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World Bank Says Kenya’s Economic Growth For The Year, Slowest In Five Years, And What This Mean For The 2018 Entrepreneurs

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By Felix Onyango

Kenya has made a couple of noticeable strides on the path of ease of doing business. We have to appreciate the steps made so far but still advocate for continuous spontaneous changes that will ensure our full entrepreneurship productivity and potentials.

According to World Bank latest annual ratings, Kenya moved 12 places from position 92 in 2016 among 190 economies as far as ease of doing business pertains. All these are based on regulatory environment, protection of property rights. Efforts to make starting a business easier is notable by the merger of procedures necessary for startups and formal business operation.

Huduma Centre services have made this even convenient as well as online platforms set aside by various county governments and other authorities. In the previous financial year, Nairobi County, for example, did consolidate a total of 5 licenses to one permit such as single business permit, health certificate, advertising signage, food hygiene to fire clearance certificate, all these are applied by entrepreneurs online with digital payment as an option as well. With these, it’s true that investors have been relieved from previous burden and bureaucracies one had to undergo in order to kick-start a business.

With devolution taking deeper root in the country, every County governments are in the race of attracting it set of investors both foreign and local to boost its own economic agenda. More regulations have been given emphasis to attract the marginalized groups; youths, women, disabled through tendering and contracts i.e Access to Government Procurement Opportunities (AGPO) among other loans and grants provided to boost these group.This has as well come up with its own set of challenges from delayed or close to zero payment even after delivery of tenders,non-compliance to contracts, corruption et al which are all manageable with proper control structure in place.

Where are we? Are we heading somewhere? What can we learn?… Insights on Kenya’s external business environment

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There have been cycles of economic growth as well as contraction due to several inevitable factors ranging from events, news, consumer preference, the general state of health of the market, these must always be taken into consideration by the investor who needs to start or spike growth of the business. In Kenya, let’s take quick look at several external environmental factors that must be contemplated by an entrepreneur ;

Political environment

Kenya economy is intertwined with the political aspect, impact on one will definitely have a consequence on another.It has been a long political season accompanied by political instability in several regions and towns thus derailing investment rates throwing most of the entrepreneurs into a ‘wait and see’ situation in order to explore their next step.With political rhetorics ‘slowly cooling down’ and political class showing capabilities of settling down issues at hand, entrepreneurs can only be optimistic about a better time ahead.

Business only thrives where there is sizeable peace and tranquility, security and a condusive environment full of a corporation with the political players, policies, and regulations that seeks to promote SMEs, manufacturing sector, processing, service, agricultural sectors for the good of the economy.

Interest rate

High-interest rates discourage customers /entrepreneurs from borrowing to expedite their entrepreneurial interests, on the other hand, the lower the interest rate the more the stimulation of industries growth, innovation, and more jobs.

The bill capping interest rate has been effected to law,this ensures maximum interest rate charged by commercial banks is only 4% above the CBK rate, the impact of this law is slowly being felt among the banking sector with several experiencing drops in ‘supernormal’ profits but critics including economists, banking sector have always stood their ground against the bill with IMF also chipping in to offer advice on the adverse effect in the long-run in the economic growth.

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But the intention of those who pushed the bill was to support the growth of SMEs and entrepreneurs to access affordable loans and attract even those who were afraid of defaulting due to the high-interest rate. The challenge for many towards this remains to be collateral required for the loan acquisition. The banking sector have their own school of thought and continues to have own mitigation measures to curb the impact of the new law.

Prevailing currency strength

The value of Kenyan currency compared to foreign currency is an important business aspect for any entrepreneur, the strength of the Kenyan currency to US dollar is at least currently fairly stable despite the long political season but with time indication are pointing towards its growth.Whenever it strengthen, business in the sphere of international trade are able to be even more competitive in pricing, loss mitigation, and spike growth.

