Monday, June 20, 2011


TITUS Naikuni, the Kenya Airways CEO, could not help himself the other day. “Didn’t I tell you? Five years ago I said we would be a billion-dollar company in 10 years; now we are here,” he said directing his comments at a journalist during a recent press conference.

He was referring to the company’s turnover for their just-concluded year in March.

Well, he stretched the truth a little. Kenya Airways market valuation will have to jump five-fold to become a billion-dollar company.

The company whose tag is “The Pride of Africa,” turned over a Kshs85.8b just over sh2,200b of which about sh88.4b was the net profit. Put into perspective, the airline’s total sales last year is the equivalent of Uganda’s national budget for three months.

The airline does 380 flights a week, its 377 pilots fly their 31 aircraft fleet and last year they flew three million passengers to and from more than 50 destinations on the continent, Asia and Europe.

To sustain that size of company, lack of growth is not an option. CEOs like Naikuni, will be licking their lips at plans to have a Free Trade Area that stretches from Libya to South Africa within three years.

This was announced last week after meeting in Johannesburg of the leaders from the regional trade blocs, EAC, COMESA and SADC.

The merger of these three blocs will account for more than 500 million people and a $1 trillion economy.

I think it is safe to say that for the continent to unite, business has to thrive and with mutually shared economic interests, the politics will follow. As it is now, trade within Africa accounts for less than a tenth of all trade the continent does.

One can assume that the larger impetus for this merger is coming from South Africa, whose companies already have a head start. More importantly, the leadership understands that the only way to fulfil a pledge to create five million jobs over the next 10 years will only happen if South Africa Inc. grows.

The same pressure is felt in Kenya and even Egypt.

Governments have to create jobs to keep their citizens occupied and away from any seditious thoughts. Governments creating jobs by building a huge public administration, is a model that can only take you so far.

The more sustainable way is to create an enabling environment for your businesses to thrive, therefore creating more jobs and everybody is happy.

Companies do not expand beyond their borders out of some romantic sense of adventure. They do so because there is little scope for more growth in their own markets either because of increased competition or because the economy has reached maturity or both. Expanding beyond borders is a survival tactic.

An unintended consequence of this need for growth leads to political union, because companies for operational ease, would like to work in a uniform environment.

Borders come down, currencies are discarded in favour of a single legal tender and free movement of labour is allowed. Our own regional multinationals – all Kenyan by the way, leverage their economic muscle to influence policy to their advantage.

The potential for a region’s integration has a lot to do with the presence and viability of the region’s companies.

Companies like Kenya Airways will be the drivers of Africa’s integration.

However, the growing capacity of businesses to influence the affairs of state often has politicians up in arms, which raises a dilemma.

Governments see a stronger business community as a counter to their power and are often reluctant to help business grow. On the other hand, they need business to pay taxes and employ their citizens.

As long as politicians don’t run rogue and shoot up the whole place, the continuous interaction between governments and business ends up with businesses getting what they want, which is not always bad for the rest of us.

On the balance of things, the more companies we have like Kenya Airways, that become billion-dollar companies, the better for us.

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