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Mutua, 26, is the founder and CEO of his own small informal entertainment business, an enterprise he’s been building from the ground up for the past six years. His company provides equipment for weddings, political rallies, corporate parties and other events throughout the city. As such, Mutua often operates in the Nairobi’s formal realm, a side of the city that might otherwise be closed off to him. While older generations of Kenyans continue to hope that their sons and daughters find formal employment, those sons and daughters are becoming disillusioned with their chances – and rightly so.
“If you look at life in Nairobi, things aren’t very certain,” says Mutua with notable understatement. “You might have a job today, tomorrow you might be unemployed.”
Such is life in the capital city of East Africa’s economic powerhouse. But the burden of unemployment isn’t spread equally in Nairobi – it rests disproportionately on the shoulders of the youth. Due to demographic shifts that have created a massive youth bulge, today one-third of the country’s population is between 18 and 34 years old – far more young people than there are jobs to support them, according to the United Nations Development Programme (UNDP). The situation grows worse every year: According to the World Bank’s Kenya Economic Update, while 800,000 youth reach working age annually, only 50,000 new formal modern-wage jobs are created. It’s because of this imbalance that 80 percent of the country’s 2.3 million unemployed are between the ages of 15 and 34.
Faced with this grim scenario, Nairobi’s youth are flooding into the informal sector, which, in 2011, created six times as many new jobs as the formal sector did. For youth like Mutua, the informal sector is a godsend – its lack of regulation and taxes enables young entrepreneurs to attain a degree of prosperity outside of the formal economy. Indeed, businesses like his, with staffs of employees and ambitious expansion plans, could uplift the country as a whole, creating jobs that the formal realm has failed to generate.
But for young Nairobians who don’t possess the innate savviness of a Daniel Mutua, much informal work remains an unskilled, low-paid, day-to-day grind. For these young people, what’s missing is a system that cultivates success in the informal realm: Educational institutions geared toward the informal sector, and government programs that reflect Kenya’s current economic reality.
Such initiatives have emerged only gradually and sporadically. In 2006, the Kenyan government launched the Youth Enterprise Development Fund (YEDF), which provides training and seed funding for young people to start their own businesses. And this year, the Technical and Vocational Education and Training Act was passed, aiming to expand and improve the country’s system of vocational institutions, which impart practical, entrepreneurial skills.
But as of now, the percentage of Kenyan workers with a formal job stands at about nine percent, down from 13 percent in the early ’70s, a trend that will probably continue. Despite the country’s steady economic growth, the UNDP says it’s unlikely that the number of formal jobs will increase significantly in the near future. For Kenya to succeed, it will need more Daniel Mutuas – lots of them. That means creating the conditions necessary for more young people to pursue that destiny. At the moment, an informal economy fueled by young entrepreneurship looks like the country’s best hope.
Bridget Achieng is a young woman you notice.
The day I met the young designer she wore long, fake eyelashes, bright blue skinny jeans and a skin-tight, gleaming white blazer. Tattoos crept from beneath the jacket, and jewelry dripped from her chest. At 23, Achieng has built a fashion empire in Nairobi. Her clothing and jewelry have been showcased at Fashion Weeks around East Africa, and she dresses some of the country’s biggest media personalities. For two seasons, she styled all of the contestants on East Africa’s version of American Idol, a smash-hit TV show called Tusker Project Fame.
“This was always a passion,” she says. “I used to collect things when I was young and put them together. When I’d wear them, everyone would say, ‘This is so dope, this is so dope. If you don’t want to give it to me then sell it to me.‘”
In her shop in downtown Nairobi, chunky gold bangles compete with oversized pendants for customers’ attention. Neon-colored dresses and vintage sunglasses dangle from the ceiling. Achieng makes about two-thirds of the clothing and jewelry herself; the rest she has friends bring from abroad or finds while scouring Nairobi’s many second-hand markets.
“I love what I’m doing right now. I thought it was going to take me a long, long time, but it happened so fast. I come from a very humble background,” she says, dragging out verrry for emphasis.
