With reliable information, investors, financiers and managers can make informed and productive decisions that will lead to effective use of resources.
By EDWIN MUSONYE
The business environment in Kenya remains harsh even as policy makers take an ill-advised stance, leaving businesses to operate without support. Yet, the science behind increasing the success rate of businesses operating in any country or a region is ensuring start-ups and running businesses get the highest chance of survival and thriving.
In Kenya, promises made in political parties’ manifestos, economic blueprints such as the Vision 2030, and international pacts such as Sustainable Development Goals (SDGs) can be achieved if businesses flourish.
Whereas, financial capital is being touted as the key factor in setting up a successful enterprise, information is the chief ingredient. With reliable information, investors, financiers and managers can make informed and productive decisions that will lead to effective use of resources. In circumstances where comprehensive information lacks, businesses fumble in the dark. Their choices are based on guesswork and not data or facts. In such cases, not even substantial financial capital investments will guarantee success.
A working national business information system will entail intergovernmental departments approach that stretch from the Registrar of Companies and Businesses in Attorney General Office to the Kenya Revenue Authority (KRA) and Central Bank of Kenya (CBK). The data collected is then sent to Kenya National Bureau of Statistics (KNBS) for packaging and dissemination.
At the Registrar of Companies and Businesses, information relating to the industry, sub-industry, and exact business lines needs to be captured. A newly registering business may be broadly in the Agricultural industry but in crop growing sub-industry and still in more exactness – in the coffee or sugar cane farming. This data can form the basis for trend analysis at several levels of aggregation. Similarly, capturing geographic locations and investment size in terms of employees and invested capital range creates a rich data depository.
KRA is the agency that is well poised to collect information on gross sales as well as gross and net incomes. It can also capture operating margins starting with individual firms and then aggregate them in trade line, sub-industries and industries. A few years back, KRA used to publicly acknowledge organisations that were Kenya’s top taxpayers. The exercise was criticised as being discriminatory since all taxpayers paid according to their capacity, yet the small-sized payer was being disregarded.
Without repeating the mistake of glorifying some taxpayers over others, KRA would play a vital role in collecting useful data. However, this will require the agency to shift its mindset from just tax collection to gathering data.
CBK being the regulator of the banking sector can effortlessly gather data on loan uptakes and repayment status by businesses in a trade line, sub-industry, and industry.
Once this data is given to the KNBS, it is processed and circulated to the interested data consumers that include the Ministry of Planning, business associations and affiliation bodies, industry regulators and collaborators; and even more importantly entrepreneurs, business owners and managers.
With this data, the Ministry of Planning will be able to develop better and more practical policies and plans based on actual happenings on the ground.
Business associations and affiliations play a dual role in that whereas they gain from the KNBS data, they are also essential collectors of data from their membership. The data should be delivered to the national depository and also shared internally with members. While sectors like banking, insurance, dairy and telecommunications have robust data collection and sharing practices; others such as professional services have lacklustre show. Effectively, having access to exhaustive information will enable entrepreneurs and investors seeking to make the initial entry into business to avoid mistakes that will lead to losses and time wastage. Those resources can otherwise be channelled to most promising prospects. Similarly, with data, managers and business executives who are already in the game can make more productive decisions and consequently return better value for their investors. Ultimately, the government benefits as resources invested in the right places based on statistics.
Edwin Musonye is a freelance writer based in Nairobi.