MOSES KIBE KIHIKO

Background of study

Theoretical foundation of study

Abridged literature review

Research Methodology

Findings

Conclusions and recommendations 

From a hitherto almost un-bankable town which initially had two banks, and one closing down due to hostile entrepreneurship condition, leaving only one on the verge of closing as well rising to a town which has attracted at least ten (10) banks, and those that had closed down coming back, as well as many more microfinance institutions, it was interesting to see the rise of entrepreneurship in the town.

The aim of this study was to establish the cost of doing business in the counties specifically whether devolution is offering enabling environment for businesses, especially small businesses

The study was not provoked to prove whether it was a good decision to have a new constitution that came with devolution neither was it interested in ‘measure’ the worth thereof of devolution

Rather, the study was occasioned to evaluate the county government progress in various issues, notably whether they are offering an enabling environment for businesses, especially small businesses

The external locus thus considered is whether the business community, especially

small business community feels that the business environment has been very conducive

since the inception of the county government and they feel that the county government

has been very willing to serve the small business community, whether they feel that the

county government has made it easier in acquiring relevant business permits and other

required business registrations and whether they feel that the county government has

been fare in its taxation for small businesses growth, that they have indeed realized

some specific successes as a result of the county government and whether they feel that

county government has facilitated small business growth in the county or has indeed

has done enough in facilitating small business growth.

The study was largely based on Rotter (1954) theory of social learning which

introduced the central construct of locus of control with internal and external locus

of control, the former defined as the personal belief that one has influence over

outcomes through ability, effort, or skills; and external locus of control defined as

the belief that external forces control outcomes.

In this study, the focus is more on external locus of control of how the external

environment of devolved units have hindered or facilitated the growth of

entrepreneurship.

If entrepreneurship is equated to starting one’s own business, taking advantage of a

profit opportunity that presents itself in the economy or a person who is willing to

take risks; or a person who, by exploiting market opportunities, then, there must be

conducive environment of doing so.

The Organization for Economic Co-operation and Development, (OECD), (nd) also list

of indicators of entrepreneurial determinants are Government Regulation, number of

days for starting a business, number of procedures for starting a business,

registering property, as well as time it takes to prepare, file and pay the corporate

income tax, VAT

The twelfth edition of Doing Business 2015 report by World Bank Group has a

theme Going Beyond Efficiency the overall ease of doing business ranking is

an aggregation of 10 component indicators—measuring how easy it is (in the

economy concerned) to start a business, deal with construction permits, get

electricity, register property, get credit, pay taxes, trade across borders,

enforce contracts and resolve insolvency and how strong the protections for

minority investors are.

De Soto (2000) sought to discover why capitalism triumphs in the West and fails

everywhere else. He gives a case study of Egypt where he says that the person who wants

to acquire and legally register a lot on state-owned desert land must wend his way through

at least 77 bureaucratic procedures at thirty-one public and private agencies. He continues,

“This explains why 4.7 million Egyptians have chosen to build their dwellings illegally.”

In other words, if the legal system is so complicated and demanding, this sort of

environment only retrogresses, rather than advances the entrepreneur spirit people must

enjoy.

 If the above are easy, then environment the cost of doing business (CODB) environment is

easy too and hard if complicated or costly

Some examples of factors making the CODB go up in various counties are:1 Malaysian government Bureaucracy or “red tape” with which  entrepreneurs must contend which causes  delays of several months just to get approval  for applications2

In Denmark and Sweden EU citizens are less inclined to become entrepreneurs, and

more risk-averse than their American counterparts3 Ethiopia High tax rates4 Nigerian Inadequate, inefficient, and at times, non- functional infrastructural facilities, which tend  to escalate costs of operation as SMEs

The research design employed in this study is descriptive in nature. Descriptive

studies describe characteristics associated with the subject population. Data was collected

using a survey instrument (questionnaire) that was developed by the researcher on the

basis of research questions and was analyzed with the assistance of Statistical Package for

Social Sciences (SPSS) program.

The research was based in Ongata Rongai Town of Kajiado County. This county was

chosen because it is one of the few metropolitan counties in Kenya with a population of

687,312 according to 2009 population census and the town was chosen because of its

growth, expansion and development as well as its entrepreneurship from a hitherto almost

un-bankable town to a town which has attracted at least ten (10) banks as well as many

more microfinance institutions

The researcher used non-probability sampling as a sampling is the method used to

select individuals due to specific reasons.

By selecting businesses in existence for the last five years and with at least five

employees, in this sample thus is not the representative of the population from which it

is drawn due to the fact that the units in the population are not given an equal chance of

being selected.

Likert scale questionnaire, interviews which was administered to each and every

businessman or woman through face to face.

Findings from the data was analyzed using the Statistical Package for Social

Sciences (SPSS) and were presented using frequency, percentage tables, column charts

and pie charts where applicable.

The target respondents of the study as given in Table below were the 38 business

men and women regardless of the gender.

