Indian Africa, minorities of Indian-Pakistani origin in Eastern Africa, is a 484-page book with lots of information, charts, statistics and stories of the arrival and enduring impact of Indians in East Africa:
- Almost all Indian traders to East Africa were from the northwest (Sindh) now Pakistan, Gujarat, Punjab, and Maharashtra in India.
- The Indian population in Kenya which fell to 78,000 in 1979 rose once again to stabilize at 100,000, half of whom acquired Kenyan nationality. The demographic resurgence was probably due to donor pressure but also favorable treatment under President Moi who got into a tactical alliance with high society to check the influence of the emerging Kikuyu middle class. Thus in 1986, Indians who had been dispossessed in 1967 returned to manufacturing, by buying out subsidiaries of multinationals.
- Indians are in 80% of industrial sectors and control 90% of business activity in the textile industry through 50 mills and 350 other companies. In the pharmaceutical sector, they control 60%, 80% of the chemical/plastics, 80% of iron business, and 90% of electrical installation ones (French Embassy statistics).
- 25 of the 44 banks are controlled by Kenyan Indians.
- Family business structure: Capital raised stays with the founder (first generation) while the second generation (sons) assume managerial and administrative positions and prepare the business for expansion.
- Business Capital: Most Kenyan Indians businesses are totally dependent on local resources unlike the perception that they get foreign capital – only 5% of 210 entrepreneurs surveyed said they had received such – and this was from expatriate parents in Britain, India, Dubai.
- Business Finance: Bank loans are secondary sources of funding – only 33% had received them, while 67% never had. They have other informal sources of credit such as employer associations to which some Europeans and Africans all benefit – and 32% of interviewees were members of groups like the United Business Association. Suppliers are frequent credit sources for small merchants. To obtain credit, one must demonstrate honesty, good management and present minimum guarantees such as from family members, real estate collateral, and repayment schedule. There is also mutual help within communities on matters of illness, death, or when a business is failing.
- The book has profiles of different types of duka wallahs (traditional shopkeepers) as well as chapters on the settlement and emergence of business communities in Kampala, Nakuru, and Dar es Salaam.
- For Ismailis, health and education are their priority political commitments.
The book, edited by Michel Adam is published by Mkuki na Nyota publishers of Dar es Salaam and the French Institute for Research in Africa and distributed outside Africa by the African Books collective.
Yesterday saw the launch of a book entitled “Youth In Kenya: A Ticking Time Bomb” which is co-authored by a friend. The book looks at the challenge and job opportunities for the youth in Kenya, in terms of incentives, appropriate skills, cost of business, and new jobs for the youth, who one guest described as only interested in watching English soccer matches in the villages.
- Kenya’s education systems was designed by the British to be a source of raw material and cheap labour.
- Education CS Fred Matiangi: No other sub-Saharan Africa has put the resources in education that Kenya has in 50 years, and with 290 technical education institutions, there will be one in every constituency.
- George Njenga: There are over 70,000 skilled Kenyans working in South Africa. It is important to look at the training of teachers, so that they also impact good foundation and lessons to the youth and Strathmore Business School has started on that.
- Jonathan Mueke: There have to be standards in the Jua Kali sector – thousands of people produce hoes (jembes) that won’t dig, and which Nakumatt (a large supermarket chain) cannot sell
- FT Nyammo: We have thousands of available jobs to be done in the coffee, tea, and dairy sectors in rural Kenya, but no youth are willing to do them as they consider them to be menial. Also, the Jua Kali sector provides 80% of employment when the economy is good, and the government should channel incentives there to create more Manu Chandarias! (one of Kenya’s most renowned industrial entrepreneurs)
One of the books’ main authors says he was inspired by media stories from last July, which described the Kenya Judiciary and Ports Authority as being were overwhelmed by job applicants; some had received 80,000 applications for 1,000 jobs advertised and even had stampedes at their offices.
The book was published by Longhorn and sells for Kshs 900 ($10). It’s a non-academic book edited for everyone to read.
Aside from this, last week, the KCB (Bank) Group launched “2JIAJIRI”, a KShs. 50 billion job creation program under they committed to “set aside Kshs.10 billion annually in the next five years towards driving this enterprise development programme over the funds which will be used largely to support small and medium businesses run by the youth.” They hope to “reach 500,000 entrepreneurs (both existing and new ones) in 5 years, thereby creating at least 2.5 million direct and indirect jobs.”
The Central Bank of Kenya, Financial Sector Deepening Trust Kenya and the World Bank, have published a study on bank financing of Small and Medium Enterprises (SMEs) in Kenya ($1=Kshs 100). Excerpts
- The total SME lending portfolio in December 2013 was estimated at Kshs. 332 billion, representing 23.4% of all banks’ total loan portfolio
- Donor Support: Nearly all of the banks interviewed received some form of donor support or were in discussions with donors for support directly related to financing of SMEs. In several cases there were banks with support from as many as four donors at a time.
