The Business Environment

Entrepreneurship has had and continues to have a huge role to play in any economy.

Governments, the world over are able to offer essential services to the people by collecting revenue in form of taxes from businesses.

Business provides the goods and services people require. Government alone cannot provide the basic goods and services required such as technology, transport, food, housing and clothing.

Business has led to globalization even as the world becomes more and more connected.

Business has led to migration flows as people seek better employment opportunities and businesses seek better investment opportunities worldwide.

Business has led to sustainable solutions such as:

Empowerment of the youth by providing mentorship programs, exchange of skills, capacity building, skills acquisition, training, knowledge, on-the-job trainings, support of research work and scholarships.

Providing environmentally friendly goods and processes to citizens.

Allowing for mutually beneficially collaboration between government and the private sector and

the provision of basic and essential services such as education, health, security and transport.

In Africa business also provides people with the jobs they require to make a living. Many people get to earn a living by getting jobs and working in factories and companies. As people work, they get to spend, save, travel and invest. As they invest and spend, more and more jobs and opportunities are created. Businesses hire well trained and educated personnel so as to achieve best results. By providing employment both directly and indirectly, poverty is reduced and the quality of life of the citizens is raised, allowing for economic growth in the country.

Since economic growth is measured in terms of a sustained increase in real income businesses complement and supplement economic growth increase per capita income by exploring and venturing into profitable business ventures.

Another pillar of economic growth is infrastructure development that is the building of roads, bridges, railway lines, hospitals, schools, houses and factories for workers and businesses. With the establishment of businesses and factories comes the need for infrastructure building to boost business growth. Roads and railway lines will be required to move raw materials and finished products to the factories and to the markets respectively.

A person working in a factory will need food, a house and clothing from the income got. A person producing food will need a house and clothing. Business allows for these and many other exchanges, creation of profits and allows us to get what we require.

Businesses are involved in non-profit ventures aimed at making the community, society and the world better. Businesses are involved in raising education and medical standards in our

communities. Businesses are also involved in empowering women, the youth and the disabled in society establish start ups and enroll into schools.

Businesses are involved in sustainable and environmentally friendly projects such as encouraging the use of biogas, solar energy, wind energy and geothermal energy that are both clean and renewable.

Business has allowed Kenya, Africa and different cultures in the world explore their cultural diversities by investing in their tourism industry, music, poetry, stories, clothing, languages, traditions, geographical and historical features in the countries. Handmade crafts such as jewelries, handbags, carvings and textile are produced and exported to other regions of the world. These make use of local and traditional technologies and skills. Kenya has the Maasai markets that are popular with tourists where local handicrafts and textiles are sold to both locals and foreigners.

Exhibitions conducted both locally and internationally allow for the exchange of ideas and selling of these high quality products on the international markets provides the country with the much needed foreign exchange.

Business provides for capital formation and skills development. Businesses started in Africa bring in machinery, equipment and improved human resource required to accelerate economic growth.

In Kenya businesses put to better use raw materials and other low value resources in the communities they operate in. Recycling makes use of waste material to produce useful products and other products required by the manufacturing industry. Organic waste is used to create fertilizer, paper and plastic waste are used to create new paper and plastic materials and products. After the ban on plastic bags Kenya makes use of sisal to produce bags and other products such as mats and ropes. These in effect create jobs and government can collect revenue in form of taxes from these businesses.

The informal business sector popularly known as the jua kali sector in Kenya provides income and a source of lively hood to thousands in the country. The sector is known for handmade metal products such as cooking stoves, storage boxes, cooking pots and other products. Some of these products are made from recycled metal. The sector continues to improve on the quality and efficiency of the products.

Businesses in Kenya have over the years developed innovative products some of which have gained international recognition. Some of these products include energy saving cooking stoves, drought and disease resistant seed varieties and the famous and internationally recognized mpesa mobile money transfer facility.

Businesses in Kenya support the community in various ways. Examples here include:

the Wings to fly which is an initiative by Equity bank and the Mpesa foundation by telecommunications giant Safaricom which both support education for the less fortunate bright youth in Kenya.

The annual Standard Chartered marathon is an initiative by Standard Chartered bank that supports the disabled in the society.

