Competition is good, but you need to be careful not to get into a business you are not fully equipped for, just because you heard others are making money. In the 1990s when the economy nearly collapsed, companies closed down and those who did not, restructured in order to survive. They offered their employees “Golden Handshake”. This was a plan to get employees to walk away from their jobs before retirement age and the companies paid them lump sum amounts of money as a payout. A lot of people took the handshake instead of waiting to be laid off. People who earned Kes.10,000 a month got amounts like Kes.80,000 as handshake. They had never dreamed of owning such amounts of money unless they took a loan which they had to repay for years, shrinking their monthly salary into half.
With this windfall, people’s decision to take the Golden Handshake was heightened. They were leaving employment in their 20s and 30s to become ‘self employed’. That was a very attractive prospect for most. But consider this: these are people who had never done any business or even planned on doing business, but now, all of a sudden, they felt they could do business simply because they had the capital. The early 1990s was also the time when the second hand clothes (mitumba) business was booming after the government relaxed restrictions on bringing in bales of mitumba.
Almost everybody I knew who took the Golden Handshake went into mitumba business. They rented stalls in local markets and they bought their first bale of mitumba. We all know the rule of “Supply and Demand”. Any situation where supply exceeds demand, prices are driven to the ground. This is what happened to our over enthusiastic mitumba traders. Only a handful of them made it. They were out of business in a matter of months and their Golden Handshake was gone.
