Business start-ups are companies that are in the first stage of their operations. These companies are often initially bank rolled by their entrepreneurial founders as they attempt to capitalize on developing a product or service for which they believe there is a demand.
The following is a term paper that i wrote during my first year at Daystar Universty for e112. I find it very informative and relevant to the current unemployment issues. Hope you enjoy and get informed while reading it.
Inflation, this is the direction Kenya is headed if it does not embrace business start-ups in the country. Thousands of people are unemployed while thousands more graduate from educational institutions every year. The country is not able to create jobs for them hence, they start practicing illegal activities like theft and robbery which will eventually destroy the country. The established companies can no longer be able to create new jobs because they have exploited their expansion and development gaps unlike business start-ups. Business start-ups are inevitable if Kenya is to create jobs for its citizens.
OVERVIEW OF BUSINESS START-UPS IN KENYA
There are thousands of entrepreneurs that apply for incorporation of a firm or company in the registrar of companies every day in Kenya. However, the number of existing business start-ups is way below 10% of the incorporation applications. This is due to the long processes, policies and guidelines that one has to go through to register a company (group, 2008). Due to this, most people don’t manage to finish with the registration of their companies. This has resulted to low number of business start-ups in Kenya hence, very few jobs are created by the registered start-ups. Due to this there is a high rate of unemployment, insecurity, low living standards and many people living below poverty line.
Reforms have been introduced in the past years to make it easier for business start-ups but in vain. Some reforms made it easier to start and do business in Kenya where us others made it harder. The following are reforms that made it easier to start and do business in Kenya. Kenya made paying taxes faster for companies by enhancing electronic filing systems. It also introduced a case management system that will help increase the efficiency and cost-effectiveness of commercial dispute resolution. To ease business start-up the government reduced the time it takes to get the memorandum and articles of association stamped, merging the tax and value added tax registration procedures and digitizing records at the registrar of companies. In addition it speed up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue Authority’s electronic data interchange system for customs clearance.
Kenya has increased the cost of dealing with construction permit process. It improved its access to credit by passing and implementing a law on credit bureaus that will provide a framework for a regulated and reliable system of credit information sharing. Improvement at the registry and better communication between relevant agencies resulted in substantial time reduction. Kenya extended the opening hours of customs and port authorities and reduced the number of inspection points between Nairobi and Mombasa. It also introduced an electronic system allowing traders to submit their documents online. A few years ago an ambitious licensing reform program was launched which has led to the elimination of 110 business licenses and the simplification of eight, reducing the time and cost of obtaining building licenses and registering a company.
Kenya made obtaining construction permits easier by implementing licensing reform, which simplified the procedures. Also, the government improved the efficiency of permit issuance. The cost of telephone connection has been reduced as well. The introduction of competition among land valuers (allowing private practitioners) led to a faster turnaround of one week instead of one month for a land valuation. In addition, private credit bureau also deepened its database coverage by adding retailers and utility companies as providers of information.
However there are other reforms that made it more difficult to start or do business in Kenya e.g. Kenya increased the administrative burden of paying taxes by requiring quarterly filing of payroll taxes. It is also clear that most of the reforms that were conducted benefit established businesses and not start-ups. In addition, despite the many reforms that were to make it easier to start and do business in Kenya, the business start-ups and all the stake holders in the business sector find it hard to start a business because the reforms are not effective. The officials responsible in all aspects do not follow the regulations nor do they take the reforms that were made seriously. Luck of a monitoring authority has made it easier for the officials to practice nepotism and completely ignore the rule of law when it comes to business start-up.
The reforms that were made are of no use if they are not implemented. It takes more than fifty days to register a company in Kenya at a cost of over thirty thousand shilling. The policies, process and guidelines to starting a business are too complicated which makes it hard for an individual to start a company. Compared to other countries Kenya is rated at 30% when it comes to supporting business start-ups. Below is a detailed summary of the bureaucratic and legal hurdles faced by entrepreneurs wishing to incorporate and register a new firm in Kenya? It examines the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy’s per-capita gross national income.
