Kenya lies to the east of the African continent and has a coast on the Indian Ocean. The country straddles two of the most famous lakes in Africa - Lake Turkana and Lake Victoria. At its heart is Mount Kenya from which the country takes its name. The Kenyan population is heterogeneous, comprising seven major ethnic groups as well as tens of smaller ones and non-Kenyan communities. There is a religious mix with a Christian majority and Muslim and indigenous religious minorities. Formerly a British colony, Kenya achieved independence in 1963.
Understanding the various cultural norms and ethnic and religious groups is essential when doing business in Kenya. Kenyan Culture - Key Concepts and Values Group-relations – Kenyans have strong affiliations to their ethnic group or tribe and sometimes place them in front of the ‘nation’. The family is at the heart of Kenyan life and is given priority over everything else. Several generations will live together in one house with all family members taking care of one another. Absenteeism from work or delays in performing tasks due to family obligations is frequently experienced in Kenya and is viewed as perfectly acceptable.
Religion – The majority of the population is Christian (Protestant and Catholic) but there is also a substantial Muslim (Sunni) minority. At the same time Animism and ancestor worship remain widespread. Both Christians and Muslims have managed to incorporate traditional practices into their respective religions creating unique blends to suit their particular needs. Time – In general, Kenyans have a more relaxed approach towards time and live at a slower pace. It is not unusual to wait half an hour for someone to arrive for an appointment and this is seen as perfectly acceptable.
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Taking care of personal affairs first is regarded as more important than arriving on time. This being said, today particularly in the private sector there is a growing trend of punctuality and observing deadlines. Doing Business in Kenya is the one of Africa’s more affluent nations and is seen a business hub for East Africa. The country’s economy has been hampered though by corruption and a reliance on certain goods whose prices have failed to rise sufficiently. Kenya has also been affected by the global economic downturn and in 2008 saw a 7% drop in its GDP growth from the previous year.
Despite this, tourism, manufacturing and investment have predominated in the Kenyan economy over the last four decades giving Kenya a prized position within Africa. Understanding how Kenya’s economy and politics impact its business culture will help you when doing business in Kenya. Kenyan Business Part 1 - Working in Kenya o Working practices in Kenya • Business hours in Kenya are from 9:00am to 4:00pm, with a one hour break for lunch between 1:00pm and 2:00pm. Some businesses also operate on Saturday mornings. Kenyans have a flexible attitude towards time, so don’t be surprised if business meetings or social events begin late.
Punctuality tends to be expected when dealing with foreigners though, so make sure to arrive on time. Kenyans do not tend to schedule a precise end to meetings. What matters is not adhering to a schedule but ensuring that everybody involved is satisfied with the outcome. Therefore make sure to leave enough time in your agenda when attending a meeting. English is widely spoken in Kenyan business environments and you can expect your counterparts to have good language skills so you can conduct your business in English. A little knowledge of basic Kiswahili phrases always leaves a good impression and can help to break the ice.
Structure and hierarchy in Kenyan companies • Business hierarchies are generally clearly defined, especially in family owned companies. Although employees are welcome to give suggestions and comments, the final decision is taken by senior members or managers. Education and experience are important qualities and main sources of credibility. A personable character can earn extra credit. Foreigners tend to be approached with high regard simply on the basis of their international expertise. Hierarchy plays an important role in the business structure of Kenya. Be mindful of a colleague’s title and their place in the organization.
Decision making in Kenyan businesses tends to work on a top-down basis, with objectives set and decisions made by those in the highest positions. Respect and deference to one’s elders should be observed when in Kenya. First business meetings are often quite formal until the relationship is established. Relationships outside of the business environment can help build stronger ties too. The unofficial and informal nature of networking out of the office can help cement a stronger working relationship. This is often done by offering your colleague a drink or meal.
Kenya Business Part 2 - Doing Business in Kenya o Business practices in Kenya • Being a polychromic society, Kenyan business practice focuses on getting things done by order of priority rather than working to a set time schedule. In many businesses the working day will halt at specific times for Muslim members of staff to pray. Business attire is formal in Kenya. Men wear suits and ties while women wear long dresses or skirts which reach below the knee. Women do not usually wear trousers although this trend is slowly changing. Women should make sure their shoulders are covered and should not wear anything too revealing.
Business cards are often used in Kenya and should be given and received with both hands. Marketing boards are state-controlled or state-sanctioned entities legally granted control over the purchase or sale of agricultural commodities. Since the mid-1980s they have declined in number under pressure from domestic liberalization and from international trade rules that increasingly cover agriculture. Where reforms have been widespread and successful, marketing boards have vanished or retreated to providing public goods, such as strategic grain reserves or insurance against extraordinary price fluctuations i. . the National cereals board, the Tea board of Kenya. Where reforms have been less successful, the weaknesses of private agricultural marketing channels have been revealed by the rollback of marketing boards, often leading to calls for reinstatement of powerful marketing boards. It is often suggested that an exporting country should set up a price stabilization fund to insulate farmers from fluctuations in the world market price, by collecting a proportion of farmers’ revenue when prices are high and paying it out when prices are low. A typical price stabilization fund is set up for an export crop.
In years when the world price is high, some of the returns are paid into the fund; in years when it is low, the accumulated revenues are used to bring up the price. There are many variations on this basic model. Some of the funds soon collapse, while others go on for years, surviving but not necessarily achieving their objectives. The objectives of the fund are usually obscure, sometimes deliberately so. For example, farmers press for stabilization without making it too obvious that to them stabilization means a lower limit to prices rather than an upper limit: in other words, they want a higher average price.
