By Ben Kiragu
One of the things Kenya’s new government succeeded in doing within its first year was to reduce the number of days it takes to move cargo from the Mombasa port to Malaba from 18 to 8 days — a 56 percent improvement in just 6 months. This is a major achievement which has boosted commercial relations with Uganda and other neighboring landlocked countries, forestalled competition from alternative transit routes, and ultimately reduced the cost of doing business, therefore improving economic growth in the region. How did the government accomplish this?
First of all, the president set up a cabinet subcommittee of Cabinet Secretaries dealing with the Northern Corridor — the transit links connecting Kenya’s landlocked neighbors to the sea — which reported to him during weekly cabinet meetings. Second, administrative changes were instituted; all agencies involved in the process including KRA, KEPHIS, KEBS and KMA were instructed to work under the authority of the Kenya Ports Authority and relocated to Mombasa port. Also all government agencies were to take orders from KPA and finalize operations in Mombasa without reference to any other authority. Finally, the process of clearing was digitized and weighing bridges were modernized.
What are the lessons learnt from this? There was very clear knowledge, analysis, and understanding of the problems and where the bottle necks lay, therefore solving the problem was undertaken with almost surgical precision. There was very little need for new financial resources or the construction of major physical infrastructure. This is one of the key reasons why most projects in Kenya are delayed, as they wait for budgetary allocations or get into procurement bureaucracy and controversy as we have come to see especially as a result expanded democratic space. Lastly and probably most important there was clear and dynamic leadership, the president led from the front on this one and delegated to decisive and action-oriented managers. The impact is there for all to see.
Creation of jobs was one of the rallying calls of the Jubilee campaign with 1 million jobs promised per year, but so far no major job creating initiative has borne fruit. The government seems to be waiting for big projects such as the Standard Gauge Railway and the Galana-Kulalu irrigation project to create jobs; one wonders if this will work, as time is clearly not on their side especially given the issues associated with some of these projects. My recommendation: why not replicate the cargo movement magic to prune low-hanging fruits and achieve quick wins in job creation by creating an enabling environment for micro and small enterprises (MSEs)?
The MSE sector generates 18.4 percent of the country’s GDP and about 25 percent of total non-agricultural GDP. Similarly, the sector accounts for about 75 percent of all new jobs created and contributes 76.5 percent of total employment in the country. Whereas unemployment remains a major problem in Kenya, the MSE sector holds the greatest potential to bridge the job deficit in the country. Available statistics show that between 2007 and 2010, the informal sector contributed about 90 percent of total employment. During the same period, the informal sector generated 9 out of every ten new jobs created. Similarly, employment growth in the informal sector has continued to outpace formal sector employment growth.
No country has successfully achieved a dynamic and vibrant private sector without the MSE sector. This is because the micro and small enterprises of today, whether in the formal or informal sector, can actually become the medium scale firms or the big businesses of tomorrow, and have the ability to create jobs at a much lower cost. Just as the fast-tracking of the movement of goods from Mombasa to Malaba required negligible resources and was achieved in a short time, the creating of jobs can be undertaken using the same methodology with minimal resources and achieve results in as little as three to six months.
We must change our attitude and view MSE sector players as investors, and therefore seek to address the challenges that they encounter. Urgently reduce the cost of credit — let us learn from how the Kibaki administration managed to reduce interest rates which is one of the key reasons GDP grew at 7 percent in 2007, and also encourage financial institutions to develop innovative and affordable financial products targeted at MSEs. Ensure that the 30 percent of government procurement set aside for youth, women, and people with disabilities actually benefits the intended targets; look at it again and ascertain that the attempt to eliminate bureaucracy and cumbersome requirements actually worked, and bundle it together programs such as UWEZO fund and Women Enterprise Fund for ongoing hands-on training and access to finance . Demand accountability by seeing to it that UWEZO is closely monitored and quarterly progress reports are produced, what is measured gets done .
Key challenges that affect MSEs, including workspace and licensing, are in the hands of the county government, therefore building a close win-win relationship with the National government is crucial. Working together they can eliminate harassment, rationalize license fees, and ensure that small businesses are getting value for money through services such as cleaning, security, and water in markets. Facilitate access to organized workspace ensuring that it has a reasonable security of tenure; don’t build just avail the space and let them put up structures with controlled standards and set up joint management. Government efforts to build market infrastructure directly through stimulus programs have previously failed miserably due to lack of stakeholder involvement, bureaucracy, and corruption.
How will this be done? Replicate the cargo clearing fast-tracking methodology outlined earlier. Set up a subcommittee of cabinet secretaries who play a role in this sector led by the Ministry of Industrialization and Enterprise development and including the Ministry of Agriculture and Fisheries, the Ministry of Devolution and Planning, and probably the ministries involved with trade.
Since the role of county governments is crucial, establishing a working framework at the highest level on this particular issue, getting their buy-in and creating a win-win scenario between national and county governments is important. Under these top-level organs, establish a multi-sectorial stakeholder working committee bringing together representatives of credible umbrella and apex associations, research institutions such as KIPPRA, and other non- state actors involved in the sector to ensure buy in and get input from the grassroots.
To guarantee that the team stays on track, give clear targets and timelines, otherwise described as SMART goals. Built in to the process should be a robust reporting mechanism that gives progress reports that are factual, e.g. how many actual jobs have been created in a given month. Since this is a very important matter, meetings with the Cabinet committee should be at least monthly with clear milestones expected.
John C. Maxell, an internationally recognized leadership expert, says “everything rises or falls with leadership!” We must get the right people into the right leadership positions in the MSE sector. For far too long this sector has suffered from lack of strategic direction and visionary leadership with a genuine interest in the growth of the sector. Many times we have politicians with personal vested interests masquerading as experts. We must get the leadership right.
Ben Kiragu is CIPE Field Representative in Kenya.