Kenya needs sound business policies

August 12, 2008

, NAIROBI, August 12 – The world over, practical experience and academic research both point to the central role of entrepreneurs in the process of economic growth and to the importance of public policy in creating the conditions under which entrepreneurial companies thrive. This can only be achieved if there are clear legal rules and well outlined policies in the regulation of enterprise.

At independence, Kenya was at per with the likes of China and the Koreas in economic development and living standards. That barely forty-five years down the line we have to turn to these countries for financial aid is embarrassing and calls for an urgent review of our national economic policies.

A closer look at our economic structures and institutions, both governmental and private, exposes a mesh of confusion and jumbled up systems that clog the wheels of our economy; there is a mix-up in the institutions that are regulating entrepreneurship. The many ministries created to satisfy the expanded coalition government did not help the situation either.

The result is that we have sacrificed economic expedience at the altar of selfish political satisfaction. The bloated Cabinet that has resulted in overlapping functions throws another spanner in the works of an already jumbled up economic environment. The question that begs for an urgent answer is whether we are providing the correct remedy for our current economic woes.

The Small and Medium size Enterprise (is it the same as Jua Kali?) sector is the vehicle in which the Kenyan government wishes to travel towards economic prosperity. It is however the one sector that is shrouded in confusion.

If you asked me under which ministry the SME sector falls in Kenya, my honest answer would be that I don’t know. The Jua Kali sector has been touted to be under the Ministry of Labour. But then one would think that entrepreneurship would better be concentrated in the Ministry of Trade and Industry. The problem is further compounded by the Ministry of Youth and Sports, through which the Youth Enterprise Fund is being disbursed, and the Ministry of Gender and Children Affairs where, again, there is a Women’s fund to help them set up business projects.

One would argue that there is no problem in such a setting as it facilitates easier access to government funds. But then, there seems to be a clear lack of co-ordination among all these Ministries such that it is difficult to monitor entrepreneurship progress among the different groups as well as sustain the initiated projects. After all, entrepreneurship as it stands now in Kenya knows no gender or age boundaries! Such institutions are susceptible to being reduced to welfare associations for use when elections are around the corner, with the funds meant to boost entrepreneurship being dished out in the form of political hand-outs. The tiresome bureaucracies we create hamper efficiency and enhance corruption, therefore derailing economic growth.

A look at our dispute resolution system also presents a similarly despicable scene. In the commercial world, it is inevitable that disputes will occasionally arise which will need to be dealt with as effectively and efficiently as possible. In Kenya, the main dispute resolution institution is the courts. However our courts are reeling in backlog of cases, greatly hampering the administration of justice. And even so, litigation has never been the best dispute resolution method for business. Like the Executive Officer of the Chartered Institute of Arbitrators, Kenya chapter Stephen Ondiek recently put it, "Those who are not lawyers often find themselves lost in the courts. They would rather not be there, if they can help it".

Entrepreneurs definitely lack the time to go through the intricate and rigid Civil Procedure to resolve their internal disputes. But then, even our alternative dispute resolution system is shrouded in an institutional confusion. Entrepreneurs do not know where to turn to for arbitration of their disputes; is it Chartered Institute of Arbitrators, Chamber of Commerce or the mostly money – minded advocates through Law Society of Kenya? The major strength of Alternative Dispute Resolution is that it gives people in a given profession an opportunity to seek a neutral arbiter, well versed in that particular profession, for quicker, amicable resolution. But in Kenya, it is becoming difficult to separate the members of the legal profession, keen on making their catch through court brawls, and an Alternative Dispute Resolution system.

The solution to this country’s current problem, especially in economic development, lies not in the introduction of more institutions, but in development of sound economic policies. Most developed economies and the rapidly growing ones like China and the Koreas have long come up with an ‘Entrepreneurship Policy’ specifically to guide the development of entrepreneurship. A clear policy, specifically tailored for entrepreneurs and industrialists, backed by sound legislations would have the Ministries of Youth and Sports, Gender and Children Affairs, Nairobi Metropolitan and that of Trade and Industry combined into a single Ministry.

Vision 2030 and the attainment of Millennium Development Goals will remain a mirage for as long as we keep offering institutional solutions to systemic problems. Sound legislation covering the finances granted to entrepreneurs, create a good business environment and facilitate quick and non adversarial resolution of entrepreneurship disputes should be the starting point.

Then along this smooth legal tarmac, we should be able to drive an equally roadworthy Entrepreneurship policy that would see this country arrive at the much desired Vision 2030. This is a feat that can only be achieved if all players are actively involved. A sustainable development University-industry-Government alliance is long overdue in this country. Valuable ideas and thoughts have gone untried because the thinkers have no means of implementing them and those with the means either have no ideas or their ideas are all misplaced.

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