I have been considering starting and building business for years. From 2015 to 2016 I spent a lot of time researching and interviewing young entrepreneurs trying to figure out business models that could work and could scale. I was hoping to build a small to medium-sized enterprise, the kind that gets recognition in the Business Daily’s Top 100 and Forbes 30 under 30.
The entrepreneurs I spoke to varied in their starts to their operations. But what was common in more niche businesses was the fight for an extremely small demographic; the less than 3 per cent of Kenya’s 2.7 million formally employed people who earned 100,000 Kenya Shillings and above. That’s roughly 80,000 people. 80,000 people in a country of 51 million people!!! What the hell is that? That is the demographic with supposed disposable income which will constitute a ‘middle class’.
I started to research on our so-called middle class. Kenya rebased its GDP dramatically increasing it by 25 per cent. This shifted the Kenyan economy to a lower-middle-class economy according to the World Bank rankings. That meant now if you earn between 25,000 to 99,000 Kenya Shillings you are now middle class. But if anyone knows anything about the cost of living in this country, anyone with that kind of income range and has a family or just lives in a city and is single, quickly realises there is nothing left over once you have paid your bills, you might actually have to take credit to keep you afloat. Most fight to save the little they can.
That means the mass market is the way to go for business, which works if you are selling essentials like food and water. But if you are in the service industry or manufacturing what may be considered non-essentials like camping gear, leather accessories or even holidays those are the first to go from the family budget. So how can I expect to build a business when I want to go niche competing with everyone for that splinter of the market?
It gave me pause. I didn’t want to be employed, confined to an office, and deal with the pettiness of office politics. I knew I had a valuable skill set and big dreams to shift industry norms to greater heights. Corporate Kenya wasn’t an option, they don’t value you enough to pay you your worth. And those who did value my work, couldn’t afford to pay. Government for me has never been an option, with the wanton corruption. The only place that made sense was the development sector.
There I have found a space where my skills are valued and I am paid my worth – most of the time. Though the sector has its challenges; like the confinement to the narrative of who funds the organisation you work for. It is worth the compromise to grow and stretch my creativity and skills and do things I only imagined to do years earlier.
But even as I work in this sector completely in awe of the social entrepreneurs and charities people are running. Sustainability models are not possible without funding. I started to notice friends with for-profit organisations also tapping into the development sector seeking funding for project work. SMEs shifting to the development sector, was so bizarre.
Following conversations with several people, I realise without the critical mass with expendable income to purchase their products. With 90 to 180 days wait to receive payments from medium and larger corporations, cash flow is sustained through debt for more SMEs. The only option for most SME’s is the development sector where they can add value, have cash flow and maybe, just maybe grow as a company.
The Kenyan economy may be the largest in East and Central Africa, but for those like me eager to build and grow solutions for this market, we need the market to also grow with us in various facets. First, financial growth so it has the capacity to afford our services and products. We also need growth mindsets for medium to larger companies to value and support SME services and products to propel innovations worthy of international acclaim. We need the government to build a more conducive environment for business especially MSMEs. We can’t build industry by depending on International NGO dollars.
We need a nation with people who can afford to buy and build their own scalable businesses which thrive from a legitimate middle class. The only way to do this is to build industry, and that takes big money. Forget vulture venture capital. The government can offer incentives first as the other usual suspects follow; banking instiutions, grants, private equity etc.
Until we get a bigger critical mass of buyers from the population who have genuine disposable income, setting up a viable business with legitimate growth prospects in this country makes no sense to me.