Securing the Future of Industry in the SME sector

Kenya’s thriving SME sector was on the spotlight during the GE Summit mid this year when the world turned its attention to laud cutting edge innovations from our country. It is no secret that the most avant-garde creations in our socio-economic sphere are nurtured in the Micro, Small and Medium Enterprises or what most people have commonly labelled as Jua Kali.

A recent report estimated that, presently, Kenya’s MSME sector constitutes 98 (really) percent of all businesses in the country and annually, provides jobs to 50 per cent of young employment seekers in the manufacturing and service industries. They are said to have an employment growth rate of 12-14 percent and contribute to slightly over 30 percent of total employment in the country. These businesses are viewed as key drivers of the economic and social development for the continent and it is no wonder that many of them are founded by or comprise mostly of young people.

Yet until recently, Kenya has seen a lethargic trend in the incorporation of the MSMEs into the larger economic, social and political agenda for development. Whilst it is true that since early 2000s, the Kenya government has officially acknowledged ‘informal’ enterprises as a potential untapped source for economic growth, the uptake by government agencies and private sector to leverage the prospects has been slow.

Some of this hesitance has been attributed to a lack of synergy between the financiers and the said businesses. For example, some funders have decried a lack of technical capacity or other factors that demonstrate the sustainability of some of the concepts presented to them. Others have pointed to shaky business plans or the inability of the founders/businesses to articulate the scalability of their ideas for a greater purpose.

Meanwhile young businesses feel marginalized, as they point to the tendencies of funders to only dialogue with ‘big business’ or corporations. Many, feel that they are not privy to the opportunities that are available because perhaps of the platforms/forums where these are unveiled. Or simply that the language used to convey the requirements for qualification maybe exclusive and therefore leaving them out of conversations that are useful for their advancement.

Consequently, out of these sentiments comes a stalemate, and the country continues to grapple with increasing poverty and staggering numbers in unemployment. There are, however, several ways through which we can bridge this gap and create working synergies between, government, corporations and MSMEs. The most important tool to equip these businesses and government with is Knowledge. For example, it is vital for government, funders and corporations to have research-based knowledge on the nature of various MSMEs, their growth trajectories and their markets in order to leverage the best avenues and platforms through which they can complement the innovations these businesses spur. At the same time, if we teach the small businesses how to package their business plans, financial needs and growth projections in a way that is attractive to investors then it is a win-win!

More than that, we must create an enabling environment for these businesses. If we look at the recently unveiled Kenya Industrial Transformation Programme by the Ministry of Industrialization and Enterprise Development, special attention is given to the role of MSMEs in catapulting our country to reach its industrialization goals. One of the ways we can do this is by using a sector-specific approach to elucidate the full-potential of these businesses and then leveraging our networks, as private sector and government to open-up their access to various markets.

We need to also enhance fair competition by strengthening the subcontracting policies to improve links between large industry players and MSMEs. This will solve the problems of mistrust harbored by small businesses whose anxieties about fair compensation and equal opportunities have been a major hindrance to collaboration with corporations. In the same breath, we need to eliminate existing policy constraints that prevent MSMEs from accessing appropriate financing mechanisms.

Finding ways for collaboration and picking up best practice from each other is the key to advancing economic diversity, robustness and sustainability. If we create these financial linkages, we will also be invested in creating the most competitive forums for technology and knowledge transfer. The best part is that these things can be realized and actualized now. We don’t need to wait for tomorrow. For example, we have stable factories in most urban towns in Kenya; why not start using them as centers for knowledge to impart expertise for the MSMEs in our home-towns?

We need to start thinking of inclusive strategies in order to step out of the endless loop-hole in which we find ourselves. Our diversity in business will, in the end, be our saving grace.

The writer is the Chief Executive of Kenya Association of Manufacturers and can be reached at ceo@kam.co.ke.