How supply side policies in Kenya can prioritize small businesses

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Supply side policies are aimed at incentivizing greater production in an economy. More production by entrepreneurs should mean more jobs.

Kenya continued its push towards that end with the announcement of new electricity rates to not only cut costs for businesses but also promote a 24-hour economy.

But a criticism of supply side ideas is that they are oft top-down and easily hijacked by the biggest players, at the expense of everyone. In this case, possibly, at the expense of small businesses.

While all good moves made for small businesses are commendable, Kenya is still dragging its feet in prioritizing small businesses. The country has been caught up in the glamour of building cities from scratch instead of finding means to put up basic amenities for ones that have been settled on for as long as anyone can remember.

This is surprising because small businesses in Kenya generate the most employment every year. Yet they continue to suffer from over 50% mortality rate in the first year of operations. Their supply side problems are easy to identify, so why not solve them?

Tax

This is not the first time tax is mentioned on this site. A member of the Kenya Association of Manufacturers touched on the same. Entrepreneurs in Kenya describe taxation of their businesses as cumbersome, instead of simple submission of returns. They also describe it as complex, with many steps and sub-steps, which encourages tax evasion.

Taxation of small businesses in Kenya is also costly. The few formally set up small businesses are burdened with the cost of informal businesses. In Eastleigh, retailers complained about how they had to compete against hawkers setting wares outside their shops. This, instead of spreading the net wider and lowering rates to allow room for these over-burdened entrepreneurs to reinvest in greater production.

Ease of Doing Business

Related to the above is the general environment of doing business. Steps have been taken in the right direction to unify the process of starting a business. This reduces corruption as well and must be coupled with a reliable e-based system. The fewer the middle-men, the better life is for everyone.

LIST OF KEBS REQUIREMENTS FOR STARTING A SMALL MANUFACTURING BUSINESS

Kenyans who want to start a business must also find that it is a quick process. Why should the process not take a whole day as a maximum? And once these businesses are launched why should they not find that their intellectual property will be well protected and that resolution of small conflicts, at the Courts, is quick but with a caveat; without “knowing someone.”

Incubation of small manufacturers and agroprocessors

It’s becoming obvious that Kenya will not protect it’s value addition sectors from imports. That ship looks to have sailed. While South Korea locked out the iPhone or China locked out American software giants until their own could compete, Kenyan Jua Kali workers will have to compete with spoons from India, for instance. There is no such thing as free trade.

The next best thing would be for Kenyan to subsidize these businesses in the way of incubation. The industrial parks being talked about still feel to be reserved for deep pockets and FDI, even if that is not the intent. These businesses, agroprocessing and manufacturing, need to continuously improve their production processes, their supply chain but these are expensive in terms of research, testing and training.

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