Arm yourself with adequate capital for rural business
Posted Monday, July 30 2012 at 17:38
About 80 per cent of Kenya’s GDP comes from Nairobi whose population is more than three million people. This makes the capital the business hub of the region.
There are thousands of shops, vegetable kiosks, exhibition rooms, market stalls and SMEs. But is there an alternative to doing business in Nairobi?
There are entrepreneurs who have established their businesses out of Nairobi from scratch and are successful.
These include tourist hotels, restaurants on major highways, hardware suppliers, wholesale businesses, fishing and agriculture.
These businesses look simple and easy given the demand around them. However, closely, one understands the challenge of registering a business out of Nairobi.
First, it takes longer for a business to pick up due to low population density, meaning few customers.
Further, rural folk take longer to get to understand you given their little exposure as compared to the upbeat Nairobi consumers. An entrepreneur venturing into these areas should prepare adequate capital as break-even might delay. Further, investment in simple CSR activities might help a great deal.
Secondly, you will remember that there is little or no income for rural communities.
Even those who live in those smaller urban centres, could be making less compared to the average Nairobi resident.
It behoves the businessman to price his goods while sensitive to this fact.
Thirdly, logistics. Sourcing goods can be a nightmare. Further, there are areas where when it rains, they get their newspapers after three days. It is more expensive to do business due to logistical challenges.
Other challenges include high rate of corruption and difficulty in starting up, poor service from the local government and discrimination if you come from another area.
That said however, there are unique benefits of establishing a business out of Nairobi. First, land, rent and other costs are relatively low.
These include labour, food items, and permits. This brings your cost regime to a manageable level. Secondly, some firms have enjoyed government incentives including tax holidays, duty waivers and subsidies to establish out of Nairobi. One can take advantage of these incentives by talking with the Kenya Investment Authority.