Why information is key in trade

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BY EDWIN MUSONYE

There is no dispute that the current business environment in the country is harsh. Policy makers have taken an ill-advised stance that businesses flourish on their own effort without cultivation and support. However, the reality is that there is a science behind increasing the success rates of businesses operating in a country or a region. Utilising the rules of the game ensures businesses that are starting and those already running get the highest chance of not merely surviving, but of thriving. Any progressive government appreciates the role prosperous enterprises play in helping the country achieve its socio-economic goals. In Kenya, promises made in political parties’ manifestoes, economic blueprints such as the Vision 2030, and international pacts such as Sustainable Development Goals (SDGs) can easily be met if businesses grow.

Whereas, financial capital is being touted as the key factor in setting up a successful enterprise, the truth is that information is actually the chief ingredient. Information that is reliable will provide the investors, financiers and managers the resource they need to make the productive decisions.

In circumstances in which comprehensive information lacks, the important players work fumbling in the dark as their choices are based on guesswork and not on data or facts where not even substantial financial capital investments will guarantee success.A working national business information system will entail intergovernmental departments approach that stretches from the Registrar of Companies and Businesses in Attorney General Office to the Kenya Revenue Authority (KRA) and Central Bank of Kenya (CBK). The data collected is then sent to Kenya National Bureau of Statistics (KNBS) for packaging and dissemination.At the Registrar of Companies and Businesses, information relating to the industry, sub-industry, and exact business lines need to be captured. A newly registering business may be broadly in the Agricultural industry but in crop growing sub-industry and still in more exactness – in the coffee or sugarcane farming. This data can form basis for trend analysis at several levels of aggregation. Similarly, capturing geographic locations and investment size in terms of employees and invested capital range create a rich data depository.

KRA is the agency that is well poised to collect information on gross sales, gross and net incomes. It can also capture operating margins starting with individual firms and then aggregating them in trade line, sub-industries and industries. A few years ago KRA used to publicly acknowledge organisations that were Kenya’s top taxpayers.  The exercise was criticised as being discriminatory since all taxpayers paid according to their capacity yet the small-sized payer was being demeaned. Without repeating the mistake of glorifying some taxpayers over others, KRA would play a vital role in collecting useful data. However, this will require the agency to shift its mindset from that of merely collecting money to that of also appreciating gathering data.

CBK on its part as the privileged regulator of the banking sector can effortlessly gather data on loan uptakes and repayment status by businesses in a trade line, sub-industry, and industry. Once this data is given to the Kenya National Bureau of Statistics, it is processed and circulated to the interested data consumers that include the Ministry of Planning; business associations and affiliation bodies; industry regulators and collaborators; and even more importantly, entrepreneurs, business owners and managers.

The Ministry of Planning will be in a position to develop better and more practical policies and plans based on actual happenings on the ground. This is cherished when an organisation chooses to adapt the Hatua Model, designed and used by a local NGO, which dictates that data from research should inform the platform from which to work in policymaking. This therefore facilitates policy reforms, system strengthening, and advocacy stances. On their part, business associations and affiliations play a dual role in that whereas they gain from the data from KNBS; they are also essential collectors of data from their membership and delivering it to the national depository as well as sharing it internally with members. While sectors like banking, insurance, dairy and telecommunications have robust data collection and sharing practices; others such as professional services have lackluster show.

It is uninspiring that neither the Law Society of Kenya (LSK), the Institution of Engineering of Kenya (IEK) nor the Institute of Certified Public Accountants of Kenya (ICPAK) have data on their sub-sectors. It remains unknown as to how many law, engineering, or accounting and auditing firms exist in the country; and what their economic contribution in terms of revenue, employment and tax remittance are.

For the entrepreneur and investor seeking to make the initial entry into business, having access to exhaustive information will enable them to avoid some costly mistakes in terms of funds and time, which can be channeled to most promising prospects. Similarly, managers and business executives who are already in the game will make more productive decisions and consequently return better value for their investors. With this, all economic factors operate at near maximum from tax collection, capital investing, return on investment and job creation.

The information sharing environment help in establishing baselines and standards for enterprises at all levels. This is beneficial in that professional business is a game that has rules, principles and standards. For it to work, all stakeholders, both in the public
and private sector and all levels must play their part with great devotion.

The author is a technical communications specialist