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REVIVING ECONOMIES POST COVID-19

It's individuals who create wealth, not governments

Kenya’s future prosperity depends more on the determined and creative efforts of individual entrepreneurs than it does on the government.

In Summary

• A survey quoted by CBK Governor Patrick Njoroge revealed about 75 per cent of Kenya’s SME’s are risking of collapse by the end of June, if they fail to get fresh funds from banks and equity partners.

• A credit guarantee scheme backed by the CBK is currently under consideration with a view of the government providing guarantees for loans given to Kenyan-based SMEs,

CBK Governor Patrick Njoroge talks to a trader in Nairobi
CBK Governor Patrick Njoroge talks to a trader in Nairobi
Image: COURTESY

Some of the most interesting conversations I have had during my tenure here have been with Kenyans who had no real interest in hearing a foreigner tell them how beautiful their country is – the amazing wildlife and the magnificent landscapes.

If I am to summarise those views expressed to me by various individuals, I would put it this way: For the first 20 or so years after its Independence in 1963, Kenya apparently acquired a reputation as 'the Switzerland of Africa'. What was meant by this was that Kenya was a peaceful country; the capital city Nairobi had clean streets and impeccable gardens; you could walk around even at night with no fear of any attempted robbery or carjacking; both primary education and public health services were free and so on.

And this is why some of the most patriotic Kenyans I have met are not really interested in the pleasant small talk of comparing notes about game drives and beautiful safari camps. What they want to know from a Swiss Ambassador is whether there is still a realistic chance that Kenya can 'restore its lost glory' and how exactly this can be done.

In other words, will Kenya manage — within its lifetime — to be a country with adequate decent housing for all, free education and health services, clean footpaths and well-maintained roads and all the other things citizens of Switzerland are proud to enjoy but take for granted as the inevitable outcome of accountable political and economic governance?

Above all, they seem to want a restoration of the levels of economic opportunity that Kenyans once had. They want Kenya to be a country where young where  they will be able to find the kind of employment or entrepreneurial options that guarantee them a good middle-class life.

Well, I have now been here for some time and I feel that I am better able than before to answer that question. And my answer is an unequivocal Yes!

But why do I feel so confident about this?

I am a historian by academic background and what any historian can tell you is that the days when we considered the fate of a nation to be in the hands of 'great men' are long over.

We may still read about the lives of great men of antiquity or even of just a few centuries ago and how they guided the affairs of their nations. But behind all that, we know what really mattered was the calibre of people they led. And that the real makers of history are the ordinary people of any nation.

And not only are the ordinary people the shapers of their own destiny but also the real wealth of any nation. What is particularly important in a country seeking to make giant leaps of economic progress is the fact that the people are the real wealth of any nation.

Consider my country, Switzerland.

We are not richly endowed with vast natural resources, oil, or minerals. We do not have endless acres of rich fertile plains that could make us an agriculture powerhouse.

Despite all these limiting factors, for decades past when there has been any list of the richest nations, Switzerland has been somewhere near the top.

This is not because Switzerland produced a George Washington or some other famously great leader who led us to prosperity. Rather, this prosperity is a tribute to the entrepreneurial spirit of the Swiss.

So, what is it about Kenyans that has impressed me so much?

It is simply that they have an incredibly entrepreneurial national culture. This enterprising population is Kenya's real wealth. Kenyans want to be self-employed. They want to set up their own business. And so, I do not doubt that Kenya will surmount any temporary problems or setbacks that it may face and be a beacon of stability and prosperity in this region, if not in all of Africa

COVID-19 IMPACT

Let me illustrate this point with one current example:

In Switzerland, Small and Medium Enterprises (SMEs) form 99 per cent of the companies and create two thirds of jobs. Indeed, they are the backbone of the Swiss economy.

Acknowledging how important these SMEs are to the economic health of the country, when the global Covid-19 pandemic struck, the Swiss government in March unveiled its package of $20 billion in emergency loans to support small businesses. It eventually doubled this to $40 billion.

In its first week of operating, it disbursed more than $15 billion to 76,034 businesses. This is how the Swiss government assisted restaurant owners, bakers, electricians and hairdressers.

How did that work concretely? Businesses could apply for a loanof up to 10 per cent of their annual revenue. The maximal amount was $500,000. The loan is interest free and is provided by Swiss banks, while the government gives a full credit guarantee to the loan. A simple declaration is all that is needed.

If your business needs more liquidity, there is another lending process that was put in place. You can borrow up to $20 million from your bank and the government guarantees 85 per cent of the loan ata  0.5 per cent interest rate. The bank assumes the risk of the remaining 15 per cent, charging a commercial interest rate.

The key to this successful financial assistance to SMEs is that everything was done through the existing banking system. Banks and customers know each other based on an existing financial relationships. Banks already had the credit history of their clients. I heard numerous stories of small business owners who received their loan from their bank within hours!

I was pleased to see that much the same kind of thing is being planned in Kenya.

A survey quoted by Central Bank Governor Patrick Njoroge during his recent virtual press conference revealed about 75 per cent of Kenya’s SME’s are under the risk of collapse by the end of June, if they fail to get fresh funds from banks and equity partners.

A credit guarantee scheme backed by the CBK is currently under consideration. The intervention is being designed with a view to the government providing guarantees for loans given to Kenyan-based SMEs, meaning the government commits to repay banks a share of the loans, should the small traders default.

What I have seen here in Kenya over the past five years is a determined people, who have one thing in common with the many great Kenyan marathon champions: Whatever the setbacks or frustrations, they simply refuse to give up. They keep on moving forward.

All they ask of their government is the facilitation of economic opportunity.

The key message from President Uhuru Kenyatta and Health Cabinet Secretary Mutahi Kagwe in the fight against Covid-19 has been that the final victory will be due more to what individual Kenyans do, than to what the government can do for them.

I would say the same applies to Kenya’s quest for economic advancement.

It is individuals who create wealth, not governments. And so, Kenya’s future prosperity depends more on the determined and creative efforts of individual entrepreneurs than it does on the government.

DrRalf Heckner is the Ambassador of Switzerland to Kenya