Pre-Covid official figures from the Kenya National Bureau of Statistics estimate that some half-a-million (500,000) small enterprises cease trading every year, the entrepreneurial life blood of the economy cut off at source. Now a report from the World Bank suggests some answers as to why this is happening.
The World Bank’s Systematic Country Diagnostic report published earlier this week points at corruption and excessive bureaucracy in Kenya as two of the prime reasons why the country’s business start-ups fare so badly.
OLD, UNPRODUCTIVE COMPANIES AND STATE-OWNED ENTERPRISES RESTRICT GROWTH
The report also suggests that the economy is too dependent on old established companies and some unproductive companies that are not creating employment. Added to this the report argues, are the sizeable state-owned enterprises and others that are state-linked that are restricting the growth of new enterprises in Kenya.
The upshot of these factors is that there are not enough new businesses coming to market and many that do are unable to survive the start-up phase.
The oxygen that loans provide in nurturing a new business enterprise is also reduced by considerable government borrowing, with banks understandably preferring to put their money into less risky state institutions.
SMALL IS BEAUTIFUL
Small and medium sized enterprises are the basis of many of the world’s most economically successful countries. With over 1.8 million people unemployed in Kenya the country’s economy needs entrepreneurial base if jobs are to be created.
Kenya’s young people are a go-getting and innovative. Many tens of thousands of them however, are languishing in an unemployment trap. We need to unleash their talent and resourcefulness. To do so we need to cut the corruption, cut the red tape, invest in new talent, and enable our young entrepreneurs to compete on a level playing field.