This article has originally been published on the CUBE IN platform of the EU, meant for SME’s in emerging markets.
The 5 most important things to know about doing business in Kenya are the following:
- Business is done between people and not between companies. Building up a personal relationship is key.
- Kenyans are, generally speaking, collectivistic people and, as such, they trust their own extended family and the people from their ethnic group first and foremost. As a business person from Europe, you remain part of the ‘out-group’ and, therefore, it is wise to remain cautious, to check and follow up, and to build the business in small steps.
- Kenya offers many business opportunities for those who have time. Time is needed to invest in building relationships, overcoming set-backs, dealing with bureaucracy, understanding interests and how the networks function.
- People use non-confrontational, indirect communication among equals, very respectful language to a senior, and possibly more direct feedback and forms of addressing to a subordinate. Being able to package your message and to listen between the lines are very important skills.
- Make sure to have your paperwork in order (work permits, business licenses, bank guarantees, taxes and statutory reductions) to prevent paying unnecessary high fines or, worse, having to bribe specific authorities.
According to the Ease of Doing Business ranking of the World Bank, Kenya is almost the best country for business in Sub Saharan Africa, with only Rwanda above it. Out of the total of 190 countries worldwide, Kenya has risen from place 136 in 2015, to place 56 in 2020. The Economist Intelligence Unit places Kenya 74th on the global ranking. These are very respectable scores. From its independence onwards (in 1963), Kenya has always followed an accommodating policy for business. According to The Economist, the government will remain committed to pro-market reforms, including deregulation, public-private partnerships and trade liberalization. Finally, the African Development Bank (ADB) states that the private sector is vibrant and resilient due to its diversity.
Imperative social networks
Kenyan society is a collectivistic society. This means that its people are organized in large extended families, which are tied together in ethnic groups through marriage, common geography, history and language. The ethnic groups, in turn, are also connected, but these ties demand less loyalty and responsibility. These ethnic groups had been neighbours, with their own collaboration, trade and rivalry patterns, before they were pushed together into one country during colonization. As such, they share a common colonial history and almost 60 years as an independent nation state. This has created a certain level of nation-building among the ethnicities.
Within the modern state, as well as through education, economic or religious activity, and especially within the cities, people from different ethnic backgrounds mingle, knitting the imperative social networks of former classmates, colleagues, business partners, etc. In fact, Kenya has a vibrant business community with people from various backgrounds and at times it may seem as if ethnicity does not play a major role. Yet the unrest after the 2007 elections has made it very visible that people remain much attached to their ethnic identity, that there is some lack of trust among them and that ethnicity remains a major determinant of one’s place within the networks.
This being the fabric of society, the question then becomes: how to link up with these large webs of people, families and ethnic groups? After all, these networks form the basis of doing business and getting things done. The main answer is that this is done through introduction. It is the relationship between people that counts, so the trust in the person who does the introduction will, to an extent, be transferred to the one being introduced.
Besides being a collectivist country, Kenya also has a high score for power distance, meaning that there is a significant amount of hierarchy. Differences in power are acceptable and leaders deserve respect. Hence, within the networks, one is able to observe people of authority. As a consequence, it is wise to pay close attention to the person introducing you, since this will influence your position in the network. You may look to be introduced through somebody from your embassy or possibly people from the networks in your home country, either from the government or with business in Kenya. Over the course of time, it is advisable to get to know and seek introductions of locals with social standing.
As mentioned, Kenya has a large cosmopolitan business community, made up of Kenyans as well as expats from all continents. There are trade missions, trade fairs, business events and network institutions. There is an active Rotary Club and the InterNations Network is also interesting. Make sure to visit and hook up to these networks.
When people with Kenyan descent get introduced to each other, they often start by establishing two things. The first is to find out if and how they are connected within the large web. This determines, to an extent, the second thing that needs to be found out (albeit unconsciously): how do they relate to each other hierarchically. In a country with large power distance, a difference in power is existential and one needs to know how to behave, i.e. who needs to show respect to whom. Revealing that you have some powerful people in your network will not be considered bragging, but is rather admired and respected.
