Tag Archives: kenya

The Impact of the Property Rights Regime on Small Business in Kenya

New "malls" in downtown Nairobi offer opportunities for small business. But are their property rights being  respected?

New “malls” in downtown Nairobi offer opportunities for small business. But are their property rights being respected?

By David Owiro

Over the past few years, residents of Nairobi’s central business district (CDB) have noticed an interesting phenomenon. The previously large commercial premises on the main streets and avenues have been subdivided, converting them to mall-type premises that allow for subletting to many micro, small, and medium businesses. This phenomenon is, however, not unique to the CBD. This model, I’m made to understand, was borrowed from India, where mostly fabric traders sell their wares under one roof. The concept has spread to Eastleigh estate in Nairobi and can also be observed in some of the major towns in Kenya.

The Institute of Economic Affairs (IEA) carried out a qualitative survey of small businesses who operate in such mall-type commercial premises in Nairobi’s CBD to determine the impact of the property rights regime on their businesses, and the findings point to a deeper policy problem. In spite of the recent property rights reforms brought about by the new constitution, the study found poor enforcement of property rights, agency coordination problems, and low awareness levels among small businesses, leading to exploitation, abuse of tenant rights, and a hostile business environment.

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Cash for Corn


“When we entered the room where the President received us, he put the briefcase by the wall and left it there. After the meeting we collected the briefcase from where we had left it. On the departing journey I looked in the briefcase and saw that the money had been replaced with fresh corn.”

Nasir Ibraham Ali, the chief executive officer of World Duty Free, told the International Centre for the Settlement of Investment Disputes (ICSID) how, in 1989, a representative of former Kenyan President Daniel arap Moi explained to him that protocol in Kenya required that he make a “personal donation” to the president in order to establish duty free shops at the Nairobi and Mombasa airports. Ali understood “that this was payment for doing business with the Government of Kenya.” The price of this contract: $2 million.

Three years later, after spending $27 million to construct and equip his shops, Ali found himself in the middle of the infamous Goldenberg scandal. President Moi’s emissaries fabricated documents purporting to export gold and diamonds to World Duty Free. Moi’s emissaries then illicitly funneled the money they received in export compensation to Moi’s re-election campaign. The price of this fraud: estimated at a minimum of $438 million.

After World Duty Free claimed it was unwittingly part of the fraud, the government took over the shares and assets of the company to stop Ali from cooperating with the prosecution. When he responded by making statements to the press, he was arrested and then deported to the United Arab Emirates. Ali never recovered his assets, and Kenya never held any officials accountable in connection with the Goldenberg scandal.

Although these events occurred more than two decades ago, Kenya continues to fare poorly on Transparency International’s Corruption Index: 139 out of 176. It ranks in the 19th percentile for control of corruption, despite initiatives such as the restoration of the Ethics and Anti-Corruption Commission (EACC). However, some new initiatives are seeking to reinvigorate the fight against corruption. The private sector, led by the Kenya Private Sector Alliance and the Kenya Association of Manufacturers, established the UN Global Compact Network in 2005, which now has 83 companies that voluntarily adhere to the principles, including a commitment not to engage in corruption.

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Creating a Framework for Small Business Growth in Kenya


Malach Onditi started Elemach Scales, a small business that manufactures weighing scales, in Nairobi, Kenya twelve years ago with a startup capital of $120 and one employee. Today the company has an annual turnover of $52,000 dollars, has twelve employees, and sells the scales not only in Kenya but also in Uganda and Tanzania. To exist this long in an environment where over 90 percent of business start-ups do not survive to the third year has not been an easy undertaking. Elemach Scales has experienced several challenges along this journey including inaccessibility of affordable credit, barriers to regional trade and access to markets, and harassment by county government officials in regards to licensing and workspace

Elemach Scales typifies a majority of small businesses in Kenya — a sector which currently provides 78 percent of the country’s total employment, more than 90 percent of new jobs, and 18 percent of GDP.  CIPE has worked with its partners over the last five years in efforts to build awareness for micro and small enterprise policy reform, facilitating extensive stakeholder input and building capacity for its advocacy which culminated in the signing into law of the MSE Act in December 2012.

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Unlocking Entrepreneurial Potential in Developing Countries

Govinda explains the merits of a high-end cookstove to a potential customer.

Govinda explains the merits of a high-end cookstove to a potential customer. (Photo: Think Africa Press.)

The adjective “unskilled,” like many words favored by economists, can be highly misleading. Trying to survive on the streets in a Kenyan slum, for example, takes a lot of skills — just not ones that are easy for the market to value and reward.

Take Alex Govinda, for example: as a homeless youth in Kwangware, on the outskirts of Nairobi, he had to hustle every day just make enough money to eat, collecting and selling scraps — and sometimes stealing shoes or mobile phones, too. Now he is an expert salesperson, using his skills to hawk high-quality goods to his neighbors and earning a decent living in the process, thanks to a unique arrangement set up by an American NGO called LivelyHoods.

Govinda’s situation — and the solution LivelyHoods came up with to solve it — are a perfect illustration of the institutional forces holding millions of poor people around the world back to from reaching their true potential.

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The Kenya Westgate Mall Tragedy

kenya attack

In the worst terrorist attack in Kenya since the 1998 U.S. Embassy bombing, 49 people lost their lives and over 150 people are injured in an assault on the Westgate Mall in Nairobi, Kenya. As of Sunday at 6PM this tragedy is still unfolding since the armed attackers are still in the mall and with an unknown number of hostages. According to the local new outlets, they claim to be from the Somali-based Islamist group Al Shabab and the reason for the attack is still unclear.

