Clustering

Traditionally, microenterprises have been viewed as inefficient because they lack significant resources—capital, labor, technology, etc.—compared to larger firms. However, this view misses an important point: microenterprise efficiency comes not from the individual firm, but from the dynamics among similar enterprises in collective geospatial clusters. Clustering can bring about many positive effects: attracting customers, labor, and producer services; exchanging information and skills; and forming linkages among enterprises. Linkages among firms occur in two different ways¹:

1. Horizontal linkages – sharing labor and technology, as well as sub-contracting among firms
2. Vertical linkages – relationships with suppliers and traders, as well as groupings of enterprises in associations

Well-developed clusters experience the most advanced benefits, especially those that take conscious effort by the entrepreneurs, such as sub-contracting, firm specialization, and forming associations. However, there are also negative effects. The jua kali apprenticeship system tends to breed workers who are skilled in only one product or trade. Once they conclude their apprenticeships, workers are likely to set up enterprises that compete directly with their masters. Since copying is rampant, the jua kali feel that it is not worth investing time and money in developing new designs or technologies.

I have already taken you through the well-developed Gikomba metalwork cluster. Now let’s look at a nascent, but emerging furniture and art cluster forming along Ngong Road, known locally as Racecourse for the tracks nearby that supply a steady customer base.

Most enterprises in Racecourse reported arriving around the year 2000, though some had arrived as early as 1990. Most dealt with metalwork, though some carpenters also worked in the area. The businesses mostly produce furniture to order, whose designs come from catalogs or are copied from their neighbors. Attitudes towards other businesses varied. Some resented the competition, but others felt that they relied on their neighbors for sharing tools or borrowing materials on credit. In this case, having your trainees nearby breeds social capital.

Some enterprises, like Moses Metal Works and Philip’s Art and Design, are transitioning from furniture to scrap art for export, which is much more profitable. As more customers come to the area looking for art, it is likely that the cluster as a whole will move in that direction. Some coordination will need to occur in order for specialization to take place so all the businesses are not directly competing with each other.

Some of the entrepreneurs who have been around longer have acquired some machines, like Gabriel who has a tablesaw and bandsaw. He supplies the rest of the cluster with parts for their furniture, but has not completely specialized as he still produces his own furniture for sale.

Other producer services include several hardware stores, which supply the area with tools and simple parts like nails, screws, paint, and sheet metal. Other raw materials, however, often come from outside the sector, and some entrepreneurs reported traveling all the way to Gikomba for scrap metal. This hardware store started as a salon, which still runs concurrently next door. This woman, the proprietor, brings in supplies from the industrial area and sells it at a markup. However, competition and low demand have forced her to slash her prices and she has not come up with any other ways to compete.

Journalists from local organizations looking to promote the sector have provided marketing services by showing off the artisans’ wares. This is an important way that the artists in the area have reached international markets for export. Though no associations have been formed, those that exist elsewhere tend to be weak and underresourced.

¹Adapted from Dorothy McCormick of the University of Nairobi.