Sunday, January 15, 2012

Traders should embrace best practice, smart business to invest in counties



By Anyang’ Nyong’o

The consumer market is always segmented in terms of income groups, tastes, cultural tendencies, response to commercial advertisements and geographical accessibility to markets. Demand by consumers for certain commodities does not always increase with time or growth of incomes; it can be influenced negatively or positively by competition in the market. Hence investors and suppliers are always conscious of the need to spread risks through time and space, but this can quite often be neglected when monopoly has been enjoyed for too long.
In Kenya today, a good number of businesses enjoy monopoly either due to absence of effective competition in the market or because of effective past responses to market segmentation accompanied by comfortable monopoly profits.
Such businesses very often become comfortable and shun expansion at a very low threshold of market penetration. This had been the phenomenon with most banks until Equity entered the market with new products, new styles of market penetration and much more imaginative strategies of stimulating demands.
With the onset of devolved governments next year, many businesses still do not know how to take advantage of this major political shift in Kenya’s governmental structure and dynamics. Many are still wondering how they will position themselves within the counties, or how they will "take advantage" of county governments to do "good business." Funnily enough they do not ask themselves how they will make county governments work better through "best practice and smart business."
It is a fairly acceptable interpretation of history to argue that the original Lord Delamere had a smartbusiness adventure when he came to Kenya to farm without first and foremost establishing that "there was an enabling environment to do farming in Kenya."
Except for the land and the good weather, he risked on all the other factors but eventually became a very successful pioneer farmer in Kenya.
The new counties present "smart business persons" the Delamere-like challenge: there are risks to be taken but plenty of possibility for resounding success.
A good number of the counties have populations of half a million and above (Kisumu County for example), reasonable infrastructure, good human resources potential, and substantial unexploited or under exploited raw materials, agriculture or minerals resources and tourism potential. Compare such counties with the state of Idaho in the USA or Orisa in India.
Smart county governments will go out to woo investors, which will improve their economies, create jobs, pay local taxes, invest in infrastructure and improve the profiles of the political establishment. Smart business will go out to point out to such governments how investment in such counties will lead to these results. It is assumed, of course, that profit is made; but this should be part and parcel of the business plan and market projections that are internal to an enterprise than a factor that is viewed as risk proof. Professional firms have a lot of potential in counties for business.
Most local authorities today have little capacity to run viable financial and management systems. Institutions set up at county levels to train and work with county governments on auditing, management, accounting etc will be in demand. They should "run ahead" of counties by establishing such services aforethought at the local levels rather than wait to be hired as consultants as it were "from outside."
Most entrepreneurs view cost as the biggest hindrance to investing outside Nairobi, especially in far flung places like Garissa, Kisumu, Voi, Tenwek, Trans Mara or Mwingi. Concentration in Nairobi has meant that most investors outside the city maintain an office in Nairobi to improve operations by making it easy for the business to access the many services of the Government.
These include registration of companies and businesses, filing deeds with the AG’s chambers, and some other transactions involving various Government ministries whose up-country offices feel disempowered to make any meaningful decisions.
The Government will need to decentralise its operations to the counties to be responsive to the needs of the business community and the citizens in general.
Much as the US government has Federal Offices in the various states so will the GK have central government offices in the county capitals serving the country in tandem with the powers conferred on county governors and their respective executive committees and assemblies.
Businessmen need not fear the problem of distance from Nairobi and paucity of central government services at the county level. Given the ICT revolution, e-management and continuing improvement in communication infrastructure, it will be much wiser for the early birds to catch the worms in these counties.
Air service to Kisumu, for example, has gone up by leaps and bounds over the last 4 years, beyond the expectation of aviation experts.
In 2003, it was projected that the Kisumu airport would receive only 150,000 to 200,000 arrivals per year by 2010. In 2010 Kisumu had close to 400,000 arrivals if not more. With the opening of the new airport, numbers of arrivals are bound to approach the one million mark in the near future.
Likewise, the new railway from Juba to Lamu will open up northern Kenya to more immigration into that region, creating tremendous opportunities for business.
The writer is Minister for Medical Services

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