Entrepreneurship, Business and Life!

Archive for May, 2016

Is Kenya Experiencing an entrepreneurship Bubble?(Part 2)

soap-bubbles-107004_1280Last week we looked at all the hype that has been created around entrepreneurship in Kenya, with cheerleaders ranging from banks and oil companies to president Barrack Obama himself. This article may be considered pouring water on the fire and spoiling the party. Is the opportunity as huge as it is being touted or is it a mirage? Let us analyse the opportunities.

There are many opportunities forKenyan entrepreneurs right now. More than ever. These  range from  the 30% government procurement scheme for youth and women which will be made more transparent through the e-procurement portal .We have  47 county governments carrying out projects that present opportunities of all kinds of entrepreneurs locally. Our extractives sector is beginning to yield fruit in oil and gas as well as coal mining and other precious stones . Tourism is rebounding thanks to the Popes and Obamas visits and the lifting of travel bans. Kenya is increasingly seen as the new financial hub for the continent with a growing middle class, good internet connectivity. There is  what many consider marginally improved governance  and security as well as new laws perceived as being business friendly. It now takes 3 steps to register a business in kenya part of it can be done online. As South Africa self-destructs under the effects of populist leadership , many investors are seeing Kenya as the next destination to put up their africa headquarters. Our investment in agriculture is looking up and infrastructure development is on steroids-we are building roads,a new railway ,new ports in Lamu and Mombasa. We have the massive but faltering Ksh 900 billion Lappset project which should connect the coast to South Sudan . We have  international airports built in remote places like Isiolo as well as resort cities planned in places like Kilifi and Turkana. We will also have computers in every school for education purposes. MPESA keeps us in the global spotlight as the darling in mobile money innovation and related applications are also drawing in investors as well as inventors. We have the Uwezo fund , youth fund , womens fund and many donor funds focused on all types of entrepreneurship programs whose impact we can only question. Kenya is a basketful of opportunities.  And dont forget the world is still saying (in husher tones nowadays) that Africa is still the next frontier.

But the big question remains, are our entrepreneurs really creating sustainable economic value?

What everyone is not talking about , is the harsh reality of entrepreneurship, we have made entrepreneurship look like the most exciting thing for everyone to do.The truth is ,it takes years for a sustainable company to take off, and failure rate is also high. It takes resilience, patience, consistency and a lot of sacrifice in the initial years of building a business to succeed. Entrepreneurship can leave behind a trail of destruction. From broken families, aggressive compliance officers (KRA ,NSSF, NHIF always want a piece of your action),  lost family assets, family feuds,  tainted reputations , depression, no personal time and other dark sides. No one is telling people that this dark side is what they would be exposing themselves to. A few that survive this journey, quietly reinvest and enjoy their spoils in silence away from public attention. Those that try celebrating their wealth publicly are raided by compliance officers and those they purpotedly owed money as they built their wealth. Entrepreneurship is not as rosy as we make it look in the media.

Many donors , private equity investors and social funds have witnessed this destructive force of entrepreneurship firsthand as they watched many of  their initial investments go up in flames either due to the lack of ethics of their investees or outright failures of their investments. Some of them privately admit to having invested more in hyped up companies than substance.What is the actual success rate of entrepreneurial initiatives such as the ones mentioned above? No one really knows, and no one is really willing to measure it either. Many funds have closed down and left a pile of disillusioned and bitter foreign investors , some of whom have had their funds stollen by fraudsters to the tune of millions of dollars. The few that remain committed to funding Kenyan companies have learnt bitter lessons and now scrutinise investment opportunities with a microscope. In the absence of concrete data measuring the success of entrepreneurship programs , hype may continue to win the day until the world decides to find another interesting cause to fund.

Bubbles always burst, eventually and when the entrepreneuship one does , only the well meaning,visionary ,  passionate and dedicated entrepreneurs who are serving real needs in the market with profitable business models will be left standing and will go on to succeed. Sometimes the ones who succeed are the ones who simply held on long enough until everyone else gave up.

Before you jump out of employment to cash in on all the opportunities being flashed in your face,  think twice, entrepreneurship is brutal the world over and it can take you and your family down, nomatter where you are on this planet.

 

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Is Kenya experiencing an Entrepreneurship Bubble?(part 1)

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Kenyans have a  tendency to attack new opportunities in droves. First, it was the stock market IPOs. Then came pyramid schemes, then various multi-level marketing schemes, then came greenhouse farming (remember the tomatoes in your friends’ car boot? or your boot?) , then the infamous and magical QUAILS . And now we have the unending land and property buying sprees, despite the fact that some of the property prices make no business or investment sense whatsoever. Some houses have their return on investment pegged on being enjoyed by grandchildren! But that is a story for another day.