Economic status Kenya is indisputably the leading economy in East and Central Africa with the unique distinction of diversification and continuous advancement. According to the World Bank’s Kenya Economic update 2017, the country’s GDP projection is to decelerate to 5.5% which is 0.5 drift from 2016 forecast due to prolonged drought, food insecurity, crop failures and livestock death alluding to the fact that agriculture is the country’s economic backbone. Amidst all these, prudent macroeconomic policies are continuously considered to unlock the country’s full productive capacity; better credit access, agricultural productivity as well as optimization of sprouting new economic growth energies especially real estate which is increasingly taking center stage even in remote and previously sleeping regions, towns and cities.

Social Environment

Going by the latest country’s census, Kenya boasts of a population of about 44 million with 2.7% estimated annual growth rate.Away from the brief stats, it’s important to note that there exists continuous blossoming consumer demand particularly for high-end products and services attributed to uprising middle-class population. The country is strategically located making it a market hub in East and Central Africa.

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It’s wise also to note here current existence of trade beneficial agreement and arrangement that the country has definitely optimized such as The African Growth and Opportunities Act(AGOA) as well as Economic Partnership Agreement (EPA), all these have offered a boost towards access to the European Union and other international markets as well on a duty free access. This has contributed to the growth and offer more opportunities in textile, processing, manufacturing and service industry.

Understanding your business environment into perspective is very paramount for proper planning, analysis plus informed decision making to ensure business productivity. Through SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis you are customed to be on the track of all aspects in the business environment and to keep you ahead of competitors & offer competitive edge as well as necessary adjustments of strategies to have a reflection of the environment under which you operate your business.

Ease of doing business report ought to be reprieve and challenge to the future of entrepreneurship in the country.This has had its own share of positive changes which are to the advantage of entrepreneurs to optimize with time. More adjustments must still be made to ease further business operations and support growth in terms of policies, empowerments to at least help bridge existing gaps.

Read the full World Bank’s report on Kenya’s economic outlook below

121895-WP-P162368-PUBLIC-KenyaEconomicUpdateFINAL (1)

The writer is an entrepreneur by profession and practice also a business mentor 


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Business

Airtel Kenya And Telkom Make Official Their Merger To Face Off Safaricom’s Dominance

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Telkom Kenya Limited and Airtel Networks Kenya Limited, today announced the signing of a binding agreement that will see the shareholders of the two companies enter into an agreement to merge their respective Mobile, Enterprise and Carrier Services businesses in Kenya to operate under a joint venture company to be named Airtel-Telkom.

Telkom Kenya Limited’s real estate portfolio and specific government services will not form part of the combined entity. The final shareholding will be determined at the closing of the transaction. Telkom Kenya has the option of holding up to 49 per cent of that shareholding.

The merged company will be chaired by Telkom Kenya Limited CEO, Mr. Mugo Kibati while Airtel Networks Kenya Chief Executive, Mr. Prasanta Sarma, will be appointed Chief Executive Officer.
The finalisation and closure of the transaction is subject to approval by the relevant authorities.
Airtel Networks Kenya Limited (Airtel Kenya) and Telkom Kenya Limited (Telkom Kenya) will see no immediate changes to their operations which will continue as usual.

Similarly, there will also be no change to the current respective leadership and management, legal, organisational and staffing structures. Additionally, both brands: ‘Airtel’ and ‘Telkom’, as well as their respective products and solutions, will continue to co-exist. Similarly, service delivery to the respective companies’ customers as well as engagement with all business partners of both companies will continue to operate as usual.

As per the agreement, both the partners will combine their operations in Kenya and establish an entity with enhanced scale and efficiency, larger distribution network and strategic brand presence, thereby enhancing the range and quality of products and service offerings in the market, and greater choice and convenience to the consumer.

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The combined entity will see sustained investments in networks to further accelerate roll out of future technologies. The Enterprise and Carrier Services businesses will get a boost with a larger fibre footprint and increased number of enterprise customers – including both large corporations and SMEs who would have access to a diverse portfolio of world-class solutions.

