03.02.16

Local report: Business in Kenya

Nairobi, Kenya
Nairobi, Kenya

The economy of Kenya has been ranked as the largest by GDP in East and Central Africa, and it is growing. Nial Anderson looks like what the situation is like for the nation’s AV businesses.

Professional estimates make Kenya one of the  fastest-growing  economies in Sub-Saharan Africa,  with the outlook over the next few  years expected to remain positive.  However,  this  rosy  outlook  has  not  spelled  a  boom  period  for  AV  integration  projects  according to those working in the country.  

“The economy is pretty  stagnant  and  many  corporate businesses have downsized,” explains  Bhupesh Lakhani, the director of Nairobi-based  integrator and supplier Sight & Sound. “On paper the economy is described as being very promising and lucrative but when you are on the ground it feels very different.” 

So  while  in  theory  the  money  continues  to  flow,  Lakhani  suggests  that  an  integrator  wishing to succeed in Kenya will tread carefully  and  educate  themselves  about  the  pitfalls  in  particular verticals.

“We do refuse some jobs because sometimes you  do  not  get  paid,”  he  says.  “The  garment  industry  is  particularly  prone  to  corruption  for  instance,  and  while  education  is  growing  tremendously  we  have  chosen  not  to  work  in  that  because  universities  do  not  pay  on  time.  Instead we work mainly in the corporate sector, and we have found it reliable to work with repeat  customers and referrals. We are busy.” 

The changing nature of Kenya’s AV business  is  well  reflected  in  Sight  &  Sound,  a  company  that has followed the trends in the market since  it  was  founded  in  1989.  Started  by  Lakhani’s  brother  Rajesh  as  a  TV  repair  business  trading  from a 128 sq ft workshop, over the years it has  repaired and sold electronics, installed satellites,  set up content distribution systems for hotel TV  networks and installed and maintained cinemas  and home theatres. The company also operated in the rental market, but decided to bow out due  to security concerns. 

Lakhani  recalls:  “Apart  from  pieces  of  equipment  going  for  a  walk,  as  a  rental  company  at  an  event  you’re  the  first  guys  in  and the last guys out. Say the event finishes at 3am, by the time you pack things up it is 4am.  Where do  you  pack  and  load  the  equipment?  Then you have to unpack back at the warehouse  but  security  is  not  that  great  and  you  can  be  followed. This - along with a lot of competition on the market that led to people wanting to pay  peanuts for good stuff - made us realise it was  time to move on.” 

Now operating from a 400,000 sq ft office and  with 42 staff, Sight & Sound’s main source of  revenue  now  is  installing  and  maintaining  AV  in the corporate sector, an area that is thriving  due to multinationals coming in, and domestic  companies  who  similarly  want  an  impressive  corporate image. 

“At the  moment  they  want  high-end  equipment like the Samsung touch screens,” he  explains.  “BYOD is  also  a  growing  trend  here.  People see these installations and word of mouth leads to more business. We use mid to high-end equipment,  and  when  sometimes  people  want  things cheaper we still install the good equipment  but perhaps without the control system.” While  margins  on  equipment  sales  affect  integrators  everywhere,  it  is  an  especially  challenging aspect for those in Kenya.  

“We do face competition from IT companies moving into AV, but the good part is they are screwing it up.”
“The taxes here are a big killer and that’s not going to  change,”  he  says.  “The  challenge  is  large  corporates  compare  the  prices  to  what  is  available abroad.

“They may be global partners  so  the  pricing  that  they  get  direct  from  the  factories and global outlets is of course less than  what they would buy in Kenya.

“This might be a 20-25%  difference  in  price.  So  generally  we  get  brought  in  as  a  sub  contractor  to  install  the  equipment  and  do  the  maintenance.  It’s  a  long  process  to  get  service  contracts,  but  it’s  something  we  try  to  pursue.  These companies  may find us expensive but they will find Kenya  expensive generally.” 

So how does Sight & Sound grow its business  in  this  market,  especially  when  competing  in  tenders  with  others  providing  much  lower  quotes? 

“We let our installations speak for themselves,” Lakhani says.  “I get a  lot  of  word  of  mouth  advertisement. We do face competition from IT companies moving into AV, but the good part is  they are screwing it up. I say let them do it; they think doing this job is as simple as IT until they  get  their  fingers  burned.  We can  then  go  and  rectify the problem. 

“In  this  market  there  are  a  lot  of  ‘briefcase  companies’  –  guys  who  basically  operate  from  a briefcase and don’t have the staff to properly  complete  projects.  They  get  the  job,  they  get  paid for it whether the system works or doesn’t  work but if you go looking for them afterwards you find they have closed, bribed their way out  or  started  another  company.  We  suggest  to  potential clients that they ask for the company’s  payroll  details  so  they  know  whether  company  has enough staff to do the job. If they are not  careful  they  can  end  up  spending  twice  their  initial budget because they went with the wrong  company.” 

While  finding  and  keeping  trained  staff  is  as much of an issue as elsewhere in the world,  Lakhani  says  this  aspect  does  not  bother  him  personally. 

“The  best  thing  for  us  is  that  Rajesh  is  an  engineer and I am also,” he says. “If one of our  junior engineers wants to leave it’s not a problem  – we can do these jobs ourselves.  We’ve grown  our company by being hands on because we love  what we do. We promise to over-deliver in our  projects; this is what has sustained us through  the rough times and even when there’s little AV  business generally we’ve still been busy.”