Respondents Expected Responded Respond Rate Percent

Small Business men & women

40 38 95

HypothesisH0: The business environment has been significantly conducive since the inception of

devolved units in Kenya

CROSTABULATION & PEARSON CHI-SQUIRE TEST

INTERPRETING a (p-value)

The following table which shows the p-value interpretation was used”

◦ P ≤ 0.001 there is very strong evidence against the null hypothesis

◦ 0.001 < P ≤ 0.01 there is strong evidence against the null hypothesis

◦ 0.01 < P ≤ 0.05 there is some evidence against the null hypothesis◦ P > 0.05 there is no evidence against the null hypothesis

1: THE BUSINESS ENVIRONMENT HAS BEEN VERY CONDUCIVE SINCE THE INCEPTION OF THE COUNTY GOVERNMENT * THE COUNTY GOVERNMENT HAS BEEN VERY WILLING TO SERVE THE SMALL BUSINESS COMMUNITY

It can be observed that p-value in the chi-squire test is 0.001 which is less than 0.05. This suggests that there is very strong evidence against the null hypothesis.

Chi-Square Tests

  Value df Asymp. Sig. (2-sided)Pearson Chi-Square 38.523a 16 .001a. 23 cells (92.0%) have expected count less than 5. The minimum expected count is .05.

2: THE BUSINESS ENVIRONMENT HAS BEEN VERY CONDUCIVE SINCE THE INCEPTION OF THE COUNTY GOVERNMENT * THE COUNTY GOVERNMENT HAS MADE IT EASIER IN ACQUIRING RELEVANT BUSINESS PERMITS AND OTHER REQUIRED BUSINESS REGISTRATIONS

Again, as can be observed that p-value in the chi-squire test is 0.208 which is more than 0.05. It means many businessmen agreed that the county government had indeed made it easier in acquiring business permits and other required business registrations.

Chi-Square Tests  Value df Asymp. Sig. (2-sided)Pearson Chi-Square 20.274a 16 .208a. 23 cells (92.0%) have expected count less than 5. The minimum expected count is .05.

3: THE BUSINESS ENVIRONMENT HAS BEEN VERY CONDUCIVE SINCE THE INCEPTION OF THE COUNTY GOVERNMENT * THERE ARE SPECIFIC SUCESSES WE AS BUSINESS COMMUNITY ARE FACING AS A RESULT OF THE COUNTY GOVERNMENT

Again, a p-value in the chi-squire test is 0.046 which is near to or almost

0.05. This suggests that there is no evidence against the null hypothesis.

Chi-Square Tests

  Value df Asymp. Sig. (2-sided)Pearson Chi-Square 26.639a 16 .046a. 23 cells (92.0%) have expected count less than 5. The minimum expected count is .11.

4: THE BUSINESS ENVIRONMENT HAS BEEN VERY CONDUCIVE SINCE THE INCEPTION OF THE COUNTY GOVERNMENT * THE COUNTY GOVERNMENT HAS BEEN FAIR IN ITS TAXATION FOR SMALL BUSINESS GROWTH

A p-value in the chi-squire test of 0.00 which is much less than 0.05 suggests that there is very strong evidence against the null hypothesis.

Chi-Square Tests  Value df Asymp. Sig. (2-sided)Pearson Chi-Square 45.880a 16 .000a. 22 cells (88.0%) have expected count less than 5. The minimum expected count is .05.

5: THE BUSINESS ENVIRONMENT HAS BEEN VERY CONDUCIVE SINCE THE INCEPTION OF THE COUNTY GOVERNMENT * THE COUNTY GOVERNMENT HAS DONE ENOUGH IN BEING FACILITATIVE THAN HINDERING SMALL BUSINESS GROWTH IN THE COUNTY

It can once again be observed that p-value in the chi-squire test is 0.010 which is less than 0.05. This suggests that there is very strong evidence against the null hypothesis

Chi-Square Tests

  Value df Asymp. Sig. (2-sided)Pearson Chi-Square 31.952a 16 .010

a. 23 cells (92.0%) have expected count less than 5. The minimum expected count is .11.

TABLE 14: THE BUSINESS ENVIRONMENT HAS BEEN VERY CONDUCIVE SINCE THE INCEPTION OF THE COUNTY GOVERNMENT * THERE IS EASE OF DOING BUSINESS SINCE THE COUNTY GOVERNMENT CAME IN

Finally, a p-value in the chi-squire test is 0.003 is less than 0.05 suggesting that there

is very strong evidence against the null hypothesis.

Chi-Square Tests  Value df Asymp. Sig. (2-sided)Pearson Chi-Square 29.612a 12 .003a. 18 cells (90.0%) have expected count less than 5. The minimum expected count is .26.

Five out of six cross tabulated statements were not conducive in creating

environment of doing business had very strong evidence against the null

hypothesis, thus nullifying the hypothesis that the business environment has been

significantly conducive since the inception of devolved units in Kenya.

On the positive side, the county government should be lauded for improving

many things and hence becoming easier to access some services. As a result of

computerizing the insurance of business licenses making business people pay

through the banks, it is now a lot easier to acquire business permits. Many also

pointed out that the government has initiated projects like hospitals, polytechnics,

ECD clubs and road networks

However, on the negative side, for the cost of doing business to ease, many things

need to be done including increasing sense of security through lighting, etc. to enhance

businesses especially at night, parking fees should be revised downwards as well as

make rates including billboards and road sign charged lower

Other things to be done include but not limited to improving on the infrastructure

like roads, drainage and sewerage as well as garbage disposal improve on waste

management as well as offer sufficient water to all residents and business as well as

solve traffic congestion.

In conclusion, the county government should use such findings as a mirror to better

their services so that to improve the business environment.

Moses Kibe Kihiko

Doctoral Candidate and CEO/Director of Practicum Leadership Consultancies (PLC) Co. Ltd, P.O. Box 458-00511, Ongata Rongai. E-mail: mokihiko@yahoo.com