Local report: Business in 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.”