You wouldn’t know it from watching her interact with Nairobi’s well-heeled citizens, but Achieng grew up in Kibera, the city’s largest informal settlement. At 17, she was expected to marry an older man she didn’t know. Instead, she got a job as a housekeeper and moved into a room in Kibera for $15 USD a month. A couple years later she got a new job assisting a woman at a law firm. It paid $50 USD a month, and the woman paid for her to take classes to study hotel management, which Achieng hoped would lead to steady employment. But even having completed high school and some vocational classes, she still couldn’t find a formal job. “In Nairobi, you have to know someone who knows someone to get a white-collar job,” she says, “or you have to pay someone to give you a job.”
Meanwhile, on her way to church every Sunday, she would walk through Toi Market, the bustling hub of Kibera’s informal economy. It’s a place where spidery canopies wrought from old burlap sacks cast shadows over endless stalls of merchandise. T-shirts that once stocked the shelves of H&M and Old Navy dangle from wire hangers. Plucked from crates of donations from the West, they have failed as charity but succeeded in creating jobs for those who resell them.
Achieng was inspired. She took her life savings of $60, bought some supplies and started making jewelry out of her bedroom. Then she would walk through upper-class Nairobi neighborhoods and stop anyone who she thought could get her a sale. Slowly, she earned repeat clients. As word began to spread, invitations to fashion shows arrived in the mail. Then Tusker Project Fame caught wind of the girl who was dressing celebrities out of her tiny bedroom in Kibera. “The told me that my jewelry was so unique and good for stage performance because it was so big and bold,” she says. “They had been auditioning stylists for a week but they hired me on the spot.”
A year ago, Achieng opened her shop in downtown Nairobi, now a full-fledged member of the fashion economy. She moved herself, her mother, three of her siblings and three of her cousins to a safer neighborhood on the outskirts of Kibera (and into a home that has space for her 300 pairs of shoes). She fully supports all of them and has even hired her mother, who is trained as a tailor, to make clothes for her.
It’s the kind of Cinderella story that generates magazine pieces like this one. But even though Achieng’s stratospheric rise makes her an outlier, her business development holds a lesson about the potential percolating in Nairobi’s informal sector.
The UNDP calls outfits like Achieng’s “business household enterprises.” (They’re also often called “non-farm household enterprises,” or NFHEs). Like Achieng’s early efforts, these businesses often have no fixed location and don’t pay taxes. By the World Bank’s definition, “They consist of self-employed (or own account) workers and unpaid family members engaged in non-farm business activities at the lower end of what is often characterized as micro, small and medium enterprises.” NFHEs make up a significant portion of Kenya’s economy. About 1.7 million families owned at least one household enterprise in 2004/05, and a little more than 230,000 owned more than one, meaning that one in every four households owns at least one enterprise, making such businesses responsible for about five million jobs in Kenya, according to the UNDP.
These enterprises offer huge potential to Nairobi’s young people, who can make up to seven times more money running one than they would in a temporary, transient, unskilled informal job. Young Kenyans are increasingly recognizing this and taking advantage of it – today, one-third of household enterprises in rural areas and half of household enterprises in urban areas are owned by young people.
This is happening at a critical moment. Kenya is urbanizing fast: Its rural population has fallen from 90 to 70 percent since 1950 and is expected to drop to 50 percent by 2050. This is the moment in a country’s development when such enterprises can most dramatically boost an economy: “Nonfarm household enterprises are… most important in the period of transition, when agriculture is declining in performance but before the formal sector becomes established,” according to a 2002 World Bank working paper.
“If somebody told me to send out my CV now, I wouldn’t do it… Within a very short time I’ve achieved a lot of things I don’t think I would have in the formal sector.”
“If somebody told me to send out my CV now, I wouldn’t do it… Within a very short time I’ve achieved a lot of things I don’t think I would have in the formal sector.”
As such, the Kenyan government and its development partners are taking the potential of these enterprises seriously. “The government has come up with several measures to try to expand young people’s opportunities in the informal sector,” says Benson Muthendi, the public relations officer for YEDF. He notes efforts “such as the rehabilitation of vocational colleges, the expansion of tertiary education… and the Small and Medium Enterprise Fund and the Youth Enterprise Development Fund” as critical efforts in supporting the trend of youth entrepreneurship.
YEDF is probably the most prominent of these initiatives. Part of the Ministry of Youth Affairs and Sports, it gives extremely low-interest loans to young people to start small- and medium-sized enterprises. Between the ages of 18 and 35, these are people who are often shut out of the formal banking system.