ROLE OF BUSINESS START-UPS IN KENYA’S ECONOMIC DEVELOPMENT
The world economies are getting competitive by each day, this is posing a challenge to African economies especially Kenya. It requires a game changer, a strategic plan to aggressively compete with the rest of the countries worldwide. Business start-ups are the perfect way to develop the Kenyan economy. The contribution of business start-ups to the development of the Kenyan economy is elaborated as follows.
First, business start-ups will create millions of jobs. Kenya is a young economy, with almost 70% of its population being young people mostly the youth (18-35 years). This population is mostly dependent on the elderly people to provide for their needs who comprise of only 30% (group, 2008). It’s a time bomb, time will come when the country cannot be able to support the huge unemployment rates and the country will blast into chaos. But this could be avoided if the government tapped more into start-ups which intern will create jobs hence, the development of the economy.
Start-ups will also promote the lifestyle of the Kenyan people. Many companies that will be formed will create thousands of jobs from which the employees will be able to support their families. The living standards will improve; in addition some start-ups will offer goods and services that will improve the livelihood of the Kenyan people. This will see the economy gaining its strength to stability.
Having many start-ups means having thousands of companies breaking their way to growth and development, Kenya will be able to stabilize its output and minimize on imports. This will make the country self-reliance, stable to provide for its people and avoid external intrusions in the name of donor funds. On top of that, the country will also have a lot to export which will increase its revenue hence, the development of the economy.
To say further, Start-ups will also come up with solutions to problems facing the Kenyan people ranging from health, agriculture and even insecurity. Many start-ups will empress technology to solve the problems within the community like applications to detect bombs, an app to teach farmers on how to grow crops or even a medical system to let a person know their medical condition. Through these solutions, people will have time to focus on working and developing the economy.
Poverty will be reduced among the Kenyan people if start-ups were fully embraced. Through job creation, many people will be able to provide for their families. This will help improve the lifestyle of the Kenyan people rapidly hence, developing the economy brick by brick.
Start-ups will also solve the education problem within the country on a very high margin. Many start-ups are impressing technology to come up with ways to deliver education to every part of the country. An educational app that will have all the text books, past papers, online courses and even quizzes will help student’s country wide access education much needed but they don’t have access to. This will intern produce hard working citizens who will contribute in the development of the country’s economy.
Inadequate government support is the main cause of low number of business start-ups in Kenya in that the funding allocated to start-ups is too little, the laws do not support rapid growth of start-ups and also do not safeguard them.
CAUSES OF INADEQUATE GOVERNMENT SUPPORT
Corruption is the main cause of inadequate government support to start-ups that could save this country from inflation. The government organs in charge of dispatching money to start-ups miss use the funds by injecting the money in their own personal projects and selfish interests. Some group of people have also managed to find their way to the top management and corrupted them against funding the start-ups due to fear of losing their market share and monopoly of the industry. On top of that, the top fund management specifically releases the money to people that they know or prefer (nepotism at its best), this has denied a chance to people probably with much better ideas from receiving the funds much needed and developing the economy.
Knowing that the Kenyan economy is still young, it’s highly possible that the government lacks enough funds to support start-ups and other functions within the government. The state has been in a lot of dept. The struggling economy has not made it easier either which makes it hard to allocate the few resources to the hundreds of departments all-over the country.
Ignorance of the importance of business start-ups, it is also possible that the government does not realize the importance of business start-ups. It does not see the big picture yet; the small businesses that start in the garage end up being the multimillion dollar companies that create millions of jobs. This could also be blamed on the government strategies which do not allow the government to see the long term goal. Usually the politicians focus on short term goals which will see them elected term after term instead of building a strong foundation for the coming generation to develop the economy.