Consumers think of price stabilization as imposing minimum prices rather than both maxima and minima. It is often assumed without discussion or evidence that price stabilization benefits the farmer and is beneficial to the economy. To provide price stability, marketing boards set the prices for farmers. During a season of high prices in the world market, they stash funds over and above the set local target, which they later use to cushion farmers whenever the global market prices plummet. The marketing boards possess the sole legal authority to purchase commodities from farmers and to engage in trade.
Through the boards, governments typically fix official producer prices for all controlled commodities. Marketing boards provide a guaranteed market for the farmers, absorbing all marketed surplus at the official producer prices, and maintaining extensive buying networks and storage facilities throughout the production regions. Grain marketing boards commonly handle the strategic food reserves for emergency situations, and have the responsibility to import food in shortage seasons. They also stabilize prices, thus protecting farmers from sharp fluctuations.
The boards also obtain funds for sales promotion, research and extension services. To raise farmers' bargaining power- especially to prevent over exploitation of farmers by middle men. The boards also improve quality regulation. In the last two decades, the production of primary exports in our country has been dwindling, and in some cases, almost ceased altogether. The crops in question are pyrethrum, sisal, cotton, coffee, and to a lesser extent, tea. The NCPB sells seeds and fertilizers to farmers at subsidized rates and buys their produce at higher prices than the market price, as a way of offering incentives to farmers.
To ensure food security, NCPB has silos all over the country that store grains in times of surplus production and sell them in times of food shortages at affordable prices. This helps improve the country’s food supply situation. The Kenya Meat commission which was recently revived, served an important role, during the droughts that ravaged the country, by buying cattle from owners, who would otherwise have suffered a very big loss as the animals would have perished in the drought. Now the farmers can replenish their herds when the drought passes.
The Kenya Cooperative creameries is also another marketing board that buys milk from farmers at better prices than go between and hence offering a ready market to milk as a produce in the country. The Coffee board of Kenya and the Kenya Tea Development Authority also buys produce from farmers at good prices, so that farmers are ensured of a market for their produce and can be able to develop themselves from income earned. The boards then sell the produce through exports. This board deals with buying pyrethrum from farmers and finding a market for it.
Boards established by the colonialists have, on the whole, been playing a major role in marketing most of these crops, but the majority is inefficient, corrupt, and unable to bring the necessary changes to the agricultural sector to meet the challenges of global competition. Measuring whether the above objectives have been achieved is difficult, since most of these boards offer minimal public information and data important for analysis. In the current global market, private firms, with the intent of maximizing returns, will always hunt for the best world prices.
Their staff is likely to be more qualified than the bloated workforce littering our boards. Farmers would be better served by private entities. Since new farmers are always joining a given sector, the system of stabilization is disadvantageous to the old ones. Funds set aside earlier end up cushioning even the newcomers. Since the 1990s, the target prices set by the boards seem to have been out-paced by the rate of inflation. In real terms, it is the farmers who experience negative returns for their products.
Most crops in our country come from specific regions where weather conditions are favorable. Centralization of the marketing boards dampens the enthusiasm of farmers. It is in the best interest of the country for income obtained in a certain region to remain there in the hands of farmers, save for the taxes raised by the State. Some senior employees at the head offices, who do not even come from the areas in which the crops are grown, sometimes earn more in a year than do farmers in their whole lives.
Our marketing boards are government revenue collectors rather than price stabilizers. Farmers pay more taxes at the hands of these boards, than they would otherwise. The establishment of various agencies in the agricultural sector for various crops is wasteful in terms of overheads and inexperienced staff. The very objectives for which the boards were set up can be handled by the Ministry of Agriculture in collaboration with co-operatives and private marketing enterprises.
The subsidies embedded in grains pricing systems, coupled with heavy overhead costs associated with high administrative, transportation and storage costs, soon created huge tax burdens. The pan territorial pricing system meant higher transportation and handling costs in moving commodities from some remote areas, and the management of large volumes of commodities in storage was costly. In addition, the monitoring of private trade was not only costly but generally ineffective, especially for food commodities in shortage seasons. E. g.
The National Cereals and Produce Board (NCPB) of Kenya accumulated an estimated loss of about $300 million by 1993, in contrast with central government expenditure on agriculture of $33 million. Marketing boards also face organizational challenges. Their susceptibility to bureaucracy and corruption increased both the inefficiency in their operations and the transactions costs for farmers and consumers. In 2011 Kenya’s economy recorded moderate growth, driven primarily by financial intermediation, tourism, construction and agriculture. Gross Domestic Product (GDP) growth is projected to expand modestly in 2012 and 2013.
In 2011 it was held back by an unstable macroeconomic environment characterized by rising inflation, exchange rate depreciation and high energy costs. Limited rainfall in the first half of 2011 resulted in a decline in aggregate food production, a factor that contributed significantly to runaway inflation. The inflationary pressures experienced in 2011 and the depreciation of the Kenyan shilling (KES) can be traced back in part to the Central Bank of Kenya’s decision to cut its repo rate from 7% to 6% in December 2010 in a bid to revive lending and stimulate growth.
However, increased consumer demand pushed up prices and put pressure on the Kenyan shilling as demand for imports increased substantially. Inflation is projected to fall to single figures in 2012 and 2013 thanks to improved food production and stability in fuel prices. The year 2011 was marked by the passing of legislation to put into effect the new constitution and the appearance of six Kenyan citizens at the International Criminal Court, while political parties began preparing for elections expected in 2012.
Youth unemployment is a growing problem in Kenya as it makes up 70% of total unemployment. The Youth Enterprise Development Fund, operational over the last five years as the main intervention agency, has, among other actions, disbursed almost KES 6 billion to some 157 538 youth enterprises; organized youth trade fairs; built simple infrastructure for young people; and started pre-financing training for the young. The fund will be expanded in the coming years to ensure increased employment for the young.
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