The sprint towards export-oriented growth in Kenya

April 26, 2019

     By Maria Faciolince     

Guest post from Navalayo Osembo

I make running shoes in Kenya (we’re called Enda), and encounter any number of impact investors, NGO staff, and other people in the social enterprise space who ask me something along the lines of “what are you doing for impact?” I laugh a little bit each time. 

Because what I do – export-oriented manufacturing – is among the best-evidenced means of alleviating poverty. If you look at the countries that have gone from among the poorest to middle income, or even richest – such as China, South Korea, Taiwan, Singapore and Taiwan – they’ve all had a phase of their economic growth that involved significant manufacturing growth.

Yet, when people talk about impact in social enterprise, they often just mean selling essential services to poor people.

Don’t get me wrong. Yes, we need to get children in school, clean water for everyone, improved healthcare access and all other manner of essential services. But, hopefully most FP2P readers would agree these should all be public services. Private sanitation, water, education, and healthcare can have their place, but the services are better and societies healthier when they are public.

If we want these services to be delivered sustainably and in a way that is responsive to the people they are meant to serve, they have to be provided through governments (again, I’m hoping you agree here).

But of course, to pay for these services, governments need revenue. In many countries in the Global South, especially within the African continent, this revenue is mainly in the form of taxes and aid. While aid plays a critical role in development, you might agree that efficient aid management must involve national governments. National governments can only be efficient if they use aid as temporary supplementsfor their needs. When governments become too dependent on aid, they are unable to create sustainable structures and programs. These structures are likely to exist and be resilient when they are funded by taxes. 

Income tax, VAT, and corporate taxes are 3 of the biggest tax revenue streams for governments. If we look at the UK government as an example (not saying it’s a model, just an example) those 3 taxes account for more than 50% of government revenue. So to generate the revenue we need workers earning formal incomes, buying goods in formal markets, and companies earning profits and paying corporate taxes.

Which brings me back to manufacturing. By making consumer goods for a global market, we help individual workers and their communities escape poverty as well as enabling the government to provide essential services. 

If you disagree with me up to here, hop down to the comments. I would love to have my thinking battle-tested.

But if you’re still with me and not typing a comment yet, I assume it means we are still on the same page (literally and figuratively). So let me talk about the hard part: financing for manufacturing.

Development Finance Institutions (DFIs) such as the World Bank and the African Development Bank do finance manufacturing, but most of them don’t write cheques with fewer than two commas. Meanwhile, traditional commercial investors are moving to countries with the lowest labour and electricity costs – like Ethiopia and Bangladesh. And while there are a diversity of impact investors in this world, and I’ve met some who I love and agree with deeply, the majority of impact investors I’ve encountered see ‘impact’ as selling Chinese-made goods, e.g., solar products, in Kenya rather than selling Kenyan-made goods around the world.

Which is why I have turned to crowdfunding. It is an innovative tool that has significant potential for development, so long as consumers shop their values and back the companies like ours who are looking to manufacture quality products  in Kenya.

By crowdfunding Kenyan made running shoes, we have been able to cover the initial start-up manufacturing costs and reach a large crowd of people, including my heroine Lupita Nyong’o. We did our first crowdfunding campaign in 2016 and are in the midst of our 2nd campaign now to launch our next model of shoe. Please do check it out if you agree with me so far. 

If we’re successful, it means consumers around the world get top quality products and we take another step in the process of economic growth and poverty reduction. It also means that we will be contributing to wealth redistribution by channeling money from the global running footwear industry into Kenya. Wealth distribution not only reduces income inequality, but also ensures that economic growth actually reaches the people who need it the most, through job creation and provision of essential services by governments. By increasing tax revenues, we will get better government services, and build a population that feels the government should be accountable to them as taxpayers.

I love the title of this blog, because I see my work as doing precisely that: moving with my fellow Kenyans from poverty to power.

[1]Lancaster, C. (2007). Foreign aid: Diplomacy, development, domestic politics. Chicago: University of Chicago Press.