While getting acquainted with people, the people in Kenya have an interesting mix of formal yet relaxed behaviour. Dress code is quite conservative, appearing smart and well dressed. There’s the exchange of who you are, whom you know and what’s the nature of your business. In case you’re part of a religion, this may create a bond; if not, the subject is better avoided. Do avoid talking about politics as well. It is largely appreciated if you show a genuine interest in the well-being of the other and his or her family, maybe not at the first introduction but surely after that. It is advisable to remember all personal information and to enquire again next time you meet. In a collectivist society, business and private life are intertwined; people want to know you before they can trust you. But this doesn’t mean you should share everything you think either.
Humour is well appreciated and the ability to make some light jokes will do wonders for the relationship. The humour used in Kenya is not that of mockery nor of the cynical kind, but rather a graceful, flattering humour, putting the other person in a positive light. It is possible to make some small promises, even if you cannot keep them. Here it’s the intention that counts, more than the actual execution, and a simple explanation afterwards of why it proved to be impossible to keep the promise is often accepted quite easily. Bringing a small gift on a second occasion is a good idea and this will be explained further in the article on negotiation.
The hierarchy in Kenya gets reinforced by the fact that it is one of the more masculine countries on the African continent. This means that status symbols and showing one’s success are encouraged. Business climate can also be quite assertive and competitive. Remember that the invisible fight for scarce resources can be quite fierce on the African continent. If you trust too quickly and too easily, you are offering scope for abuse and this is not well respected. Don’t let the fox guard the hen house. Keep in mind that you are ‘out-group’ and move slowly, strategically, and gracefully to maintain your relationships.
Apart from the good and necessary paperwork to mitigate your risks, there are three things to keep in mind for risk reduction. Firstly, it is possible to inform yourself about a potential candidate through third parties. This may be considered sneaky in other cultures. In this case, since every connection may have consequences for the whole web, it is generally considered a wise thing to do. Choose one or two informants, ask for their advice, which is, for them, often an honourable thing to be asked for and to provide. When doing this, package your question in a larger (high context) story, communicate indirectly, listen carefully to the answer and observe closely for the non-verbal clues as well. People may not give you the feedback directly, but reflect on the message you received and accept it.
Secondly, as you go about your business, always continue to build your network. Networks prove to be one of your main safety-nets in Africa in general. If you are wondering what is going on with one of your partners, it is quite usual to ask others in the vicinity to go and check upon him or her. In addition, you can use your network to seek advice on another issue and being part of the larger network will motivate your partners to live up to the occasion.
Thirdly, enjoy and always stay in close contact with your business partners. Establish personal bonds, reconfirm, follow up and check how they (and their families) are doing. A regular face to face meeting is often necessary; a phone call is preferred above an email. All in all: stay connected!
Short case study
A manager from Spain wanted to start up a business in Kenya. He was part of a larger Spanish multinational but business was very slow during the 2008 recession and the African opportunities seemed attractive. He informed himself about the country, read a few books and articles and followed one or two seminars about doing business in Africa. On those occasions, he connected to a few business people from Spain who were active in Kenya and received quite a good impression of the country.
He went to visit Kenya for a week and a Spanish businessman in Kenya introduced him to a few other expats and to one or two local business people. He realised one week would not be enough and extended his stay for another week, to give him time to visit his new, preliminary contacts. In this first phase, he had to go up and down from Kenya to Spain a few more times, in order to work out all the practicalities and paperwork and in the meantime extending his contacts, which took more time than he expected. After setting up base, he decided to become a member of the Rotary Club of Nairobi and this would prove to be one of the main sources for business development, new partners and assignments. Through this network, he was able to double his turnover in the first years of his business.
References & Interesting Links
- African Studies Centre’s Country Portal: http://countryportal.ascleiden.nl/kenya
- Hofstede, G., Hofstede, G.J., Minkov, M. Cultures and organizations: Software of the mind. New York: McGraw-Hill, 2010
- Jordans, E., Ng’wena, B., Spencer-Oatey, H. (eds). Developing Global leaders: Insights from African case studies. Palgrave Macmillian, 2020 (see p.212)
- World Bank’s Ease of Doing Business: https://www.doingbusiness.org/en/rankings (consulted on 24-4-2020)
- The Economist Intelligence Unit: https://country.eiu.com/kenya (consulted on 24-4-2020)
The original article can be found here: Finding Business partners in Kenya.