“Our goal is to change young people from being job seekers to job creators,” says Muthendi. To complement its loans, the fund also provides mentorship, entrepreneurial training and links to larger-scale enterprises.
“By 2012 it had reached 158,000 youth enterprises and… it has also trained slightly more than 200,000 in youth entrepreneurship and assisted about 1,800 young entrepreneurs to market their products and services,” says Dr. Jacob Omolo, a lecturer in the Department of Economics at Kenyatta University who has also worked as a consultant for the Kenyan government and the International Labor Organization (ILO).
The Small and Medium Enterprise Fund, formally known as the Fund for the Inclusion of the Informal Sector, is another effort by the Kenyan government to exploit these opportunities. Launched in 2001 by President Uhuru Kenyatta when he was still Minister of Finance, the Kenyan government partnered with several major Kenyan banks to make credit more readily accessible to household enterprises.
When the fund was launched, Kenyatta wrote in The Star, a Kenyan newspaper, that “the Government recognizes the critical role that small and micro enterprises play in the development agenda. The Government also acknowledges that a significant barrier to the growth of MSEs, most of which are owned by the youth, is access to affordable credit…The Fund, therefore, aims to meet the twin objectives of addressing youth unemployment and encouraging growth of micro and small enterprises (MSEs) as key drivers of economic growth and development.”
But throwing funding at a population that hasn’t been prepped to properly use those funds speaks to another challenge Kenyan youth face – one that starts years earlier, before small businesses are even a glimmer in their eyes.
If you’ve ever been to raucous Kibera, you might be surprised to learn that it has a quiet side. You’ll find it at the end of the main road, just before the tin-roofed structures drop off into the greenery that used to run thick in this area. Nestled into intricately carved hedges, a carefully painted menu sits on the side of the road marking the spot where Koor Osman has carved out his own little chunk of the informal economy.
At KO Restaurant, Osman directs his ten employees and chats with his customers. Some lounge on the outdoor veranda, enjoying tea and coffee in the mid-morning sun, while others rush through, grabbing mandazi (doughnuts) or chapati (fried flatbread) on their way to work.
Osman’s round, ruddy features and easy smile don’t scream “cunning entrepreneur,” and Osman never really pictured himself as a businessman either. And yet, he laughs, “I’ve never been ‘employed’ in my entire life.” He completed primary and secondary school, and went on to study travel consulting at a small college that he thought would lead to a job selling plane tickets at a travel agency.
“We had to learn all of the capitals around the world and the airlines that flew to them. I still know most of them,” he says. “Rome, Italy. Berlin, Germany. Oslo, Norway… I was watching a movie the other day and they mentioned being in Bogota, and immediately I knew that they must be in Colombia!”
But despite liberally distributing his resume and talking to everyone he knew in the industry, Osman searched for two years without ever finding so much as an unpaid internship. By 23, with a wife and child, he was becoming desperate to make ends meet. So he rented a popcorn maker and started selling small bags on the side of the road for 10 cents apiece.
“Small business in Kibera hasn’t really been targeted by the government to pay taxes so they’re really making money,” he says. “I know people with really small businesses who are making a lot more money than they would in the formal sector.”
With time, he saved up enough money to buy his own machine and started paying younger boys in the neighborhood on commission to sell his popcorn for him. Soon after that, he opened a small roadside stall selling French fries. The fry stand became a store front, which grew into a full-blown restaurant whose menu he expanded every year. Now he has over fifty customers per day and a successful catering business that serves weddings, special events and workshops for local and international non-profits.
Osman dreams of expanding his business to additional locations, and is exploring other markets. He tells me he’s considering setting up a sort of mini gas station in Kibera where he would sell petroleum for motorcycles and household use.
“I stopped even thinking about sending out my CV,” he says. “If somebody told me to send out my CV now, I wouldn’t do it… Within a very short time I’ve achieved a lot of things I don’t think I would have in the formal sector.”
But the reality is, not everyone is a natural born entrepreneur like Osman and Achieng, and it isn’t laziness that blocks most young people from starting up a successful business. There’s a yawning education gap that leaves young middle-class Kenyans floundering for years looking for formal employment, and lower-class Kenyans stuck in low-wage, unskilled informal jobs.
