Kenyan enterprises defy economic storm to post strong growth

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By Philip Muema, Project Director

Posted  Sunday, October 23   2011 at  19:20

In Summary

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The reliance on the founder’s savings for start-up capital points to reluctance by financial institutions to lend to companies that do not have a credit history. Once the companies have established themselves, the banks are more willing to provide them with expansion capital.


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Working capital challenges

About 43 per cent of the Top 100 participants experienced working capital challenges in 2011 due to delays collecting payments from their customers and stringent credit terms imposed by their suppliers.

While the number of companies citing delays in collections from customers has remained stable over the years, the proportion of companies citing stringent credit terms by suppliers rose significantly from 38 per cent in 2010 to 63 per cent in 2011.

Cash flow will continue to come under pressure into the foreseeable future due to rising inflation and interest rates and the fall in value of the Kenya shilling against major world currencies.

Growing confidence amid changing

business challenges

The challenges that the mid-sized companies are facing have evolved significantly since 2010, reflecting the changing business environment facing the companies. In 2010, the main challenges were poor infrastructure, corruption, lack of financing, and personnel related matters.

Most of these challenges did not feature significantly in 2011, with most of the companies citing high energy costs, inflation, delays in payment, increased production costs, declining national economic prospects and the exchange rates as the new hurdles.

Despite the challenges facing the companies, business confidence increased by eight per cent to 76 per cent compared to the previous.

Business innovation

More than two thirds of participants adopted new technology/ innovations in 2010, 45 per cent adopted new machinery, 22 per cent installed electronic online systems, 14 per cent had new automated systems and 10 per cent had new or upgraded software solutions.

However, the companies continue to lag behind in adopting international standards and certifications which are crucial to attracting investments and business internationally. Only 17 per cent of the survey participants obtained international certification in 2011.

Support for EA integration

The EAC continues to feature significantly in the strategic plans of the survey participants with over 74 per cent supporting of regional integration.

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