The Kenyan Startup Bill
Kenya’s startup bill was published on 14th September 2020 through The Kenya Gazette supplement No 163 (Senate Bill No.16) and is set to be debated in Senate as well as Kenya’s national assembly before signed into law.
Despite not being recognised in law, Kenyan startups continue to play an increasingly significant role in the socio-economic development of Kenya both in terms of direct job creation, contribution to GDP as well as an enabler of other industries currently classified under ICT activities.
To understand why Kenya is pursuing to establish a law to recognise and support startups one must have the understanding of what a startup is and how different they are from SMEs as well as factors hindering SME optimal contribution to Kenya socio economic development.
SMEs are businesses that are a copy of existing businesses right from target customers, product offered and product pricing among other factors and key to their success is theoretically on how well the entrepreneur is able to execute their business plan. SMEs are recognised in Kenya’s laws and although effectiveness of SME policy is debatable, they are in existence.
startups are institution designed to solve challenges faced by society based on cutting edge innovation and new technology under condition of very high uncertainty.
Despite the continued strong contribution of SMEs to Kenya socio economic development as evidenced by contributing 33 percent to GDP, employing over 30 percent of the population and more specific accounting 83.6 percent of new jobs created in 2018 as well as accounting 98 percent of businesses in Kenya; SMEs are plagued by a high mortality rate of 75 percent within 3 years of inception led by wholesale-retail accounting for 73.5 percent of businesses closing as quality and sustainability of jobs (63.8% and 16.5% being paid employees for licenced and unlicenced SMEs respectively)
Significant incremental contribution of SMEs to the economy is curtailed by the fact that; over 90 percent of SMEs are micro and folding at a very high rate, top SME sub sectors are wholesale-retail which don’t have ability to capture significant value and is exposed to external shocks as witnessed by disruption due to covid 19 pandemic.
Kenya’s labour market is expected to have an additional 9 million people by 2025 (World Bank 2012) meaning between 2015-2025, the country should be creating on average 900,000 jobs annually holding all factors constant.
startups if well supported have the potential to rapidly and significantly contribute to the economy’s GDP as well as employment based on their rapid hockey stick growth due to their ability to scale fast.
Kenya startup bill main objectives are
- Foster a culture of innovation and entrepreneurship
Provide framework for the registration of startups
Provide framework for linkage of startups with private investors, financial institutions, the private sector, research institutions and such other institutions at the county, national and international level
Provide framework that facilitate investments in startups
Provide framework to facilitate the provision of fiscal and non-fiscal support to startups in Kenya
promote an enabling environment for the establishment, development, conduct of business and regulation of startups
Provide framework for the establishment of incubation facilities at the National and county levels of government
The monitoring and evaluation of the legal and regulatory framework to encourage the development of startups