In mid-June Kenya’s Treasury Secretary Henry Rotich announced the country’s budget for the 2018-2019 financial year – the largest in Kenya’s history, portending accelerated demand from customers across the public sector.
This financial stimulus offers executives potentially lucrative opportunities to drive sales by tapping demand from public sector institutions. As the largest customers in this crucial East African market, these institutions procure billions of dollars of goods and services annually.
I was in Kenya recently to assess how spending across the public sector will create opportunities for MNCs, and what executives need to get right to capture this demand.
Rotich’s focus is financing pledges made during the tightly contested election in October 2017, which ushered President Uhuru Kenyatta and his Jubilee Party back into power. Specific promises include expanding access to healthcare and education, increasing agricultural productivity, and investing heavily in transport, electricity and housing infrastructure – with a view to spurring job creation by encouraging industrialization, and raising living standards.
These spending priorities offer attractive prospects for MNCs across several industries:
- Pharmaceutical and medical devicesfirmsstand to benefit from the new Universal Health Care (UHC) system to be rolled out, beginning in H2 2018. Executives I spoke to expect increased demand from the country’s main purchaser of medicines and other medical supplies, the Kenya Medical Supplies Authority. Demand created through the public UHC insurance mechanism should drive increased purchasing from B2B customers as well.
- MNCs in the industrials space are in prime position to capture upside demand for everything from heavy-duty machinery to components to building materials created by mega projects such as the new Kenya-Tanzania highway. One infrastructure consultant I met noted how, while mega transport and power projects tend to grab the headlines, low-cost housing schemes – funded by lenders such as Shelter Afrique – also offer attractive prospects for contractors.
- Technology companies said they expect demand for sophisticated project and data management solutions to rise as infrastructure schemes get underway, and the government seeks to expand the provision and quality of public services by increasingly using digital “e-government” platforms. Government ministries will also adopt technology to increase efficiency, improve compliance and tighten its performance management systems.
- Consumer industries can leverage the 61% of government spending going to recurrent spending directly by providing for public institutions’ need for consumable products such as catering and cleaning supplies, as well as office equipment. Executives stressed, however, that procurement processes to sell these goods can be onerous, with distribution partners sometime experiencing payment delays – particularly when selling to local-level county authorities.
Tapping demand from Kenya’s large and growing public sector faces wider challenges, too.
A refrain I heard repeatedly was that executives lack visibility into new opportunities, making it difficult to be proactive in aligning products and services with customers’ needs and expectations, or align their team on effective sales strategies. Corruption also emerged as an ongoing risk (although the situation is improving), while competition for projects and related supplier contracts from emerging market MNCs, especially from China, is intensifying.
Re-think your approach
These challenges do not preclude Western MNCs from successfully selling to public sector customers in Kenya.
Many are winning large-scale contracts, supplying products ranging from diagnostic equipment to irrigation systems. Based on my conversations executives based in the market, the number one feature distinguishing MNCs that are winning public sector business was the ability to gather and leverage local insights. This was followed closely by gaining access to, and building relationships with, senior public-sector influencers and decision-makers.