The annual Ndakaine marathon is an initiative by UAP Insurance meant to conserve one of the country’s largest water reservoirs. Local communities are involved in wildlife and forest protection and cultural preservation programmes. In turn the communities earn revenues from businesses that conduct tourism activities in the area.

Brookside Dairy Limited supports more than 155,000 dairy farmers in Kenya that deliver milk to its factory for the production of fresh pasteurized milk, yogurt, ghee, butter, cream and long life milk. The company is even finding ways to increase these numbers. Brookside Dairy Limited and many such companies therefore provide income for the employed and those that deliver raw materials required by industries.

So, what really hinders the growth of business in the world?

Many people do not have adequate confidence to venture into business, are afraid of taking risks, do not have a good strategic business plan and a vision for their business.

People do not have adequate knowledge, leadership skills, managerial skills, monitoring skills, delegation skills, communication skills and experience to venture into their own business.

People will always want to stick to their comfort zones instead on being flexible, open to change, innovative and creative.

Out of date systems, procedures and processes will always lead to inefficiency.

Most people do not know how to or take time to source for good, ethical and qualified employees, build a credible team, find reliable suppliers, source for the right and efficient machinery, seek low cost finance and find the best investment.

Businesses have inadequate proper and effective sales and marketing campaigns, sales processes, customer care policies and brand building processes.

Businesses do not study the market to understand the changing customer needs, preferences, taste and purchasing patterns.

Businesses fail to properly study and understand the market or the internal and external environment they operate in.

Businesses have inadequate sustainable business models that guarantee sales, increased revenues and long term business growth.

Businesses do not know how to properly manage their cash.

Businesses do not have adequate capital to grow their businesses to prosperity.

Most businesses focus on making profits and forget about building their long term business strategies and eventually end up closing down once they realize that they are not making any profits.

Language and cultural barriers have been a problem when trying to sell on the international market.

Businesses are at risk of not being recognized internationally without good and reliable networking and partners.

In Africa poor infrastructure and weak government systems hinder the establishment of new businesses and the growth of already existing businesses.

African states collect low taxes as a result of weak, time consuming and tedious tax tracking and tax collection systems, inadequate data on tax payers, limited resources to implement good tax systems which are often complex and a weak human resource. Most of the businesses in Africa are in the unregistered informal sector and do not pay taxes or adhere to other set laws and regulations such as healthcare, social security tax, labour laws, workers’ compensation and health and safety regulations.

Africa has not made much stride in stream lining its taxation policies, environmental regulations, lending requirements and government laws on licensing and these remain barriers to business. Access to loans and capital required by startups remain a major problem in Africa and businesses have to struggle and put up with high interest rates required to boost business growth.

Africa cannot fund its own development projects and has to seek foreign funding to construct roads, railway lines, bridges and other essential infrastructure required to boost business growth.

Africa finds it difficult to support business with its weak currencies, high interest rates and increased foreign debt.

African states do not produce adequate electric power required to run factories.

African states do not have in place laws, policies and regulations on mining and forest and wildlife protection to guide and encourage the growth of important sectors.

The cost of inputs such as fertilizes, metals, leather and timber is also considered high in Africa. This can be attributed partly to poor regulations, inadequate subsidies, inadequate tax waivers and logistical challenges as a result of poor roads.

Africans do not have adequate skills, technology and capital to develop and produce new and innovative products for the world market.

Africa does not have adequate skilled personnel due to the brain drain of Africa’s talented and learned workforce and also due to low education levels in the continent.

Most small and medium enterprises (SMEs) in Africa only focus and target the local markets when seeking markets for their produce.

Disunity and inadequate collaboration amongst African states has been a hindrance to business growth in the region.

The African Union visa has not helped solve the immigration problem in Africa because the visa is only available to African heads of state and special diplomats. Africans still face the problem of expensive visas and restrictive visa requirements.

Africa still faces the challenge of closed air routes amongst African states.

Lack of a unified currency and free trade amongst African states also remains a major problem and the main reasons for the trade deficit amongst African states.

Africans still find it difficult to put their trust on online shopping, giving their personal information, credit card or debt card details online.

Most of Africa is not connected to the internet therefore; businesses and households cannot get access to the internet. The internet is still also very expensive in Africa and postal services are unreliable. This makes it difficult to use the internet to seek information or buy goods.

