Making devolution a game

By John Mbugua
You are the CEO of a company that is about to change dramatically. Your shareholders have recently voted to radically restructure it by establishing offices much closer to your clients and giving local managers the power to make decisions on behalf of the firm. How do you implement such a radical shift, and how quickly? Which corporate functions do you leave at headquarters and which ones do you delegate to your field offices? How much budget will each get? How do you maintain co-ordination?


Kenya‟s government is facing a similar situation with devolution.
The only constant in life is change. Change is happening in the external environment of doing business in Kenya. The political, economic, social and technological (P.E.S.T) variables have changed. We are under a new government with 47 devolved units which changes the economic, social and technological status of people in the rural areas, though we remain one united state.
Nairobi used to generate about 50% of our GDP. It made sense to have the Head office in Nairobi. All major banks operating in Kenya have their head office in Nairobi, as well as all major insurance companies. Even universities with main campus outside Nairobi have established a big campus in Nairobi. It is the centre of business action in Kenya and everybody needed to be there.


Will this change due to devolution?
There is oil discovered in Turkana County, there is titanium discovered in Kilifi County, and there is coal discovered in Kitui County. There is Konza technology city coming up, Isiolo city, as well as Lamu port in Lamu county and expansion of the Mombasa port, in Mombasa County. These are some of the developments happening outside Nairobi County.
The county governments will also be doing procurement of services for the county at their county headquarters. They will start various projects like construction of houses, roads, dams and others which will need insurance services. Keeping with the devolved government philosophy of bringing economic growth to the locals, they will be keen to offer opportunities to the locally based organizations unless where capacity is lacking.
The P of place in terms of marketing will be a key factor. In terms of socializing, the Governor and his executive committee will easily interact with professionals at the county headquarters.
It is easy for example for Isiolo county Governor to  meet at the local  members club in Isiolo town and discuss business with the local branch manager of an insurance company or bank. An insurance company or bank having a branch in Isiolo town will likely tap the local business faster than the one premised in Nairobi only.
Maybe the question to ask is; should a prudent insurance company or any other business set up branches in all the 47 county headquarters? Setting up the 47 branches needs substantial resources to set up the physical infrastructure as well as ran the re-current expenditure till the branches break even. That may take long before they become viable units.
One strategy would be to combine services so as to have economies of scale. For example an insurance company may offer, investment advisory services from its life side, life assurance (group & individual life), pension administration or fund management, general insurance (from a sister General insurance company) among other services. These will bring in the idea of one stop shop as well as economies of scale.
An alternative strategy would be to have one regional office to serve a number of counties. For example a branch office in Kisumu town may serve Kisumu county as well as a number of neighbouring counties. That way, economies of scale will be achieved as well as economic viability.
Another strategy would be the use of technology. A number of universities in Kenya are offering virtual learning. Virtual buying and selling has also been with us for a while. Banking halls are deserted due to online banking services.
Investing heavily in technology can then be part of the strategy to tap the devolved business arising out of the devolved government. The country is investing heavily in technology, including fibre optic. Nairobi will still remain the seat of the central government and the regional business hub for East Africa.
After all the best strategy may be to have Nairobi as the Head office, a few regional offices and invest heavily in technology.

Mr Mbugua is Director,
Chancery Wright Insurance Brokers Ltd 

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