Counties new frontier for entrepreneurs looking for growth

It is just a year since the county system of governance came into force. Some of the devolved units are still smarting from accusations of poor spending, lack of foresight in their development plans, and high levies on small businesses. However, if well managed, the regions could be the launching pad for budding investors.

A look at the counties reveals that nearly all of them possess unexploited potential.

Last year, the counties got Sh197 billion from the National Treasury for development. In the coming financial year, the counties will share Sh226 billion — a 20 per cent increase.

With the allocation going up, many of the small traders Money spoke to look forward to establishing new business.

“Our county government has enacted a law stipulating that local entrepreneurs will pay Sh10,000 to start a business. Instead of forcing us out of business through heavy taxes, they should use some of the development money to facilitate trade in this town,” says Fridah Kasaya, a resident and trader in Bungoma County.

According to the Kenya Investment Authority (KenInvest), the strategic plan of unlocking the potential in the counties rests on finding an anchor investor for each region.

VALUE CHAIN ENTERPRISES

In Machakos County, for instance, investors have pledged over Sh53 billion in the development of Machakos City. In a similar vein, 500,000 small and medium-scale farmers in 22 counties are set to benefit from Sh3.4 billion grant from the US government.

To be wired through the Kenya Agricultural Value Chains Enterprises, the funds are aimed at revamping value chain in dairy, staple crops, and horticulture to shore up incomes.

The counties lined up to benefit are Bomet, Elgeyo Marakwet, Kericho, Uasin Gishu, Busia, Trans Nzoia, Bungoma, Taita Taveta, Makueni, Machakos, Kitui, Kisii, Migori, Siaya, Tharaka Nithi, Homa Bay, Kisumu, Nandi, Kakamega, Vihiga, and Nyamira.

An additional Sh25.5 million is lined up for disbursement to 30,000 young women to help them start businesses in these counties.

Such financing presents small and medium entrepreneurs a chance to tap into the available opportunities. As Money found out, some towns have been reputed to be easier for conducting business than others.

For instance, in a 2012 report by the World Bank and the International Finance Corporation, Malaba was ranked the best place to start a business followed by Narok, Thika, Garissa, Eldoret, Mombasa, Isiolo, Kisumu, Kilifi, Nyeri, Kakamega, Nakuru, and Nairobi.

The report noted that it was easier to deal with construction permits in Malaba, register property in Mombasa, and enforce a contract in Garissa.

Kisumu County was viewed to be the most burdensome to start a business, while Nakuru posed difficulties in getting construction permits. In Isiolo, you would have to move mountains to register property while enforcing a contract in Nairobi was seen as a difficult task.

According to Edwin Rono, a financial consultant, key sectors that an investor can look out for in the counties are manufacturing, wholesale and retail, agriculture, tourism, energy, and financial services.

“Nonetheless,” he adds, “SME traders will have to be careful not to venture into saturated markets. The trick is to make your services or products unique.”

If you are eyeing agri-business, Nyandarua County is the place to go.

According to Rono, this is a goldmine that, if well exploited, could transform agri-traders into millionaires. Agriculture accounts for about 80 per cent of Kenya’s workforce and generates 30 per cent of revenue to the GDP.

According to the county integrated development plan, transforming agriculture from the traditional model to agri-business is a top priority.

Isaiah Karungu has been doing just that in the past year: “I had subsistence milk farms in North Kinangop and Passenga in Nyandarua. I didn’t think they could be sources of wealth and concentrated on other businesses in Nairobi.”

Since April 2013, Mr Karungu has established zero grazing units. “I sold my herd of 10 cows and brought four hybrid dairy cattle, which now fetch Sh90,000 a month.”

CONSUMER GOODS

In Kajiado County, farmers now buy low-cost greenhouse tunnels to mitigate the effects of unpredictable rains. “I have an eight-by-30 metre greenhouse tunnel which I bought at Sh180,000 for tomato farming,” says Paul Lempaa. “My farming project has since been giving me Sh30,000 profit a month.”

In Nakuru County, the ballooning middle class in its big towns has been fuelling business growth, especially in consumer goods. The county has a population of about 300,000 and is currently Kenya’s fourth largest town. In 2011, a report by UN-Habitat reported Nakuru town as the fastest growing town in East and Central Africa. For businessmen looking for ventures in the area, construction and consumer goods such as food and beverages and personal and home-care services are the leading big money opportunities.

Interestingly, Nakuru County borders Baringo, Laikipia, Nyandarua, Kajiado, Narok, Bomet, and Kericho which, according to Rono, places the county strategically in an area that has the necessary raw materials to spur entrepreneurial growth. In the 2013/14 financial year, the Treasury allocated the county Sh7.2 billion, much of which was meant to go to boosting investment.

According to KenInvest, Nakuru County has also experienced growth in manufacturing. “Roads and reliable power sources have seen the manufacturing industry take off in Nakuru,” it notes.

Zacharia Musembi, an entrepreneur and financial consultant based in Nakuru says that agro-chemical production, dairy, and grain milling and storage are other key segments that ripe for investment.

“For the ambitious trader, the town possesses easy access to overseas markets like China, Comesa, and Europe,” he says.

A report by the Kenya Association of Manufacturers says that dairy farming is the key and viable activity in the area.

“Traders may also consider opening retail businesses that provide goods and services to the manufacturing and agricultural sectors,” adds Musembi.

 And with increasing demand for green energy, the solar power industry is a feasible opportunity for small and up-coming industries.

“More Kenyans are embracing the idea of renewable energy due to its affordability and environmental friendliness. For businesses, this is an area that is proving to be highly profitable since the market is yet to be saturated,” notes Musembi.

GREEN ENERGY

“People have been embracing the idea of green energy and for us, business has been booming,” says Emmah Kariuki of Solar World East Africa.

The uptake of solar power has been prevalent in Nairobi County, with houses developers and up-market home owners, fuelling demand.

In Homa Bay County, a solar lighting project worth Sh240 million is underway. In Taita Taveta, increased presence and access to funding from local micro-financiers has boosted the germination of SMEs.

According to Dr Charles Rambo, a finance expert, enhanced relationship between small-scale entrepreneurship and micro-financiers has been the oil fuelling trade in Taita Taveta.

“The significance of increased activity by the micro-financiers is present in capital provision, training, offering of viable business ideas, and advisory services to small-scale entrepreneurs,” he says.

The county currently has a Sh2.3 billion allocation from the national government for development.

TOURISM

For traders banking on tourism, Mombasa, Kwale, Kilifi, Lamu, Nakuru, and Baringo are the counties to focus on.

According to KenInvest, these regions are expected to steer the management of key tourism sites as well as streamline the licensing and facilitation of travel-oriented firms.

Apart from the national reserves in Baringo, livestock entrepreneurship ranks top in the county’s growth plan. This is replicated in Samburu County, where investors inclined to animal-related enterprises usually source their products.

EASE OF DOING BUSINESS IN SOME KENYAN TOWNS

• Malaba — Best place to start a venture. Narok and Thika follow closely.
• Mombasa — Easy to register property.
• Garissa — Easy to enforce a contract.
• Nakuru — Fastest growing town but difficult to get construction permit.
• Kisumu — Most burdensome to start an enterprise.

Source: The world Bank and the International Finance Corporation report.