According to Wikipedia Africa is the world's second largest and second most populous continent. At about 30.3 million km² including adjacent islands, it covers 6% of Earth's total surface area and 20% of its land area. With 1.2 billion people as of 2016, it accounts for about 16% of the world's human population. Africa has 54 countries with a lot of diversity. The countries have different cultures and economical and political situations making it difficult to do business.

Africa still struggles with high illiteracy levels and an inadequate educated youthful workforce.

Markets and finding market opportunities for their produce also still remain a major problem for Africa. Most African states cannot adequately meet regulations and standards set in the international markets such as standards set for food and horticultural produce.

Corruption hinders foreign investments into Africa and increases the cost of doing business in Africa.

Africa has inadequate strong, independent and essential institutions required to foster business growth such as strong and independent judicial institutions and institutions required to fight and end corruption.

Civil wars, political and power struggles and political differences between leaders and ruling parties in some African states has resulted to underdevelopment in other regions of Africa, making the regions unfavorable for doing business. African countries currently at war include Togo, Cote d'Ivoire, Sierra Leone, Nigeria, Liberia and Guinea. Countries in East Africa currently at war include Eritrea, Ethiopia, Somalia, South Sudan and Uganda.

In Kenya the government is doing very little to support the informal business sector in the country. The small-scale jua kali sector and artisans, miners and small scale farmers are largely ignored by government and get little to no support or subsidies from government.

Largely all inputs required and consumed by the local factories have to be sourced outside the country and imported.

The society’s perception of entrepreneurship and inadequate business training still remains a major hindrance to the growth of businesses in Kenya. Many in Kenya still believe that the SME sector is for the less educated people in the society and the jobless. The youth still seek white collar jobs instead of starting their own small businesses and growing their businesses.

A high corruption level in Kenya also hinders business growth in the country. Criminal and corruption laws in the country seem not to apply to the rich, powerful and well connected individuals or companies in Kenya.

Old leadership still holds on to power in Kenya and continues to head politics and state owned companies that have been seen to be inefficient and corrupt. Some have even collapsed such as the Kenya Oil Refinery and the KP&TC. The government is today spending a lot of public money trying to revive sugar companies in the country, KCC, KQ, government owned banks, Kenya Power, KMC among other parastatals. KPA is today also working hard to improve on its operations with the introduction of the SGR so as to remain competitive in the region and offer world class sea port services.

But what measures are being taken to spur business growth in the world?

It is impossible and expensive to be in all parts of the world doing business but today, using online tools businesses can reach customers from all over the world, know their needs and deliver products to them. Businesses can also analyse the changing market needs and their competitors. Using social media and websites, businesses gain from valuable local and international connections, influencers and partners.

Today there are various international forums for entrepreneurs. Through these forums entrepreneurs get to encourage each other, motivate each other, share information on shared topics and experiences and build valuable and important networks. These forums and networks also consist of both women and the youth.

Businesses and products that are visible on the international platform gain legitimacy amongst suppliers, vendors, stockiest and customers both locally and internationally.

Businesses are building strategies to get their products into the international markets and reach more consumers by building networks of trusted distributors and marketers.

Bilateral agreements between countries allow for skills and capital transfer. These also focus on providing training programmes and brand building.

Goal 1 of the Sustainable Development Goals talks about ending poverty, goal 4 is about providing quality education, goal 8 is about providing decent work and economic growth while goal 12 talks about providing responsible production and consumption. All these goals go a long way towards spurring business growth in the world. Sustainability is profitability for business.

Governments in Africa are today putting resources towards training entrepreneurs on important business topics such as formulation of business plans, preparing financial proposals and record keeping therefore, increasing the chances of success in their businesses.

For African businesses to be successful in e-commerce, governments in Africa are today continuously investing in fibre optic cable networks across their countries so as to increase internet connectivity across Africa.

Africa is narrowing the gap with the rest of the developed world partly because of institutional reforms carried out that have helped countries in Africa respond to changing global market demands, attract foreign investments, efficiently utilize local resources, fight corruption, respond to global financial crisis global social crisis and health crisis.

Inorder to stimulate the growth of businesses in the continent, African countries have taken numerous steps to provide an enabling business environment and even improve on the business environment by improving transportation, reducing the cost and time it takes to register a business, establishing interest rate and bankruptcy laws and provide reliable electric power for industries. Kenya, Ethiopia and Morocco are some of the countries in Africa that have constructed new, reliable, modern, and fast railway networks to help ease and speed up the transportation of commuters and cargo in their countries.

