Thinking of starting a business in Kenya?
Well, not all businesses are created equal. While there are some ventures that are considered relatively safe, and thus promising, some may actually fit the term: worst businesses to start in Kenya.
Some sectors in the Kenyan market are notoriously difficult for entrepreneurs due to factors such as:
- Oversaturation
- Technological advancements
- Regulatory hurdles
- High operation costs, and
- Changing consumer behaviors.
Don’t get me wrong, some of the ideas below can easily net you Kshs 100,000 and above a month within 6 – 12 months of operation, but they carry their set of risks that can be quite costly in the end.
These risks might include you:
- Losing your investments
- Accruing debts, or even
- Losing face
Thus, understanding which business opportunities carry substantial risks can save you both time and resources.
Your entrepreneurial spirit should be directed towards gaps within the market that promise growth, rather than ventures that may lead to financial setbacks.
Risky business ventures in Kenya
Some risky business ventures in the country include:
Table of contents:
1) Government tendering
Engaging with government tenders can be a lucrative but precarious area.
Engaging in government tendering as a primary business model is a risky move that can be quite costly.
The process is often marred by delayed payments, bureaucratic red tape, and a high level of competition, including from well-established firms with deep pockets.
In 2023, counties owed supplies over Kshs 159 billion in pending bills, and following a court order that demanded an audit be done before the payments could be made, suppliers would have to wait for a whole year.
In business, cash flow is everything, and when nearly all of yours is tied up at the government, there’s only so much you can do, before you go under.
The government’s push towards supporting local industries and small businesses is commendable, but the unpredictability and the often-politicized nature of the tendering process can lead to significant financial instability for new entrants.
2) Energy business (Renewable)
Investing in Kenya’s energy sector, particularly renewable energy, seems promising given the country’s abundant resources like solar and wind.
However, the sector is fraught with regulatory issues and substantial upfront investment costs.
The return on investment can be slow, and the complex nature of setting up energy plants can deter potential entrepreneurs.
The market is dominated by government and large private entities, making it tough for smaller independents to break through.
Reliability of technology and maintaining profitability amidst fluctuating global energy prices add to the challenges.
Products such as solar panels and accessories doesn’t make sense to Kenyans due to high costs. For instance, to power your entire home, you will need at the very least Kshs 750,000. Given that most households spend Kshs 50,000 per year in KPLC bills, that’s like paying for power 15 years in advance.
While KPLC prices are quite expensive, they are still the most affordable option for many Kenyans.
3) Political blogging
While freedom of expression is a constitutional right in the country, political blogging, especially those with a critical edge, can attract unwarranted attention and potential legal battles.
The political climate is fraught with sensitivity, and bloggers often find themselves walking a fine line between expression and offense.
Let’s also remember that Adsense pay is measly, so you will need quite a lot of traffic to make real money. More traffic means more content, more content means you need to shell out your savings to hire writers at a minimum of Kshs 1500 a post.
Monetizing such content with sponsored posts can be challenging, given the reluctance of advertisers to associate with politically charged platforms.
So, Building a sustainable income from a political blog is difficult unless you become heavily biased, which undermines credibility, but then again most Kenyan political bloggers have built their blogs this way, so there’s that.
4) Cybercafe business
The advent of affordable smartphones and the widespread availability of home internet have significantly diminished the demand for cybercafes.
Most Kenyans now access the internet directly from their devices, making cybercafes an obsolete model in urban areas and increasingly so in rural regions.
This trend is accelerated by mobile data providers offering competitive packages, further eroding the customer base for cybercafes.
There’s also direct competition with free Wi-Fi hotspots provided in public spaces, such as restaurants, libraries, learning institutions, and shopping centers.
5) Charcoal selling business
Despite being an established source of fuel, charcoal selling faces two main challenges: environmental regulations and the shift towards renewable energy sources.
The Kenyan government has been stringent about conserving forests and curbing deforestation, leading to tight restrictions on charcoal production and sale.
Also, there’s a growing consumer preference for cleaner, more sustainable energy sources like LPG and biogas, further shrinking the market for charcoal.
6) Mobile loan lending firm
While mobile money platforms are thriving, opening a mobile loan lending firm comes with high financial risks and tight government regulations.
Starting a mobile loans lending firm in Kenya now faces significant hurdles, including stiff competition and regulatory challenges.
The industry itself is highly competitive, with numerous established players already dominating the market.
Companies like Husler Fund, M-Shwari, Tala, KCB Mpesa, and Branch have a strong foothold in the country.
