Top 5 Things That Will Kill SMEs in Kenya in 2019

2018 is fast fading away and 2019 is fast approaching but for Kenyan SME, 2019 might not come with the blessings that the majority of them are expecting.

Stats show that more than 400,000 small medium enterprises have been dying annually in Kenya. Between 2010 and 2016, an estimated number of 2.2 million SMEs might have closed shop. 80 percent of the SMEs closing shop do so before their first birthday, meaning they die in their first year.

Here are the top 5 things that will kill more SMEs in Kenya in 2019:

• Taxes

The SMEs in Kenya is about to be hit by the worst taxes right from the 1st of January 2019. According to the new Finance Act, SMEs will have to pay the presumptive tax of more than 15 percent of the normal rate. Kenya Revenue Authority has already notified the public that the tax will come into effect starting 1st of January 2019.

SMEs with salaried employees will also be required to pay at least 1.5% for each one of their employee that will be a “contribution” to the affordable housing program, which is part of President Uhuru Kenyatta’s Big Four Agenda. Guidelines on how the contributions will be made are yet to be given and nobody knows whether SMEs will be exempted.

There are other numerous taxes that SMEs will have to pay and this is set to hurt their business. Those who will not be able to manage will have no otherwise but to shape out of the business.

• Funds

Most SMEs in Kenya have had a challenge of having access to adequate funding. Most SMEs that have closed shop have blamed it on lack of funding. The SME sector, for a long time, depended on commercial banks for loans.

The passing and coming into law of the Interest Capping made things difficult for small businesses in Kenya. Commercial banks refrained from lending to SMEs as they were considered risky, a move that affected more than 2 million small businesses.

The irony is commercial banks insist that they have not stopped “lending to the SMEs” and blamed SMEs for “not seeking loans from them.” Majority of businesses that have struggled through 2018 are unlikely to survive in 2019 in not funded.

• Markets

The Barclays Bank of Kenya recently conducted a series of tours across various counties including Nairobi and Mombasa in a mission to meet with SMEs and entrepreneurs and listen to them and understand their challenges.

A challenge that seemed to cut across all the SMEs was about accessibility to markets. It emerged that most SMEs set up businesses without having a clear picture of their markets. Some, especially those established in the remote areas, are literally not able to access to markets, forcing them to either to rely on middlemen or close shop all the same.

This is likely to be a major problem for both the existing and the upcoming SMEs in 2019.

• Cost of business

The cost of doing business in Kenya is just on another level. Among the costs that hinder many entrepreneurs from setting up a business includes the processes involved in setting up a business, the cost of power, transport among other factors. In fact, Kenya is among top countries in East Africa where the cost of doing business is a major hindrance to businesses especially new ones.

• Competition

The majority of SMEs in Kenya are not able to keep up with the stiff competition from other sectors and things will be the same in 2019.