While Kenya’s population growth has slowed and its economy is growing steadily, the UNDP report says that “even under reasonably optimistic expectations, regarding growth and employment creation, the mix of jobs will not dramatically shift towards formal jobs by the year 2030.” The Kenyan educational system, however, continues to churn out young people ready for formal employment, equipping them with briefcases full of diplomas and accreditations that do them little good.
“There’s no [formal] employment in Kenya,” says Osman. “People are highly qualified – they have their diploma but they can’t find a job… I’ve met many people who have degrees and even master’s, and they’re not employed.”
This isn’t entirely true – unemployment rates are relatively low for college graduates. But that’s only a small fraction of the population, and those who only make it through primary or secondary school are hobbled by an outdated and externally imposed system that holds little relevance in today’s Kenyan economy. “When you get down to it, the gist of the problem is the education system,” says David Maina, a consultant at the Dutch development organization SNV and the former head of enterprise development and linkage schemes at YEDF.
This system was put in place by the British colonial government and designed for a population that would continue school through a four-year university. Job-specific training does not come until late in secondary school or college, and even then, it’s usually training for the type of white-collar employment that British youth would have encountered in the United Kingdom.
Reforms have been attempted, the most notable of which was former President Mwai Kibaki’s decision to make primary school free of charge to all Kenyans in 2003. Once that happened, primary school enrollment doubled, and while these schools remain overcrowded and strained for resources, 92 percent of Kenyans are now able to enroll – a noble effort, indeed. But these numbers drop dramatically when it comes to secondary school, with only 24 percent attendance, and even more when it comes to higher education, with only a two percent attendance rate.
Even students who make it beyond primary school are often poorly served. The public system hasn’t evolved much since colonial times and still relies on techniques like rote memorization, hardly preparing students to be the innovators that the informal economy demands.
“There’s definitely a problem with the quality of people coming out of the education system. I have been involved in hiring people and quality of applicants is a problem,” says George Waigi, a national program coordinator at the ILO. “If you hire someone, they want you to give them a template to work off of. There’s no ability to think outside of the box.”
What’s more, even profitable inside-the-box abilities are culturally discouraged – skills that might help a young man or woman create a nest egg in a country where 14 percent of formal jobs (and an additional 1.4 million informal jobs) are in manufacturing. Kenya has over 700 vocational institutions in the form of youth polytechnics designed for students who do not have the finances or skills to move onto secondary school and complete the education needed to have a shot at formal employment. But white-collar employment remains the yardstick of success in Kenyan society.
“The culture perceives that the bright students go to secondary school and the not-as-bright go to polytechnics,” says Maina. “No one wants to be seen at the polytechnics so people avoid this as a destination.”
According to Maina, the Kenyan government has so far failed to invest in these institutions, doing little to combat their negative image or adapt them to better fit the needs of Kenyan youth. “How do you make it look luxurious? How do you make people feel proud to be where they are?”
Where the government has failed, private institutions have stepped in, creating a huge for-profit industry around higher education in Kenya. These institutions are private colleges aiming for young people like Achieng and Osman who are unable to attend four-year universities, but strive to attain the higher education they believe will lead to formal jobs.
“If you look at yesterday’s paper, 60 percent of the ads are for universities. Most of them are looking for this group of students,” says Maina. “Higher education in Kenya has become a money-making business.”
This private-education sector is still largely unregulated. While there are reputable private institutions, hundreds more offer low-quality education and target poor students who can’t afford anything better. These students end up investing precious funds in sub-par educations that rarely result in good job prospects.
“They shouldn’t show one success story, they should show hundreds. They receive one billion shillings. Where is that money going?”
“They shouldn’t show one success story, they should show hundreds. They receive one billion shillings. Where is that money going?”
Despite past failures, the Kenyan government is working to make gradual, but potentially significant changes to its education system.
Recognizing the failures of the public polytechnics to serve Kenyan youth, the government has recently been working to revitalize this system, including passing the Technical and Vocational Education and Training Act this year, which seeks to expand and revitalize the nation’s youth polytechnics. It has also allocated funding to subsidize the tuition of these institutions and is working to shift their negative image – for instance, there is now a path for students to move on to a university education after graduating from a polytechnic, helping to fight the stigma of the schools as a dead-end.