The Central Bank of Kenya (CBK) has introduced tighter regulations on digital lenders to protect consumers from predatory lending practices, requiring firms to obtain licenses and adhere to strict operating guidelines.
Not to mention the fact that many Kenyans tend to default on their loans, and working with a collection agency comes with its own measure of substantial costs.
Considering the cost of starting this type of business, the returns might not be worth it at all.
Given these considerations, starting a mobile loans lending firm in Kenya in 2024 would require careful planning, a solid understanding of the regulatory landscape, a strong risk management framework, and strategies to differentiate from competitors and establish trust with potential customers.
7) Retail roulette
Retail in Kenya has seen some dramatic failures, particularly in the form of large supermarkets and retail chains.
High rental costs in prime locations can cripple a new business before it gains momentum.
Also, the Kenyan market has experienced saturation in certain retail segments, leading to fierce competition and thin profit margins.
There is also a growing trend towards online shopping amongst consumers, which traditional brick-and-mortar stores are struggling to compete with.
Small retail businesses often fail to maintain sufficient cash flow and find it difficult to manage inventory effectively, leading to significant losses.
8) Movie shop
The popularity of streaming platforms like Netflix, and Amazon Prime, and local services like Showmax has significantly reduced the demand for physical movie shops.
Consumers prefer the convenience and variety offered by these online platforms, making it challenging for traditional movie shops to compete.
Once a popular venture, movie shops are rapidly being replaced by streaming services and digital media choices.
9) Matatu business
The matatu industry in Kenya is highly saturated, with numerous operators competing for passengers on popular routes.
New entrants often struggle to establish a foothold in the market, as they face stiff competition from established players with loyal customer bases and influential associations.
As a business owner, you will also part with various fees, including:
- Parking fees
- Sacco fees
- Traffic police bribes
- Repair costs
- Fuel levy
10) Betting firms
A betting firm may seem enticing due to high market demand, but it exists in a heavily regulated space with a focus on gambling laws.
The Kenyan government has been increasingly regulating the betting industry, imposing higher taxes and stricter licensing requirements.
This has led to the closure of several betting firms and created an uncertain environment for new entrants, making it a risky business venture.
The fluctuating legal landscape can shift abruptly, affecting operations.
11) Insurance company
Starting an insurance company involves navigating a complex regulatory landscape and a saturated market. The financial commitment and risk involved are considerable.
12) A liquor store
Opening a liquor store often entails navigating intricate licensing and government regulations.
With market saturation, you face stiff competition from other wine and spirits outlets.
13) Bookshop business
Bookshops struggle to compete with digital media and e-commerce platforms.
Changes in consumer preferences away from traditional print media can lead to uncertainty for such ventures.
Rent in CBD, and busy areas such as Sarit Center and popular malls is unreasonably expensive, given that bookshops take quite a good amount of space.
Most bookshop businesses are already struggling, with established brands such as Text Book Centre diversifying their ventures.
14) Clothing boutique
The fashion retail industry in Kenya is highly competitive, with numerous local and international brands vying for market share.
New entrants may face challenges in differentiating themselves and attracting customers in a crowded market.
Also, the high cost of rent in prime locations and the need to constantly update inventory to keep up with changing fashion trends can put pressure on profit margins.
15) Restaurant business
While the food and beverage industry can be lucrative, starting a restaurant in Kenya comes with its own set of risks.
High competition, rising food costs, and changing consumer preferences can make it difficult for new restaurants to succeed.
Moreover, the COVID-19 pandemic has significantly impacted the hospitality industry, with many restaurants struggling to stay afloat amid lockdowns and reduced dining capacity.
16) Traditional photo studio
Digital media and advancements in personal photography devices diminish the need for a traditional photo studio.
The narrow scope for professional photography requires innovative strategies to stay relevant.
17) Forex trading
Forex trading can be a highly speculative and risky venture, especially for inexperienced traders.
The forex market is highly volatile and can be influenced by various factors, such as economic events, political instability, and market sentiment.
Many individuals may be attracted to forex trading as a way to make quick profits, but without proper knowledge and risk management strategies, they can easily incur significant losses.
Conclusion
The businesses above may be considered unfavorable due to factors such as market saturation, intense competition, regulatory challenges, changing consumer preferences, and high capital requirements.
Thus, if you are looking to start a local business in Kenya, you may want to explore alternative sectors like e-commerce, agribusiness, real estate, or other industries with higher growth potential and fewer barriers to entry.
