Enabling SMEs In Kenya to Scale Up: Q&A Session with Patricia Ithau
- First of all, who are SMEs and what is their role in the economy?
An SME is a small or medium sized enterprise. SME’s role in Kenya’s economy cannot be overlooked at any cost at this time of our economic development. The SME sector is reportedly the largest business cluster in Kenya and has created substantial job opportunities for Kenyans.
Both in Africa and in developed economies, evidence shows that SMEs, especially those in the informal sector, account for over 70% of all new jobs created annually.
There is also evidence that in Africa SMEs are the main source of employment comprising over 90% of African business operations and contributing to over 50% of African employment and GDP.
- About 70% of SMEs in Kenya do not make it past their second year of operation. What do you consider to be their biggest constraints?
The biggest symptom is cash flow but the illness is lack of strategy in areas such as unclear sizing of the opportunity, unclear organization/resource with the founder owner doing everything so getting burnt out or not having someone to bounce off ideas so delivery gets compromised. We are enterprising so we see an opportunity and we go for it with little planning or clearly assessing what it will take to realise the opportunity.
- What can be done to turn this around?
The first thing is stronger planning mindset. One of the reasons there are many incubators being set up is to support entrepreneurs in planning and thinking through the size of the opportunity. It may not be accurate but there is at least a sense of the environment mapping and clear articulation of what is the gap you are filling and what is the differentiating proposition. That then allows understanding whether the business is sustainable over a longer period.
- The government has come up with many SME support programs but it hasn’t been effective to certain standards. Why is that?
There are many programs, not just by the government but also by the private sector. The infectiveness has been influenced by a number of factors, not limited to the following: lack of awareness of the existence of the programs, limited follow through to support the businesses on an on going basis, impact – very many SME’s coming up every day, not enough capacity to support them, short term mindedness of entrepreneurs – want to make money now. The formation of the Micro & Small Enterprises Federation (MSEF) was to give the sector a voice and advocacy platform. The enactment of the MSE Act, 2013, sought to promote, regulate and develop the SMEs through the formation of Micro and Small Enterprises Authority (MSEA).
- What do you see as the private sector’s role in helping create business opportunities for SMEs?
The Private Sector plays a pivotal role. Larger private sector organization become the source of business for SME’s as they become the suppliers. The ability to take advantage of entrepreneurs to meet the needs of private sector companies creates the pipeline of SME’s
- Why should strategic branding be of importance to SMEs to increase their chances of survival?
Branding creates distinctiveness. It allows an SME to be known or associated with something, and particularly something good. With that, they are able to continue attracting or doing business. Without branding, you are a commodity and commodities are a dime a dozen.
- How can SMEs capitalize on digital technology to increase visibility and opportunities?
Digital technology is the future. We are in the era of interpreneurs which says something about where opportunities lie. We know now that the platform where people absorb media and information is on digital platforms. If you do not become savvy in making yourself visible there, you become irrelevant. Take advantage of social platforms – see what other entrepreneurs and business have been able to amplify and communicate through Instagram or Facebook. Remember you are the one who chooses what to project, and there is power in creating your own message not letting it be created for you Learn how to be your digital communication agency – it is incredible what you can achieve at no cost!
Patricia Ithau is the Regional Director, Stanford Seed -EA. She has also served as the Managing Director of East African Breweries Limited and L’Oreal East Africa.