Wednesday, June 4, 2008

Infrastructure + entrepreneurship = development?

George_4_web_2 George had a plan when he moved to Nairobi from Western Kenya. He shared a room in Kibera and worked for a year as a construction laborer. Making less than a dollar a day, he saved up enough money to put himself through driving school. He worked as a day laborer for another year until he found a job driving for a NGO. He's now saving money to buy his own vehicle. Once he's driving for himself, he'll save money to buy land in Western Kenya. After he's saved a little more money, he will go back to Kisumu and build some houses. He'll do the work himself. When the houses are up, George says the rent income will support his retirement.

George is in his late 20s. He knows that this plan will take him many years. It will not make him rich, but it will make him financially independent.

George is one of the most hard-working and determined people I have ever met. He is also deeply optimistic that he will achieve his goals.

Here in Kenya, I've met quite a few people like George, people with plans for how to build modest or great wealth for themselves.

I grew up in Canada. I nursed at the teat of a great social welfare state. I came out of university with a journalism and political science degree that had only reinforced my left-leaning tendencies (no fault of my professors, I studied what I wanted to study). But the longer I spend here, the more I see the power of business. I also see the critical role the government must play in supporting business development without stalling it with too many licensing and registration rules. I am increasingly convinced that infrastructure (and maybe micro-finance, though my internal jury is still out on that one) is key to helping George and other entrepreneurs to improve their lives.

Good roads make it easier for people to move materials to manufacturing centers, then to move finished goods to market. Electricity makes it possible for businesses to open earlier and close later, and for small manufacturing industries to increase their productivity.

The Kenyan Slum Upgrading Program is working slowly to provide some of that much-needed infrastructure in various communities around the country. The program is not perfect. The work is slow and sometimes involves displacing people who live in the slums, but in the end it may help improve the entire economy. If people start their own businesses, they can provide for themselves. They can also hire other people and, eventually, pay taxes that could (minus corruption and mismanagement) be invested in more infrastructure development.

I did a story for marketplace about the potential for business creation in the slums.

Someone pointed out to me recently that a more stable domestic economy is another benefit of small business development. Currently Kenya's economy depends greatly on foreign aid money, tourist dollars and internationally-owned agricultural businesses. If the country sees another, more lengthy round of domestic unrest like we had in January, the tourists and the foreign farmers may flee. But Kenyans aren't going anywhere and the money they make tends to stay in the country.

I know it's not quite so simple but for now, my hypothesis is that Infrastructure + Entrepreneurship = Widespread, Stable Domestic Development.

What do you think?