Let’s be honest; many businesses fail, not just because of the hard economic times in Kenya but because of bad choices.
Entrepreneurship can be a pathway to success if approached well. However, not all business ventures are created equal. Some industries face significant challenges, including high risks, low returns, or outdated business models that struggle to keep pace with evolving consumer preferences and technological advancements.
Read on to learn about the worst businesses to start in Kenya.
Also Read: Best Business Ideas in Kenya Today
10 Worst Business Ideas in Kenya Today
This article goes deep into the worst businesses to start in Kenya, looking at the main reasons behind their failure and the factors that make them risky investments.
1. Movie Shop
The once-thriving movie shop business in Kenya has experienced a dramatic decline over the past decade. This shift can be attributed to several factors:
– Streaming Services: The rise of streaming platforms such as Netflix, Showmax, and YouTube has altered how consumers access entertainment.
– Convenience Factor: Modern consumers prioritize on-demand access to content, eliminating the need to visit physical stores for movie rentals or purchases.
– High Operational Costs: Movie shop owners face significant expenses in licensing fees, inventory management, and store maintenance, which are difficult to recoup in the current market.
2. Liquor Store
That’s right!
While the demand for alcohol remains high in Kenya, starting a liquor store comes with a unique set of challenges that make it a risky venture:
– Stringent Regulations: The Kenyan government imposes strict licensing requirements and regulations on alcohol sales. Obtaining and maintaining a liquor license is both expensive and time-consuming.
– Regular Inspections: Liquor stores are subject to frequent inspections, with the potential for heavy fines or closure if found non-compliant with regulations.
– Market Saturation: The alcohol market in Kenya is dominated by well-established brands and large chain stores, making it difficult for small, independent liquor stores to compete effectively.
– Price Competition: Large retailers can often offer lower prices due to bulk purchasing power, squeezing the profit margins of smaller stores.
3. Tendering to the Government
I know most people will likely disagree with this one, but I’ll tell you why it’s on my list.
Government contracts may seem lucrative, but the reality of tendering to the Kenyan government is fraught with challenges:
– Corruption and Favoritism: The tendering process is often marred by allegations of corruption and nepotism, making it difficult for new or smaller businesses to compete fairly.
– Difficult Bidding Process: Opaque bidding process requires extensive knowledge and, sometimes, insider connections.
– High Initial Costs: Preparing comprehensive bid documents and meeting various pre-qualification criteria can be expensive, with no guarantee of success.
– Payment Delays: Even when a tender is successfully awarded, government agencies are notorious for delayed payments, sometimes stretching for months or even years.
4. Matatu Business
The matatu industry used to be a big deal about a decade ago. Well, not anymore! Here’s my reasoning:
– Regulatory Pressures: Government efforts to streamline and regulate the public transport sector have led to increased operational costs and stringent compliance requirements.
– Competition from Alternative Transport: The rise of motorcycle taxis (boda bodas) and ride-hailing apps has eaten into the matatu market share, especially for short-distance travel.
– High Operating Costs: Fluctuating fuel prices, frequent maintenance needs, and insurance costs cut into profit margins.
– Trouble with the police: if you’re lucky to get your foot into the business, you’ll have to part with a significant amount per day to ensure you don’t get into trouble with the police.
5. Clothing Boutique
A lot of Kenyans are into this business, and some are making it big. However, a good number tend to close their business in the first year.
– Market Saturation: The clothing retail sector is highly competitive, with numerous boutiques, second-hand clothing markets (mitumba), and online stores vying for customers.
– High Import Costs: Importing trendy clothes can be expensive, especially with fluctuating exchange rates, impacting profit margins.
– Changing Consumer Behavior: Many Kenyan consumers are shifting towards more affordable options like second-hand clothing or online shopping platforms.
– E-commerce Competition: The growth of online shopping platforms offers consumers more choices and often lower prices, challenging traditional brick-and-mortar boutiques.
6. Cyber Cafe
Once a thriving business, cyber cafes have become increasingly obsolete in Kenya due to several factors:
– Mobile Internet Penetration: The widespread availability of affordable smartphones and mobile data plans has drastically reduced the need for public internet access points.
– Declining Demand: Most people now access the internet through personal devices, eliminating the need to visit cyber cafes.
– High Operational Costs: The expenses associated with setting up and maintaining a cyber cafe, including rent, electricity, and equipment costs, often outweigh the potential revenue.
– Competition from Free Wi-Fi Spots: Many businesses, such as cafes and libraries, offer free Wi-Fi to attract customers, further reducing the appeal of paid internet services.
7. M-Pesa Agent
While M-Pesa has revolutionized financial transactions in Kenya, becoming an M-Pesa agent is no longer as profitable as it once was:
– Market Saturation: M-Pesa agents are everywhere, in both urban and rural areas. This has led to intense competition and reduced profit margins.
– Low Commissions: The high number of agents has driven down the commissions offered by Safaricom, making it difficult to generate significant income.
– High Capital Requirements: Agents need substantial working capital to handle daily transactions, which can be challenging for small entrepreneurs.
– Risk of Fraud: M-Pesa agents are often targets for fraudsters, risking financial losses that can be difficult to recover.
8. Money Lending
The money lending business in Kenya, while potentially profitable, comes with significant risks:
– High Default Rates: Many borrowers struggle to repay loans, leading to substantial losses for lenders.
– Debt Recovery Challenges: Recovering unpaid debts can be difficult and costly, often requiring legal action.
– Regulatory Scrutiny: The government has introduced strict regulations on interest rates and lending practices to curb predatory lending, impacting profitability.
– Negative Public Perception: Money lenders often face stigma and are viewed as exploitative, making it challenging to build a positive reputation.
– Competition from Digital Lenders: The rise of mobile lending apps has created fierce competition in the personal loan market.
– Security Risks: Handling large sums of cash can make money lenders targets for theft or robbery.
9. Charcoal Selling
The charcoal business, once a common source of income, has become increasingly problematic:
– Environmental Concerns: Growing awareness of deforestation and its environmental impact has led to reduced demand for charcoal.
– Government Regulations: Strict laws aimed at forest conservation have made sourcing charcoal more difficult and expensive.
– Legal Risks: Involvement in the charcoal trade can lead to fines or imprisonment due to its association with illegal logging.
– Alternative Energy Sources: The push towards cleaner, more sustainable energy options has reduced reliance on charcoal, especially in urban areas.
– Supply Chain Disruptions: Crackdowns on illegal charcoal production can lead to unpredictable supply, affecting business stability.
10. Traditional Taxi Business (Offline Taxi)
The traditional taxi industry has been severely disrupted by technological advancements:
– Ride-Hailing Apps: Services like Uber, Little Cab, and Bolt have captured a significant market share, offering convenience and often lower prices.
– Customer Preferences: Many customers prefer the transparency, safety features, and ease of use offered by ride-hailing apps.
Worst Businesses to Start In Kenya Infographic
Key Takeaway
The Kenyan business space is full of opportunities, but as we’ve explored in this article, not all ventures are equally promising. The businesses we’ve discussed – from movie shops to traditional taxis – face significant challenges in today’s rapidly evolving market.
However, the goal of highlighting these struggling industries is not to discourage entrepreneurship in Kenya. Rather, it’s to encourage aspiring business owners to approach their ventures with careful consideration and thorough market research.
