Government must pay SMEs for Big Four success

The government’s implementation of the Big Four agenda offers countless opportunities for Small and Medium Enterprises. The business community will play a pivotal role in its success.

Early estimates indicate trillions of shillings will be used in the rollout of the four pillars—manufacturing, universal healthcare, affordable housing and food security. It’s an opportunity that business players must seize.

Though the government has promised to ensure Small and Medium Enterprises (SMEs) benefit from this transformative initiative, the need for proactive involvement cannot be gainsaid. SMEs need to effectively compete with multinationals and other global players.

However, to achieve this, the government must prioritise prompt payments to SME contractors to ensure businesses remain afloat and enable them to meet their tax obligations, which translates to more revenue for the government.

Majority of SMEs are suffering due to payment delays yet most engage financial institutions to undertake the contracts. About 2.2 million small enterprises have closed shop in five years.

In a commendable move, the government has reduced electricity tariffs for manufacturers.

The Kenya National Bureau of Statistics report titled ‘Micro, Small and Medium Establishments’ clearly indicates most of the businesses that shut down blamed shortage of operating funds, increased operating expenses, and declining income.

The government’s projection is to expand manufacturing and increase its contribution to Gross Domestic Product from nine per cent to 15 per cent in the next five years.

For instance, in the agro-processing sub-sector, the Big Four agenda looks to create 1,000 SMEs with a goal of 200,000 new jobs in the next five years.

Similarly, they can also invest in textiles and other light manufacturing sectors such as leather, food and beverage processing.

In an exemplary scenario, the government has announced plans to produce 20 million shoes by 2022 in order to reduce the current import of finished shoes to cushion local entrepreneurs and create more absorption of unemployed youths.

Additionally, in support of SMEs, which form the bulk of Kenya’s population in active employment and thus commensurate as the largest bracket of taxpayers, the government has expressed plans to consolidate Kenya Industrial Estates, Development Bank of Kenya, Industrial Development Bank of Kenya, Uwezo Fund and Youth Enterprise Development Fund to ensure the traders are adequately supported.

However, more needs to be done to capacity build this sector to fully exploit their potential side by side.

From the foregoing, the government has prioritised to operationalise the ‘Buy Kenya Build Kenya strategy’, where the private sector will complement government ministries, departments and agencies to dedicate 40 per cent of their allocations for local purchases by opening up the markets.

The same sentiments were echoed by visiting France President Emmanuel Macron, who underscored that SMEs are a critical component of the economy.

As it stands, though the government is the largest buyer of goods and services, most of them are largely sourced from foreign markets adversely affecting cash flow for local firms.

In retrospect, transfer of modern technology and expertise into the country has served as an accelerant of development.

The aquaculture sector is another area that SMEs can invest in.

As noted during the recent meeting between President Kenyatta and SME investors at the Strathmore Business School, which was organised by the Strathmore Business School, NIC Bank and the government, the sector has a potential to produce 11 million tonnes of fish as opposed to the less than 400,000 tonnes it produces currently if only it gets government support.

In housing, SMEs can take advantage of technology and supplement government in constructing affordable houses, which they can then lease or sell for a profit.

Commendably, the government has initiated a long-term social security measure to construct at least 500,000 affordable houses by 2022.

From: https://www.the-star.co.ke/opinion/columnists/2019-03-18-government-must-pay-smes-for-big-four-success/

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