The number of young Kenyans enrolled in youth polytechnics has increased from 85,200 in 2008 to 127,691 in 2012. There has also been an important shift in the curriculum that provides students not just with employable skills, but also with the skills to create their own jobs. Youth polytechnics now play a critical role “in promoting youth entrepreneurial skills development as well as equipping the youth with employable skills…It gives you a two-way opportunity, one to venture into self-employment, and two, to venture into wage employment,” says Omolo.
Omolo is more optimistic than Maina about the potential of these institutions. “To me the perception is changing,” he says. “Let’s not say that it has changed, but to me I want to use the term that it is changing. People are now seeing that formal employment is actually shrinking and polytechnics are playing an important role in increasing opportunities for informal employment.”
The government has also begun the process of instituting important reforms to Kenya’s higher education system and of halting the proliferation of colleges that are providing substandard education to Kenya’s youth. Last year as part of the Universities Act, it established the Commission for University Education, whose goal is to provide quality assurance of all colleges and universities by establishing standards for the qualifications of staff, mandatory curriculum reviews and structures to better promote, coordinate and regulate universities across Kenya.
“I am hopeful that the establishment of the commission will improve quality. Even the mere fact that they are able to compel universities to submit to their programs is a major step,” says Omolo, adding that the day prior to our conversation, the commission had given notice to a private university that it would be shut down if it didn’t comply with certain standards. “It’s going to be less and less possible for institutions of higher education to be just started without any regard to basic guidelines.”
Solely improving Kenya’s school systems, however, won’t be sufficient. Those schools, and the government systems that complement them, need to reach the right people. As it happens, those are often the toughest people to reach.
Daniel Mutua didn’t start Next Level Events without help. He received his first loan from YEDF when it started in 2006, and has since received three additional loans.
For someone like Mutua, YEDF is an effective program. He’s the kind of guy who’s got a mind for business, always mulling his next idea. (At one point during our conversations, he mentioned he was thinking of getting into the fish-farming industry: “It can’t be that hard,” he said casually. “Start-up costs are low, the risk is minimal and demand is really high as Lake Victoria’s population of fish is depleted.”)
But for someone without such business acumen, polished demeanor and language skills, these types of programs, even with the best of intentions, often remain out of reach. YEDF wasn’t even Mutua’s first loan. He learned about it from a bank that had previously given him a loan for his business. Critics say this is the flaw in these programs: They mainly work for youth who already have the means to succeed.
“The youth we hoped would come and benefit were the youth who were disadvantaged and lacked opportunity,” says Maina, who worked for YEDF for a year and is outspokenly critical of its approach. “The people who found out about it were young people leaving university and college who knew how to speak English and had the skills to apply for a loan. The people we were targeting didn’t know about it. They didn’t know how to speak English, they were scared of the government… We attracted the people we didn’t mean to attract.”
Maina left YEDF several years ago, convinced that its approach needed revision. “They shouldn’t show one success story,” he says when I bring up Mutua. “They should show hundreds. They receive one billion shillings. Where is that money going?”
In Kenyan politics, that’s a question you hear often. Another government foray into the youth unemployment problem offers one of many possible answers to it.
In 2009, the Office of the Prime Minister launched Kazi kwa Vijana, an initiative focused on creating jobs for unskilled youth. It was a kill-two-birds solution, elegant in its simplicity: Young people would build roads, create irrigation systems and assist with waste collection, improving the country’s cities and infrastructure while learning the skills that could get them a job outside the program.
In 2010, the program received a $43 million loan from the World Bank. When the Bank audited the program the following year, the results were disturbing even to foreign aid’s harshest critics. One-third of the money set aside for it was nowhere to be found, drained into a bottomless funnel of salaries for employees that didn’t exist, lavish retreats that never happened and payments for services never rendered. The World Bank demanded that the money be repaid and the program has since faded into hushed obscurity.
It’s a familiar story in Kenya, which frequently finds itself near the top of “Most Corrupt Countries” lists. Indeed, effective government support could be the missing link in the youth unemployment problem. The issue played a major role in Kenya’s recent presidential election. The winner of that contest, Uhuru Kenyatta, has promised over $70 million in interest-free loans for youth and women, and called for mandatory allocation of one-third of government contracts to young people.