Commenting on the agreement, National Treasury Cabinet Secretary, Mr. Henry Rotich said:
“This move is well aligned with the government’s agenda to optimise the value of the assets that it holds in trust, on behalf of Kenyans, while cementing the country’s position not only as a regional business hub but also as an international investment magnet.”

ICT Cabinet Secretary, Mr. Joe Mucheru commented: “ICTs remain a vital link to achieving Kenya’s economic goals and our national development agenda, particularly with respect to service delivery. Such mergers have had positive impact on the development of the sector and service levels to consumers in other markets. Similarly, we look forward to this merger leading to the introduction of new technologies and telecommunication products which will, in turn, support the growth of other business sectors of our economy, thereby spurring national production to meet the growing demand locally and beyond.”


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RBA Gives Cytonn Investment The Nod To Manage Retirement Benefit Schemes Funds

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Investments Manager at Cytonn Maurice Oduor.

Cytonn Asset Managers Ltd (CAML) says it has been registered and authorised by the Retirement Benefits Authority (RBA) to manage retirement benefit schemes funds.

The Capital Markets Authority (CMA) also licensed CAML in March 2018. The Cytonn arm said it will “further grow its regulated products portfolio to include fund management services for retirement benefits schemes” following the nods.

“Despite the retirement benefits assets under management growing to about Sh1.2 trillion as of June 2018, only 15 per cent of Kenyans belong to a registered pension scheme and there is a vast opportunity to increase this,” said Cytonn Asset Managers principal officer Maurice Oduor.

“With this licence, we look forward to adding value to the retirement benefits industry by reaching more Kenyans and enabling them to save for their retirement and securing their future.”

According to Zamara, a pension fund administrator, pension funds only earned 9% p.a in the last year. The entry of Cytonn into the pensions industry brings high yielding products earning upto 18% p.a into the industry.

Cytonn Asset Managers earlier acquired Seriani Asset Managers Ltd.


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Business

With Sh2B Investment, Taaleri Set To Purchase 20 Per Cent Of Cytonn Real Estate Project

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Cytonn CEO Edwin Dande

On 8th November 2018, Cytonn held a client cocktail meeting at the Nairobi Serena Hotel. The forum served as a platform to enable Cytonn celebrate the ongoing successful partnership with Taaleri, its institutional investor, while also providing an opportunity for Cytonn clients to interact directly with The Cytonn Board and Taaleri.

A section of attendees during the cocktail

“This forum is meant to celebrate the great milestone we have had in our relationship with Taaleri. It will be a platform to get to know what we are doing as Cytonn, The Board and Taaleri as well as get to respond to any questions our clients may have around the firm’s governance,” said Edwin H. Dande, Cytonn’s CEO during the forum.

Edwin H. Dande, Cytonn’s CEO

“With the continued attractive investment opportunity in Kenya and the region, and the committed team at Cytonn, Taaleri has this year invested a further Kshs. 2bn in our Real Estate projects, and are now looking to purchase 20% of Cytonn during our IPO,” said Prof. Daniel M. Njiru, Cytonn’s Board Chairman and Vice Chancellor at Embu University, during the forum.

Prof. Daniel M. Njiru, Cytonn Group’s Board Chairman

He further said that, “The listing of Cytonn will only serve to increase our levels of governance, risk management, disclosure and transparency. As a Board, we are supporting Management on the listing, and would like to congratulate them for taking the firm to these heights.”

Prof. Daniel M. Njiru also introduced members of the various Boards at Cytonn, which are The Cytonn Group Board, Cytonn Asset Managers Limited (CAML) Board, Cytonn Hospitality Board, the Special Purpose Vehicles (SPVs) Boards and The Cytonn Education Board.

A representation of The Cytonn Group, Affiliates and Special Purpose Vehicles (SPVs) Boards

Kati Salo, Taaleri Africa Team representative, reaffirmed the Cytonn – Taaleri partnership. “As a Risk Manager, I am confident about the risk position of the firm and I can sleep well knowing that my investments are in good hands,” she remarked.

Prof. Daniel M. Njiru engaging with a client

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