The United States government is today supporting Africa’s development by having U.S. companies partner with the local African private sector to build new initiatives and encourage the growth of the private sector investment in Africa. The Rockefeller Foundation, Microsoft and Google are in Africa and are involved in trying to build the Information Technology capacity in the continent through various youth training programmes. One such case is the Ajira Digital project in Kenya that is financially supported by the Rockefeller Foundation. The project seeks to equip the youth in Kenya with online work skills.

Africa states have collectively formed the African Union (AU) and they have also formed trading blocs such as EAC, COMESA, CEN-SAD, ECCAS, UMA, SADC and ECOWAS so as to create expanded markets for their produce, boost economic prosperity, raise the standards of living for its people, provide political stability in the regions, provide social stability in the regions and maintain peace in the regions.

Such trading blocs also allow for the free movement of capital, skilled labour, knowledge and goods and services within the regions.

African businesses are today partnering with governments to build both national and continental brands.

African businesses are today gaining a competitive edge in the international markets by sharing information on their consumer and business environments.

To establish credibility, African businesses are today partnering with governments, other businesses and the community. Such partnerships also help businesses overcome challenges such as monopolies in the markets, unfair competition, unnecessary regulations and barriers to trade and unwanted bureaucracies.

In Kenya, the government through an affirmative action plan was wise to set aside affirmative action funds such as the Women Enterprise Fund, the Youth Fund and the Uwezo Fund so as to enable the youth and women get access to start up capital.

Most entrepreneurs are very learned and experienced. Their skills are further improved on through free training programmes provided by the government. Government provides training in different areas such as planting, grain storage, disease control and sourcing of markets for their produce. Kenya does this through annual agricultural exhibitions conducted country wide.

In Kenya, the government helps entrepreneurs get access to start up loans and loans to grow and expand their businesses. Kenya has very strict interest rate control laws. Interest rates can only be up to 4% higher than the current bank rates.

Kenyan entrepreneurs can access business loans from various well established and regulated financial institutions such as banks, cooperative societies, mobile companies and micro finance institutions.

The Kenya government has been involved in providing an enabling business environment by:

The government has been involved in providing an enabling business environment by working to maintain a stable political, social and economic environment in the country.

The government has been involved in providing an enabling business environment by establishing and implementing laws to allow for healthy business competition in the country.

The government has been involved in providing an enabling business environment by protecting consumers from exploitation, unsafe products and unfair business practices.

The government has been involved in providing an enabling business environment by setting standards for products used in the country.

The government has been involved in providing an enabling business environment by providing road, rail, adequate electricity and other infrastructure.

The government has been involved in providing an enabling business environment by providing security.

The government has been involved in providing an enabling business environment by establishing import restrictions and import quotas so as to grow the local industries.

The Kenya national chamber of commerce and industry was established to:

Issue certificates of origin.

Offer relevant and necessary information on the businesses of its members and products produced by its members.

Publish trade journals giving relevant and necessary information to its members and the public.

Discuss trade regulations.

Hold discussions with other countries on behalf of its members.

Protect members from unfair trade practices.

Seek new markets by hold trade fairs and exhibitions.

Provide consultation services and information to its members.

Measures taken by the Kenyan government to promote business growth include:

The government is easing access to credit.

The government is easing the tax payment process.

The government is easing the registration of property.

The government is easing the transfer of property.

The government is focusing on supporting and growing the SME sector.

The government is providing an enabling and predictable business environment.

The government is focusing on technology transfer by working in conjunction with developed and industrialized countries in the world.

The government is changing the education system in Kenya to focus on talent building, relevant skills building and technology.

The government is focusing on improving on the universal health care system and access to basic health care services so as to ensure that the country has a healthy and strong workforce.

Solving the problem of underdevelopment and marginalization of some regions in the country by changing to a federal system of governance and giving every region an equal opportunity to develop, prosper and stimulate business growth.

Setting up and strengthening already existing institutions aimed at stimulating business growth in the country such as institutions to fight corruption in the country and the judiciary so as to speed up already filed court cases.

The government is reducing poverty, increasing access to basic, technical and higher education and educating on family planning.

Cheers,

Peter kirimi Mburugu.

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