Next President can boost Kenya`s growth by supporting SMEs

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The party that wins Kenya’s General Election has an opportunity to supercharge economic growth by adopting policies that help Small and Medium Businesses.

By SAMMI NDERITU

The party that emerges the winner of Kenya’s general election, to be held on 8th August 2017, has an opportunity to supercharge job creation and economic growth by adopting policies that help Small and Medium Businesses to thrive. That’s according to Nikki Summers, the Regional Director for Sage in East Africa. She says the next government will have a strong framework and foundation to build on, following years of State investment in creating an enabling environment for entrepreneurs and business builders.

According to the Kenya Economic Outlook 2017 report by Deloitte, political tensions in Kenya will rise as campaigning for the next elections gathers momentum. The next presidential and legislative elections are scheduled for August 2017, with President Uhuru Kenyatta seeking re-election for a second and final five-year term.

Corruption is a major impediment to doing business in Kenya, with allegations of misappropriation of public funds on the rise. The 2016 Corruption Perception Index released by Transparency International (TI) ranked Kenya among the most corrupt countries at 145 out of 176 nations. The Economist Intelligence Unit (EIU) expects a boost in accountability, especially at the county government level, following implementation of stronger checks and balances.

GDP to grow

“With GDP expected to expand by around six per cent this year, Kenya is on the right track for growth,” says Summers. “Improving the ease of doing business and following sound macro-economic policies will help ensure that this pace of growth continues, also offering an environment where Small and Medium Businesses can flourish.”

The Deloitte Report predicts Kenya’s real Gross Domestic Product (GDP) to grow at 5.5 per cent in 2017 down from an estimated 5.8 per cent in 2016 due to a combination of domestic and international constraints. Domestic constraints include the forthcoming elections, which might inhibit investments. International constraints include disruptive geopolitical events such as the UK’s impending exit from the EU and Trump’s presidency, which are likely to translate to reduced foreign investments to emerging economies.

The report further notes that growth will remain robust between 2017 and 2021, averaging 5.8 per cent, as a result of sustained expansion in consumer services, urbanisation, East Africa Community integration, structural reforms and investment in infrastructure.

The US Department of State notes that Kenya is a favoured business hub for oil and gas exploration, manufacturing and transport. Kenya ranked 92 out of 189 economies in 2017.

Job-creating SMEs

Summers says that Small and Medium Businesses deserve a special place in government policy because they contribute up to 80 per cent of jobs in an emerging economy such as Kenya. As important as large infrastructure projects are, Small and Medium Businesses are the engines of job creation and the most efficient vehicle for redistributing and creating prosperity for the benefit of ordinary people, she adds.

“The new government should continue to follow the Kenya Vision 2030 blueprint, which recognises the crucial role of micro, small and medium business in industrial development,” says Summers.

The Kenya Vision 2030 is the national long-term development policy that aims to transform Kenya into a newly industrialising middle-income country, providing a high quality of life to all its citizens by 2030.

“This blueprint should also look at ways of strengthening its various small business funding efforts such as the Uwezo Fund and the Youth and Women Enterprise Fund, since access to financing remains one of the most significant challenges for entrepreneurs and business builders,” Summers says.

Improving small business survival rate

According to the Kenya National Bureau of Statistics (KNBS), around 2.2 million micro small and medium enterprises (MSMEs) shut down in the last five years. Some 30 per cent of the enterprises reported shortage of operating funds as the reason for closure, highlighting the importance of sustainable financing in ensuring a healthy environment for small businesses.

“We also believe that technology could play a role in improving the sustainability of small Kenyan businesses and that government could encourage uptake of accounting solutions,” says Summers. “Accounting and payroll software could help entrepreneurs keep more accurate records, comply more easily with government and tax regulations and gain better visibility into financial performance. This could, in turn, improve their financial planning and their ability to manage cash flow.”

Summers says that the governments’ drive of entrenching a Buy-Kenya-Build-Kenya policy in public procurement is also welcomd. “The procurement budget is one of the best tools government has to help develop emerging businesses,” she adds. “By giving small businesses preferential treatment in tenders, paying them quickly for work they do and helping them develop skills, government can help them grow their businesses to the next level.”

There should also be closer collaboration between small business forums, big business (including multinationals) and government in nurturing the small business sector. “We at Sage would welcome working with other large companies and government to create forums for education, recognising and rewarding small businesses,” says Summers.

“Mentoring programmes, where business builders can learn from established entrepreneurs and businesspeople, as well as platforms that connect small businesses to big business and government, could all help smaller businesses to grow and thrive.”

Email: snderitu@kim.ac.ke

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