What the Kenyan SME Should Look Forward to in 2018

The SME sector continues to be a very strong economic pillar for to the Kenyan economy even with all odds stacked against it. Coming from a brutal 2017 which spared no single sector SME included although based on research by Wylde International (Taking Stock Of 2017; A refection of Kenyan SMEs) indicates that the SME sector performed relatively well compared to listed companies and other bigger companies.

The year 2018 is upon us and therefore SMEs need to plan appropriately for the year early enough in order to take advantage of available opportunities as well as make contingency plans for less than desired business environment.

Part of planning for a business is mapping possible risks and opportunities that may or may not occur in the course of the coming year based on historical and existing trends and developing or aligning internal plans accordingly.

General source of indicators that SME can work with are; National Government priority shifts, County Government priority changes, Development partners such as World Bank, African Development Bank among others change in strategic focus, Sector changes, consumer trends and disruption.

The recent declaration of the Jubilee government on focusing on economic development through the president's 54th Jamuhuri day celebration can be taken as an indicator of the national government priorities going into 2018 and the next 5 or so years. This is based on the trend that Kenya has of aligning national priorities based on political manifestos rather on consistent strategic plan such as the Vision 2030. The president indicated 4 areas which his administration will focus on namely; Food security, Affordable housing, Manufacturing and inexpensive healthcare.

Similarly changes in the education sectors in terms of free secondary education and 100% admission of all primary school leavers means that public secondary schools will be stretched to capacity leaving enough room for private secondary schools to absorb the exec capacity profitably
Based on these indicators SME in the mentioned sectors must develop plans to take advantage of the upcoming opportunities.

The recent report by the World Bank on ease of doing business at sub national level ranked the various counties in Kenya and the result was as follows starting with top; Buisa, Mombasa,Nyeri,Isiolo,Usasin Gishu and Nairobi respectively. Based on recent elections and track record of new leadership; Makueni,Machakos and Kitui counties are also a must watch.

SMEs must be cognizant of sector subtle changes such as retail sector where the bigger and more established retailers such as Nakumatt and Uchumi are struggling. This struggle affords smaller retailers an opportunity to eat into the market share by quickly developing an advantage either in terms of moving into vacated spaces, consolidating their supply chain to enjoy economies of scale enjoyed by big retailers or changing their business model to web driven attracting younger shoppers.
Similar to retail sector ; the e-commerce sectors has recently seen Safaricom throw its hat in the ring with introduction of Masoko signifying not only its entry into e-commerce but also possible disruption of retail, House rental and purchasing, groceries among others.

The financial institutions may continue to struggle even if the interest cap is removed due to the continued rise of FinTechs who are slowly taking market share of some key products and services such as Invoice discounting, LPO financing, Asset financing among many others.
Other sector changes are: Energy where due to continued increases in cost of energy more and more opportunities will open up in renewable energy such as solar, Annual 2 to 3% increase in population provides demand for Agricultural and fast consumer goods and finally with the tourism sector growing 7.7% in 2017 despite being an election year, it's expected that it will grow by a bigger margin of more than 10% holding all factors constant.

Major risks SMEs can look out for are: Unstable political environment, Inflation, Foreign exchange fluctuations and possibly negative effects of climate change. With good planning 2018 is going to be the best year yet for Kenyan SMEs.

About Author
Victor Otieno is Director-Research and Innovation at Wylde International This e-mail address is being protected from spambots. You need JavaScript enabled to view it.