[Column] Bob Koigi: Save East African SMEs, the engine that oils the growth of the region
Like mustard seeds or the first step to a journey of a thousand steps, the Kenyan small and medium enterprises have grown to position themselves as formidable players in the country’ economic growth.
Contributing up to 45 per cent to the national purse while providing employment and income to over 85 per cent of Kenyans, the pivotal role that these institutions play cannot be gainsaid. Heartwarming stories of how families and vanguard entrepreneurs have built small businesses from scratch, with nothing but faith and zeal is why the government has hinged its hope in the SMEs as the building blocks of assisting the country attain the mid-level economic status by the year 2030.
It is equally encouraging to see initiatives like the Top 100 SMEs by credible media to recognize the role these nuggets of economic prosperity are playing.
Even in East African Community small and medium enterprises have taken the pride of place with numerous reports and key stakeholders as key in the integration process. Former Secretary General of the Community used to frequently refer to the East African region SMEs as the fabric that holds the community firmly together.
But as we ponder on these very fundamental questions we also need to note that it hasn't been a smooth ride for these very crucial drivers of economy. Certain forces including government induced, have conspired to dampen the pace of SME growth in the country.
The national policy and regulatory environment has an important impact on the life and continuity of these midsized enterprises. The Structural Adjustment Programs (SAPs) implemented in many African countries at the behest of the Bretton Wood institutions have been aimed at removing heavy policy distortions, which have been viewed as detrimental to the growth of the private sector. SAPs however have tended to severely affect vulnerable groups in the short run and have been associated with the worsening living conditions in many African countries.
This has seen small businesses take radical decisions that may in the long run harm them. Its time all industry players got serious and demonstrated unflinching commitment to prioritizing the welfare of these micro institutions if we want to cut down the worrying unemployment levels in the country.
One major question we should pose is: what solution can be offered to the plight of small enterprises in Kenya and East Africa? For one, policies should aim to encourage and promote the development of local technologies.
Emphasis should be on the promotion of the local tool industry to reduce reliance on imports. SMEs are said to face a "liability of smallness." Because of their size and resource limitations, they are unable to develop new technologies or to make vital changes in existing ones. Still, there is evidence that SMEs have the potential to initiate minor technological innovations to suit their circumstances.
However, for SMEs to fully develop and use this potential, they need specific policy measures to ensure that technology services and infrastructure are provided.
Financial institutions though having stepped up their efforts in addressing bottlenecks to the sector can do better. SMEs still grapple with red tapes and bureaucracies in accessing key financial services top among them credit.
While it is commendable that banks have established units specifically to serve these businesses, more incentives including easier and innovative ways to encourage growth could surely go a long way in creating a more conducive environment.
While it is indisputable that the revolution of the East African Community member states will be delivered by small businesses, how fast that revolution will happen will depend on whether the region will walk the talk in smoothening the road for SMEs to prosperity.
Multiple award winning Kenyan journalist Bob Koigi is Chief Editor East Africa at Africa Business Communities
