good news is that we jumped more than 20 places in the WB Ease of doing Business ranking. The bad news is that at position 108 globally we still have a lot of improving to do.

The government has heavily invested in energy which for too long has been a bottleneck in our manufacturing industry. In the past two years two major employers (Cadbury and Eveready batteries) in the manufacturing industry left for Egypt where power is a lot cheaper.

The time it takes to move goods from our port to Kigali has already been halved in the past four years and will plummet further once the standard gauge railway is chugging across the savannah.

Although much has been done to support small businesses, there is still a lot more work to do. The government needs to bet big on small businesses and the rewards will certainly be handsome.

The writer is a businessman and the Chairman of Kenya Youth Alliance. @meshackkimutai. Email: [email protected]