One of the biggest barriers to solving the youth unemployment problem, however, is that despite the funding thrown at it, there remains a lack of rigorous research into the most effective approaches. The most solid conclusion that can be made is that while formal employment is important to promote, the realities of Kenya’s economy demand that youth are better prepared to become their own informal innovators.
“From my experience that might be the only option. I don’t personally like it very much — there’s a lot of reasons that the average person doesn’t make a very good entrepreneur — but in some countries it is difficult to create enough jobs in the formal sector,” says Nathan Fiala, a post-doctoral Fellow at the German Institute for Economic Research who is currently involved in a study on youth employment generation in neighboring Uganda.
Fiala’s work is turning up some tactics that might be applicable in Kenya. For instance, for a long time, microfinance was considered a magic bullet, but its long-term effectiveness has come into question. “There’s not a lot of evidence yet that microloans improve business,” says Fiala. “They are good for smoothing consumption – people eat more consistently when they get these loans – but the judgement is still out on whether loans are going to work for the long term.”
A more effective alternative, according to the midterm results of Fiala’s study, could be grants, which his research suggests have a higher potential for impact. “There is strong evidence that cash grants can have high returns,” he says. “It’s not always a very popular idea, handing out free cash, and I want to be cautious about what can happen in the broader economy when you’re handing out free money, but the preliminary evidence is that people use cash well.”
There’s also been a shift in thinking on skills training – namely that it needs to be paired with funding to really work well. Entrepreneurial skills are important, says Fiala, but “there’s not very good evidence on skills training in itself. If you don’t have the money to buy the tools or materials you need, you still can’t do anything.”
This is why the programs that have had the greatest impact so far have been ones with integrative approaches that include access to finances combined with skills training and social support. “My advice to the Kenyan government would be, don’t just focus on economic programs to solve social issues. You also need to develop social programs: Jobs and some kind of psychological or social support,” says Fiala. These programs also require a specific focus on low-income Kenyans and must take gender and class into account to avoid YEDF’s problem of being accessible mainly to middle-class Kenyans.
The ILO has partnered with the Kenyan and Japanese governments to implement a program called Youth Employment for Sustainable Development that uses such an integrative approach. Like the Kazi kwa Vijana initiative, the program trains and employs Kenyan youth to construct roads using locally available material, providing them with jobs while simultaneously upgrading Kenya’s infrastructure. What makes it different from other programs that focus only on skills training or temporary employment, however, is that it also trains the youth to be entrepreneurs, incorporating business training and facilitating the formation of networking groups among the youth. Essentially, it trains them to be contractors, rather than just casual laborers.
“Small business start-up and management requires a number of solutions, and hence a more integrated approach accelerates the time for youth to transition to employment,” says Jane Maigua, the national project coordinator for the program. If it works, in the future the government could contract these youth groups to build the roads instead of hiring outside contractors. “I think it is a very good program,” says Omolo. “It has very high potential for massive job creation.”
None of these programs, however, can fully succeed without good governance. With the money Kenyan firms pay in bribes each year, 250,000 people could be hired, according to the World Bank’s Kenya Economic Update. As long as government programs continue to come with the expectation of cronyism and graft, even the best-designed solutions will be limited in what they can achieve.
“With good governance things will really change for the Kenyan people,” says Koor Osman. “The funds will go to the proper place and people will be more interested in investing in Kenya.”
Investment in people like Osman, Daniel Mutua and Bridget Achieng seems like a safe bet. Sitting with Achieng in her shop in downtown Nairobi, I watch her effortlessly converse with a friend from Kibera and another woman who is the star of Nairobi Half Life, perhaps the biggest movie ever to come out of Kenya. “I’ve met different people, I’ve learned how to understand people in a different way,” Achieng says of her work. “You meet people from all different genres.”
In fact, Achieng’s tiny shop seems to be one of those rare corners of Nairobi where people from different classes rub shoulders without fear or discomfort – sometimes, by hopping classes, you give other people permission to do the same. By lowering the barrier for entry into the country’s informal economy, the entrepreneurial drive of Kenya’s youth could change not only the economy, but the very culture of their country.
This story originated from NextCity
Originally posted 2015-09-15 13:19:32.
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