The government also prioritizes other issues leaving out the start-ups. For example, matters pertaining security, international relations and infrastructure have been given a front row seat in the fund allocation room. These are the sectors that are mostly considered more important forgetting that an economically unstable country is by itself a grave danger to its stability or survival. Start-ups are both short and long term builders of the economy and hence should be given maximum support from the government.
RESULTS OF INADEQUATE GOVERNMENT SUPPORT
Low economic growth will be the ultimate result if the government does not provide adequate support to start-ups. A huge part of the economy will be influenced by the business start-ups through provision of goods and services to the Kenyan people hence, being a major stake holder in economic development of Kenya. If the government does not provide adequate funding, there will be less or no start-ups at all. This means that the Kenyan economy will be on traffic or even stagnant.
If the government does not provide adequate support to business-start-ups, most of the goods and services will have to be imported because the country does not have businesses that over the services or produce the goods. This will make the country depend more on imports than its exporting. This is a tornado by itself, in case of instability in the world or inflation, Kenya will be held hostage to the situation and it will not be able to provide for its citizens. This will create insecurity in the country, increase in crime e.g. robbery which will in the end drift the country apart.
High cost of living, this is as a result of increased prices for goods or services due to scarcity. The service providers and good sellers will want to make more profits out of the circumstance hence, elevating the cost of living. Without many businesses or companies to provide the goods or services, the country is prone to a dead end. The high cost of living will trigger riots, theft and robbery, murder, and even a revolution to overthrow the government e.g. the French revolution of 1879 in which the peasants and the middle class rose to fight against the first class group of people who had monopolized every resource in the country.
Inadequate government support for business start-ups means less or no business start-ups at all. Start-ups constitute the highest number of jobs created in any country worldwide (Paul J. A. Robson, 2009). If they luck adequate support, few or no job will be created. This will increase the number of unemployed Kenyans in the communities nationwide as thousands continue to graduate from educational institutions. Idleness will influence illegal activities like theft in the fight for survival.
SOLUTIONS TO CHALLENGES OF INADEQUATE GOVERNMENT SUPPORT
There are ways by which the start-up founders and the stake holders in the business start-ups sector as a whole can face the challenges of inadequate government support. Among them is the sensitization of the government on the importance of business start-ups. The government prioritizes other sectors and issues before business start-ups because it does not see the (big picture) importance of business start-ups. The stake holders need to come with a detailed response to why the business start-ups should be given equal support to security and other sectors.
To eliminate corruption, the government should for an anti-corruption agency to monitor any corrupt activity or bribery and bring the perpetrators to book with huge sentences. This will ensure that resources allocated to start-ups get to them and that nepotism is not practiced in the process. By so doing the business start-ups will receive the funds they require to develop on the business which in turn will contribute to the development of the economy.
The business start-ups should also consider seeking support from foreign countries that are willing to support business development in Kenya. By so doing, they will open a huge environment that support will come from hence ensuring that the businesses develop as the founders had planned. Even though foreign donors may enforce some regulations to the business start-ups, the greater good is to the Kenyan people who will have a developed economy with low number of unemployment rates, (group, 2008).
Business start-ups control over 80% of jobs created in developed countries (Paul J. A. Robson, 2009). Some of the already established businesses do not have any more gap for expansion or development hence no new jobs will be created. On the other hand business start-ups have a huge gap of expansion and development. They will also employ people from scratch; this will create millions of jobs that established businesses cannot. Economic independence is the key to sustainability; time is gone when countries are to depend on other countries for goods and services. Therefore, business start-ups are inevitable if Kenya is to be self-sustaining, fully independent and have a developed economy.
Business in Kenya, 2008, McCormick and group, Pages: 362. Publisher: University of Nairobi Press
Small Business Economics, 2009, Volume 32, Number 3, Page 331, Paul J. A. Robson, Helen M. Haugh, Bernard Acquah Obeng
Small Business Economics, 2007, Volume 29, Number 4, Page 415, Meghana Ayyagari, Thorsten Beck, Asli Demirguc-Kunt
Originally posted 2015-05-29 21:05:14.