I am very familiar with the Westgate mall and was last there in 2012 enjoying a wonderful lunch and visiting the Masaai market to purchase handicrafts.  As the largest mall in Kenya, many families go there for their shopping or to spend a leisurely Saturday afternoon (when the attack first took place). I still remember where I was on September 11, 2001, when the United States was attacked by Al Qaeda, and I am sure I will remember where I was when Al Shabab attacked a commercial center in Kenya. I was fortunate enough to be in Mombasa, Kenya at a seaside resort facilitating a two-day Kenya Private Sector Alliance (KEPSA) Board retreat.

A CIPE consultant, Rick O’Sullivan, and I were working with 12 people on putting together a plan to implement KEPSA’s 2013 National Business Agenda. Part of the retreat was focused on establishing the private sector advocacy priorities and one of the points we made was how unforeseen external events will sometime set the agenda for the government, private sector, and civil society. Little did we know that a few hours later a major event would transform the lives of so many Kenyans and their families.

Unfortunately, this tragedy directly touched the life of the Chairman of KEPSA, Vimal Shah, who lost his cousin in the attack. Shah stepped out of conference room  during the Board Retreat to briefly speak to his cousin who was managing a youth cooking event at the mall before the telephone call was cut short.

Today upon our return to Nairobi, we drove to a home near the unfolding tragedy to pay our respects to Shah’s family. Later in the day I had the opportunity to walk the streets and was planning on donating blood. The security forces and the Red Cross set up facilities in various locations across the city for people to donate blood. When I arrived at the designated Red Cross area in downtown Nairobi, there were five or six tents set up and thousands of people waiting in line for the opportunity to donate blood. Tonight it looks like this terrorism saga will continue until the hostages are released, but it is clear that somehow the Kenyans will also overcome this tragedy since they are already coming together as a nation to help those in need.

Lars Benson is Senior Program Officer for Africa at CIPE. As of this morning, the official death toll in the Westgate attack stood at 62 and Kenyan security forces claimed to have regained control of the building.

A Global Voice for the Private Sector


In 2013, the world faces many challenges, ranging from youth unemployment to the destruction of the environment to armed conflicts that continue to take lives and devastate countries. This week, more than 2,000 representatives of Chambers of Commerce from around the world gathered  to discuss these issues — and the role of the private sector in addressing them — at the 8th World Chambers Congress in Doha, Qatar.

The themes were as diverse as the participants, but one common thread emerged: the business community needs to be involved in helping to solve these pressing problems. And private sector voices are most effective in a democratic context.

Indeed, many of these issues are linked, often to issues of economic exclusion, which can incite violence and perpetuate cycles of conflict and poverty. “Enemy number one to economic development is armed conflict,” said Joost Hintermann of the International Crisis Group, quoting IMF Managing Director Christine Lagarde.

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A Personal Kenyan Voting Experience

Kenyans line up to vote on Monday. (Photo: VOA)

Kenyans line up to vote on Monday. (Photo: VOA)

by Ben Kiragu (CIPE Representative) 3/6/13 at 12:30 AM Kenya Time

Having registered to vote in the first Kenyan election under the new constitution at a school 10 minutes from where we live, my wife and I arrived at the polling station at 7 AM, which is early by all standards, with the expectation that we would be done in an hour as has been our past experience. We were however in for a shock as we arrived to find the polling station full of voters waiting to cast their votes, and we also learned that some had come to the polling station as early as 4 AM and had been waiting for the commencement of the voting at 6 AM.

This time around it was totally different, as the turnout was very high, perhaps indicative of how high the stakes are with this election — even managing to get the middle class who have previously been perceived as indifferent to voting. It took us five tiring hours to vote, occasioned by firstly the big turnout which resulted in long queues (in some stations as long as 5 kilometers), secondly, unlike previous elections under the old constitution where we were voting for only three elective positions (President, Member of Parliament and Councilor), the process was slower this time as we voted for 6 elective positions! (President, Governor, Senator, Women Representative, MP & Ward Representative).

Thirdly, the use of new computerized polling books to authenticate voters also added a further complication and delays to the process. But all in all given the myriad of challenges from limited time for voter education, using of new technology etc., the Independent Election and Boundaries Commission made a good effort. This was apart from attempts made by the Mombasa Republican Council (MRC) to disrupt voting at the coast by ambushing police on patrol, which unfortunately left 6 dead. The elections have otherwise gone on peacefully throughout the country.

As I write this article 27 hours since the voting officially ended, only 39 percent of the polling stations (13,000 out of 33,000) have submitted their results . Prime Minister Raila Odinga of CORD has 42 percent of the votes cast while Uhuru Kenyatta of Jubilee has 53 percent. The delay in relaying the results which has  today seen the running mate of Raila Odinga, Kalonzo Musyoka call a press conference about 7 hours ago (5pm Kenyan time) to raise  concerns regarding delays and reassure CORD supporter that victory is still within their reach.

With the results released so far it is too early to call the election given that only 39 percent of the polling stations have announced their results. Also the new constitution requires the winning candidate to garner 50 percent plus 1 of the total votes cast, and also 25 percent of the votes cast in at least half of the counties, in this case 24. We expect the final result of the provisional presidential tally to be made known by tomorrow evening (Wednesday); however the election law gives IEBC up to 7 days after the end of voting to announce the final results.

Although people are getting apprehensive at the slow pace at which the results are trickling in there is an uneasy calm. Despite the challenges associated with running such a complex election, with all manner of expectations and suspicions after the 2007-8 debacles, the IEBC has so far been professional, transparent and have run a credible process. This credibility may however quickly be eroded if the delays in announcing the results especially the presidential election continue beyond tomorrow.

Update: Since this report was submitted, Kenyan election officials have been counting votes by hand as electronic systems broke down. Today, March 7, the party of Raila Odinga called for the count to be stopped and claims the vote is being “doctored.”