Lack of reliable contracts keeps off potential investors

There are several things that keep foreign investors away from Kenya, but only one big thing, something that the rest of us have to live with, get finished by, or survive: the absence of contract.

There is barely a word written for the outside world about business in Kenya that doesn’t make reference to the absence of any legal recourse.

It is the reason we have so few foreign ‘chains’. McDonalds has been clear. It won’t run franchises here for this one reason.

Many other world-class businesses similarly conduct the smallest investigation into Kenya and hit the ‘no enforceable contracts’ issue.

Yet as a business handicap it’s still a limp sounding thing in comparison with the reality of its impact.

For what it means is that even a publicly listed company, or any party at all, can simply turn round at any second and say: the contract is gone. If spiteful with it they might even add: ‘challenge us in court if you want to - it will take five years in the Kenyan court system.’

And the bit we all know is that even with a clear cut case, the legal costs will be huge and Transparency International rates our court system one of the most bribed in the world.

It would be a challenge that would be long, costly and without too much relationship to justice. So why do it?

There are reasons. The case will be aired. The media will cover it. The power of sunlight will be poured onto the matter.

And when we don’t challenge wrongdoing, we only keep feeding the culture of impunity.

However, my own observation, as editorial director of one media house where we specialised in covering the global pharmaceuticals and food industries, was that court cases over contract disputes had a remarkably predictable way of killing both parties - through the loss of focus on the retained business, through the court costs, and through the whole psychology of war over conciliation.

Court cases anywhere are best avoided. But in Kenya, the lack of enforceability makes it commonplace for contracts to be torn up.

Which makes it extremely important for all of us in business to select our contracts and our partners with very great care indeed: greater care here than anywhere.

As it is, there are so many ways in which combining forces across different specialisms and sectors, needs and projects, can add up to a sum of enormously more than one-plus-one.

For which reason my own company has entered so many partnerships it has even represented a challenge for outsiders in grasping the multi-layered nature of the mix.

Some have been fantastic, and still are. Some just never really happened, although the concept was brilliant, and we all remain poised for ‘one day’.

I have interviewed and met many an entrepreneur who has waded through the difficulties of a spoiled business partnership.

Typical was the restaurant owner, who had never run a restaurant but went into partnership with a long-time buddy who was already running a food joint that he was selling.

Only he never sold it, and the whole joint management notion never went to plan, in time put in, in money put in, or in any way.

Indeed, of all the stories that have been recounted to me of partnerships that have collapsed, the ‘didn’t go as planned’ is the biggest hurdle.

Yet, this is not the hardest kind of break-up, and often doesn’t turn into a break-up at all.

In my own business, one of our now longest partnerships saw both sides reassess after the first 15 months on the basis of what we had actually put in, and adjust accordingly.

In this, spreadsheets help, although they can be far from perfect when measuring management input that was never paid, but must now be costed.

However, there is another other type of contract that can go bad too, where remedy is most surely out of reach.

Often in our partnerships, we invest jointly, we both put in to the creation of something together. It is a joint endeavour, and it truly is.

As one friend put it to me this weekend, in those kinds of partnerships, the joint investment bonds are oh-so-tight when the going is tough, but when the product succeeds, there is a remarkably prevalent pattern in contractles

Kenya for the bigger partner to decide it wants it all.

It’s a norm: a ‘this is Kenya’ moment. And a moment that none of us need to live through.

The key, most surely, is not to enter contracts where it matters if it gets torn up.

Just don’t invest your business in a project critical to your whole future that depends on a contract being honoured.

And look out for the deal that means a whole lot in from your side at start, for pay-back later.

As you look at signing, do just one calculation: how will this contract look if you do the first ‘put-in’ part, but never get the second ‘pay-back’ part? Would you still sign? Would you still begin?

Because the reality is, if you happen to do that calculation in Kenya, that is very probably the contract you are, in truth, signing.

You are signing to invest on a contract that can disappear in a sweet second if you do the worst thing of all, and create a real, big success.

So don’t do it. Foreign investors won’t. Instead, build partnerships where you ‘put in’ and ‘get’ in measure - until the day the contract dies.