We are always looking for what’s hot or for the “next big thing”, trying to catch it before everyone rushes in. We don’t keenly analyze the business opportunity and  many times we will end up being conned or losing money in large quantities and then we begin to petition the government to step in and help us recover what was lost, while forgetting that our investment was  based on decisions made out of poor judgement and a lack of background checks. As a rule of thumb, don’t invest in something you don’t understand or make sure you are advised by an expert with a track record and good reputation, but that is also another topic for another day.

So today, the buzzword is entrepreneurship. Everyone is talking about entrepreneurship, and  everyone is now investing in entrepreneurs or becoming one. I might even say Kenya could be competing with a few countries in the world to become the WORLDs ENTREPRENEURSHIP HEADQUARTERS (whoever sets this up can appoint me CEO). And why not? The worlds’ most celebrated serial entrepreneur, Richard Branson,  loves Kenya and is now doing a few side hustles here (google a place called Mahali Mzuri).

However, the truth is , according to this global entrepreneurship index,  we have a long way to go to have conditions that favour entrepreneurship or providing cushions that encourage people to risk and venture into business more. We currently rank 86th overall. So much for our bravado as a nation.

Lets begin by listing those supporting entrepreneurs today.

First we have the Tech hubs, incubators, accelerators and venture capital funds , or combinations of all of them seeking to produce the next big innovators. Many hold competitions to attract those with great ideas in technology innovations, social enterprise, financial inclusion, agriculture and the best possible local and international ideas. This support sector has also seen the rise of  compepreneurs!  (entrepreneurs who jump from one competition to another and the prize money is enough to live off even without a viable business model ). The dust is beginning to settle with easy funding for such initiatives running out and people have begun asking hard questions as to which model of  building entrepreneurs truly develops great entreprises. Oh, we even have an oil company and a beverage company  running entrepreneurship competitions. It has become that popular.It’s getting harder and harder to find a corporate company that does not have a program targeted at supporting entrepreneurs . Even if it is just to fit in with the corporate crowd.

The rich have also thrown their weight behind entrepreneurs with noble intentions of recreating themselves, or at least making it easier for those coming after them not to suffer like they did. The Chandaria centres in the United States International University(USIU) and Kenyatta University hope to spur entrepreneurs to success largely through education and incubation. The Tony Elumely foundation is also running an Africa-wide competition to support small enterprises.

And then we have Banks! Can you believe it ? Banks love entrepreneurs! KCB has set aside a Ksh 50 billion 2jiajiri fund ,its small brother Chase bank Kenya before the grand scandal had announced a Ksh 60 Billion fund for SMEs (enough  money to fund 12 counties )  ,Equity bank  was given even more , USD 450 Million by OPIC   . All these were announced during the global entrepreneurship summit held in Kenya in 2015. Barclays Bank followed suit with a Ksh 30 billion fund for SMEs. K – Rep rebranded to Sidian Bank  and positioned themselves to serve entrepreneurs.  No bank is being left out of the wave and each has a product now targeted at SMEs and an SME division. However, many are struggling to structure effective programs that will help them deal successfully with entrepreneurs. And that’s because entrepreneurs are not an easy group to understand.They are visionary, but they can also be very erratic.  Value adds to entrepreneurs from the banks are questionable and that’s because its easy after all for banks to make money from entrepreneurs through loan defaults and late penalties  or unfavourably high-interestt rates. Entrepreneurs are always desperately looking for money and will take it , however expensive it is without looking at the fine print, after all they have an empire to build!Why sweat a few percentage points on your loan? Other financial players like the Mastercard foundation are also funding a program for entrepreneurs .

Even Universities have joined the fray and now everyone is teaching entrepreneurship(Is entrepreneurship inborn or are entrepreneurs made? I can hear a professor say) . Some are doing it well, others simply have it in their curriculum because there is demand for the course. Programs like the Goldman Sachs 10,000 women at USIU stand out. Research shows that funding women entrepreneurs creates better outcomes for economies than funding men .

And To crown it all , Uncle Sam came to put the cherry on the cake, and he came with a big cheque, and friends with equally big cheques (after all who goes to shags and doesnt carry lots of gifts from the city when he comes with his friends?) . The US president  Barrack Obama launched a USD 1 Billion fund targeted at entrepreneurs globally. Thats a lot of money, I wonder how its being spent.  He also stressed that  AGOA is still ongoing and he opened a centre to train young leaders and entrepreneurs.

So is the opportunity for entrepreneurship as big as its being presented to be? We analyse this in the next post next week, stay tuned!