- Limited Government Intervention: In 2010 The Government (though the Treasury) established a special SME scheme, called the MSE Fund, but since 2012 no new loans have been approved by the fund. According to Treasury, the scheme was discontinued because “the intention was not for the Government to lend, but to create an incentive for banks to engage with SMEs”. After only a year of the fund’s operation, banks started to lend more to SMEs from their own books, especially Equity Bank, and therefore Treasury did not see any reason for the continued operation of the fund. In addition to the MSE fund, the Government set up a Youth Fund and a Women Entrepreneur Fund, in which a number of banks are participating. The Government is also contemplating a partial credit guarantee for agricultural loans.
- Courts Not Good at Dispute Resolution: Enforcement of secured claims appears to be slow and costly, affecting the cost of credit. It takes 4.5 years, costs 22% of the value of the debtor’s estate, and only yields 30% of what is owed
- PE & VC’s: The majority of around 15–20 active private equity funds focused primarily on SMEs with a perceived financing gap of typically between US$50,000 and $5 million. The funds target deal sizes of around $1–3 million, which is still at the high-end of the SME segment and is therefore out of reach for most SMEs in Kenya. The venture capital industry is still nascent with about 10 venture capital type funds, but interest from international firms, as well as local ones, especially in the emerging ICT industry, has recently been on the increase. There are several incubators which have been set up to help build the pipeline for such deals, but the sector is still at an early stage of development
- 3 Kinds of Banks: Banks target the market segments they are most effectively able to service. There are 1. Corporate oriented (Barclays, CfC Stanbic, Standard Chartered) 2. Supply-chain oriented (BoA, Chase, DTB, Ecobank, FINA, I&M, NIC) 3. Micro-oriented (Co-op, Equity, Family, KCB, KREP, Jamii Bora)
- Overdrafts are Bad: The most interesting finding from this analysis is arguably the central role played by overdrafts in SME lending in Kenya. While overdrafts can be useful to meet immediate liquidity needs and to avoid firms having to turn to informal lenders or shadow banking, a problem arises when firms use overdrafts to fund specific working capital or investment financing needs. Overdrafts tend to be very expensive and inefficient in addressing specific business funding needs. Banks, on the other hand, may have limited incentives to reduce firms’ reliance on overdrafts, as the overdrafts usually provide high profit margins. Nonetheless, during the interviews some bank managers confirmed that over-reliance on overdrafts can be a major hindrance to the development of SME finance in Kenya: overdrafts are a financial ‘black box’ because they do not reveal why firms are borrowing nor how the loans are used.
- Interest Rates: The average annual interest rate is 20.6% for microenterprises, 18.5% for small enterprises, 17.4% for medium enterprises and 15.3% for large enterprises.
- Potential 20 Million Credit Reports: As of 31 December 2014, a total of 5.2 million credit reports were requested by banks, compared with 2.3 million as of December 2012. Adding the information from the over 20 million registered mobile money/mobile financial services users would lead to a significant expansion of the underlying information base.
A question I often get, is when should I hire hire an accountant to manage the books of my small or growing company? This should provide some answers. Reposted with permission from the author..article first appeared in the Nation.
Accountants help out in the growth of your business. They handle more than just tax and payroll. This question has become all too familiar. “When should I consider hiring an accountant?” It depends on your immediate needs. Out of your needs, you will either get a full-time accountant, part-time one or contract one.
A good reason for hiring an accountant however is to create a business plan, form a company, apply for loan, during tax audit or simply in order to delegate some duties. However, since we have a number of rogue ones out there, recruit your accountant carefully.
Here are some moments when an accountant would be a smart hire.
- Say you need to write down some financial projections, a business plan or the usual business finance management and reporting. An accountant can help you use an accounting software to generate reports.
- The earlier you hire one, the better. This way, you benefit from sound financial knowledge. It saves you a lot of money and helps you mitigate risks associated with poor financial management.
- An accountant can also advise you on the best legal structure for your business. For example, it is a fact that you will have business liabilities. When you operate as a sole trader, you could be held personally liable for business deals whereas in a limited liability company, the burden of the enterprise is limited to its assets.
- SME accounting can easily become complex when you do it yourself, and can get overwhelming since you are stretched across many control points. An accountant can help you fix your cashflow by computing key business metrics that help you ensure that the outfit is on track. Say ratio of salaries and other employee payments to total revenue, cashflow analysis, your gross margins and net margins. These are reports that help you understand your business’ financial standing at a glance. It is even better if you are using an accounting software that is online as this can allow even an external accountant to review your financial records for regular reporting. These kind of reports help you monitor the pulse of your business. With the reports, an accountant is able to offer input on how to improve your business model, pricing or even inventory.
- Generally, you need an accountant to prepare and file tax returns. Although we have software that simplifies this, it is always safe to get a seasoned hand to deal with the taxman. A good accountant should help you complete and file all legal and compliance company returns, prepare regular annual statements of accounts, handle your payroll, ensure all individual taxes and payments are recorded and bank reconciliation is done monthly. A good accountant will help you meet tax obligations. If external auditors are coming, your accountant should ensure that all necessary reports are ready.
- You might need an accountant when applying for a loan, overdraft or securing a fresh investment. An accountant will help you develop the financial statements your bank will need. Your accountant can help you know if the loan interest, terms and conditions are favourable.
Overall, at some point, you will need to hire an accountant, so recruit wisely!
@DorcasMuthoni is the founder of OpenWorld.