Archive | February 7, 2013

Small Business in Kenya

Obama has a side businessActually, I should title this “Business in Africa” because outside of large mining operations, just about all business in Africa is small. I just walked with my friend Gabriel out to Rusinga island. He had promised to take me to a traditional healer, but, unfortunately the good doctor wasn’t in.

This seemingly tiny community turns out to be a sprawling one. We walked for nearly 2 miles and didn’t see a break in humans once. The walk was a continuum of Cel phone shops, fruit and vegetable stands, butchers, hardware hawkers, electronic shops, cel phone charging places, household and kitchen stores and furniture shops, with the occasional health clinic and school thrown in. It’s the same as just about everywhere else I’ve been in Africa, but while we were walking back I had some thoughts (between moments of trying not to get killed by the motorcycle taxis).

1. African business is the same everywhere. People sell just about the same things, in the same manner as everywhere else. Business models tend to propagate here in ways that they don’t in the developed world, but when something works, it works. The vegetables you find here may not be exactly the same as the ones you might find in Malawi or Ghana, but the selling model is the same: a lady either grows her own or purchases vegetables from a dealer, then sells them for whatever she can get at the market. She then takes the money she earns and buys more the next day.

2. Innovation comes slow here, but when it does arrive, it spreads quickly. Africa’s cel phone model is way ahead of that in the US. We still bog ourselves down with ridiculous contracts and a litany of taxes. I’m no libertarian, but sate and local governments in the US have to get out of the business of regulating communication outside of ponying up money for infrastructure. Cel phones have transformed the continent here.

3. Businesses are way too small. Most are just one person operations that work with no budget, no access to capital and no ability to expand. To make matters worse, the litany of tiny, tiny businesses means that proprietors can’t take advantage of bulk discounts, and, even worse yet, dilute the available market share so thinly that they can’t depend on a regular customer base. Prices depress to rock bottom levels, to the point where businesses are selling goods for less than wholesale, simply in the hopes of keeping customers. The model is exciting, but wholly unsustainable. Because people are so used to working for nothing and have few other options, it continues. It is contexts like this where the free market fails everyone. Better regulation, licensing and standards would improve the situation for everyone, but that’s a tall order in politically troubled areas like Kenya.

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