Small and Medium firms (SMEs) constitute 98 percent of businesses in Kenya, contribute 30 percent of jobs as well as 3 percent of Kenya’s Gross Domestic Product (GDP). SMEs, mostly in the informal sector called Jua Kali (open air), are an integral part of Kenya’s business development especially for the low income earners.
The significance of SMEs in Kenya is reflected in the 2014 Economic Survey, which indicated that 80 per cent of the 800,000 jobs created in 2014 were in the informal sector that is dominated by SMEs.
Kenya Revenue Authority (KRA) also supports the Economic Survey report by stating that SMEs absorb up to 50 percent of new non-farm employment seekers and have an employment growth rate of 12-14 % annually. In addition to alleviating unemployment, small firms also play an important role in Kenya’s economic growth by paying taxes.
Since most small firms now register with the County Governments, Kenya Revenue Authority (KRA) Commissioner-General John Njiraini said that it will be easier to integrate them into the tax bracket enabling the Government to meet its financial obligations.
Incorporating SMEs into the tax bracket is part of KRA’s move to expand the tax base in an ambitious plan that seeks to raise the number of active tax payers from 1.6 million to 4 million in the next two years. Mr Njiraini explained that KRA will engage members of the SME sector to understand tax payers in their category better.
The role of SMEs in Kenya and the contribution they have in wheeling the economy cannot be over-emphasised. Any time of the week, you will find Jua Kali artisans busy at work and displaying their beautiful furniture and carvings, among numerous other items, for sale.
You will get them on roadsides in Kenya’s big towns. In Nairobi, the trade is common along Ngong Road between Ngong Race Course and Dagoretii Corner area, Kamukunji, Gikomba market, Kibera’s Toi market and Outering Road, to mention bet a few. These displays have a variety of high quality hard and soft wood furniture, artistic fabricated doors and gates, priceless pieces of art created from scrap metal and carpets. The artisans also offer to make items according to customers’ needs.
Some of these art works are at times destined for export markets and earn Kenya foreign exchange. The products from SME sector are of good quality so much that they sell in any part of the World.
The United Nations classifies Kenya as the only developing country in this region with the rest being described as least developed. Recognition of SMEs by the Kenya Government, which treats this sector as a major component of development, is what puts the country in the lead. Kenya’s Gross Domestic Product (GDP) stands at $ 65.9 billion which puts it at position seven in Africa.
SMEs in Kenya are more than just a residual employer in the Government’s official development policies. The Government identifies small firms and Jua Kali enterprise as significant and facilitates them to “graduate into the formal sector” to become major players in the creation of employment and promoting economic growth.
The Kenya Government has formulated systematic strategies or policies for SMEs that encourage and hasten processes of starting a business in favour of small firms. The Kenya Government has now simplified legal requirements for starting a business by removing bureaucracies.
Bottlenecks such as cases where business people were expected to acquire many permits or licences have been reduced drastically through the inception of the single business permit concept. The cost of running businesses, access to credit facilities, lack of energy, coupled with poor infrastructure including impassable roads plus the lack of electricity in most parts of the country will by 2020 become a forgotten story going by the Kenya Government’s investment in infrastructure.
The growth of Kenya’s trade sector can be exemplified in the mushrooming of microfinance banks which are major in financing SMEs. These banks are now spreading their growth to the lower levels of counties in a measure aimed at easily reaching potential clients as the Government decentralises most services. (By Christine Mutegi )
