Why it is important to support home grown businesses and start-ups

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Over the years I have argued that as a country we have to prioritize our local companies and especially start-ups. And there are a number of reports out there that shows how important the small and home-grown businesses are to the Kenyan economy

Back in 2015, The Business Daily wrote about a report by the United Nations’ Economic Commission for Africa that indicated that Kenya had the highest number of informal jobs in Africa. The numbers were interesting as shown below

“Employment in the sector stands at 77.9 per cent of the total ahead of Rwanda’s 73.4 per cent, Uganda’s 59.2 and Tanzania’s 8.5 per cent. In Egypt, Liberia, Madagascar, Mauritius and South Africa, the sector offers jobs to 51.2, 49.5, 51.8, 9.3 and 17.8 per cent of workers, respectively.”

At the same time the data from Kenya’s Economic Survey 2015 showed that the informal sector employed 11.8 million people in 2014 against 2.4 million in the formal sector.  When you look at those numbers you realize that it is in the best interest of any Government to prioritize the growth of businesses that promote local job growth as opposed to looking somewhere else.

US for example is the home of many giant businesses but you still hear them talking about America First. As big as they are, they still feel it is necessary to protect their companies and business interest.

In our case there are two things which I feel we have not done well, creating an enabling environment for businesses to grow and also advocating for our big businesses to expand beyond our borders.

The first point is rooted on the fact that despite Kenya having such a high number of informal businesses, the rate at which they close down every year is alarming. A survey by Kenya National Bureau of Statistics (KNBS), released in 2016 approximated that 400,000 micro, small and medium enterprises close down every year and most of them within the first two years of their formation. Within the five years covered by that report including 2016, a total of 2.2 million MSMEs closed down.

The second part is where we are with the Safaricom issue of dominance. For a business, it is hard enough to survive and the last thing the management and the owners want to hear once they have achieved some success is the call for them to be cut down to size.

The funny thing about the  Safaricom case is that it is being pushed for the benefit of a Multinational. Safaricom is very successful on its own rights especially within the Kenyan context. But that is where the problem is. Because of that a company which is a giant in Africa and internationally, wants a Kenyan grown company to be punished basically for its success in Kenya.

As I mentioned on the previous article, one of the ways a dominant company maintains their position is through the use of its huge resources which the other competing firms do not have. In this case Airtel for example is a giant on the world stage and even in Africa. When it comes to resources, Airtel is a mile ahead of Safaricom.

According to the Communication Authority of Kenya’s latest stats, Safaricom Limited’s total mobile subscriber base stood at 29.5 Million. According to smartinvestor.in, Airtel is the biggest or second biggest cellular service provider in 13 African countries. It is the third or fourth biggest operator in Ghana, Rwanda and Tanzania.

The company has an African customer base of 81.92 million, of which 21.71 million are data users. And in India, Bharti Airtel total subscriber base stood at 282.04 million by the end of last year. In total we are talking about 376.4 Million subscribers by the end of December 2017, making it the third largest mobile network operator in the world by subscription numbers.

Given their stranglehold in the African telco market, I find it strange that Airtel has not fully invested in the Kenyan market. Why are they not making use of their resources to expand their reach to be able to cover all regions of Kenya?

Based on the above we are basically asking Safaricom to be cut to size to allow bigger giants to compete with it or overtake it in the Kenyan market. I know, at this point there are those who probably would  be asking about the fact that Safaricom is also partly owned by Vodafone. That is true, but not relevant in this case because it is not Airtel vs Vodafone. And even if that was the case then the call still should be to let them compete without trying to use the Government to cut the leg of one, in order for the other one to gain the advantage.

Personally, I feel the Safaricom dominance is a non-issue. In ideal situation we should be encouraging Safaricom to expand its reach to other countries like what Airtel is doing. At the same time, there is need to continue improving environment to enable all the telcos to compete fairly.

What is your opinion on the topic?
Kennedy Kachwanya
Lead Blogger at Kachwanya.com
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Kennedy Kachwanya is a technology blogger interested in mobile phones both smart and dumb, mobile apps, mobile money, social media, startups ecosystem and digital Savannah. New media must not forget the strength of old tech.
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Article Categories:
BUSINESS · STARTUPS · TELECOMMUNICATION