IMFact on the financial viability of Kenyan SMEs in intra-Africa trade

In a recent interview on CNBC Africa, Timothy Gathima, the Country Director for Kenya at IMFact, delved into the financial viability of Kenyan SMEs in intra-Africa trade. The conversation centered around the competitiveness of Kenyan SMEs in the face of established businesses in other African countries, particularly those with lower production costs. Gathima highlighted the challenges faced by local industries when competing with cheap imports from countries like Turkey and China, as well as high-quality produce from neighboring countries such as Uganda and Tanzania. High production costs and inefficiencies have made it difficult for Kenyan SMEs to match prices, leading consumers to make decisions based on affordability rather than brand loyalty. The role of access to sufficient and affordable financing for Kenyan SMEs was also a focal point of the discussion. While Kenya boasts a sophisticated financial ecosystem with various sources of capital, including commercial banks, micro-finances, SACOs, venture capital funds, and the Nairobi Stock Exchange, the cost of financing remains a significant barrier. The government's high interest rates and risk-averse banks make it challenging for SMEs to secure funding, despite the availability of diverse financing options. Gathima emphasized the need for policymakers to address interest rates to incentivize lenders to support SME growth. Currency fluctuations and their impact on Kenyan SMEs engaged in cross-border trade within Africa were also explored. Some SMEs have resorted to trading in hard currency like US dollars to manage currency exposure risks across different African countries. Additionally, maintaining capital in foreign currency or doing business in acceptable currencies like the euro and the dollar has helped SMEs navigate currency fluctuations. Gathima discussed the role of logistics and infrastructure in facilitating cross-border trade for Kenyan SMEs. Advancements in online services and innovations like freight services have simplified logistics management for SMEs, eliminating the need for asset ownership and enabling broader accessibility to markets. Government investments in infrastructure, such as road networks and internet connectivity, have further enhanced the logistics landscape for SMEs. Marketing emerged as a crucial aspect of SME growth, particularly in reaching diverse customers across various African countries with distinct cultural preferences and buying habits. Gathima stressed the importance of understanding and aligning marketing strategies with local cultures to effectively promote products and services. Leveraging technology, utilizing influencers, and tapping into the expertise of young professionals were identified as key approaches for Kenyan SMEs to successfully market their offerings in different African markets. Overall, the interview shed light on the complex dynamics influencing the financial viability and competitiveness of Kenyan SMEs in intra-Africa trade, emphasizing the need for strategic planning, policy support, and cultural sensitivity to navigate the challenges and seize the opportunities presented by the evolving African trade landscape.