Making Business Development Services
work for SMEs
Presentation by:
Hon. Ndiritu Muriithi, M.P
Assistant Minister for Industrialization
Engineers Conference
KICC May 10th, 2012
Making BDS Work
CONTENTS






The character of small business
Initiatives to improve Business Environment
Programs supporting SMEs
Opportunities for SME growth
The Value proposition of BDS
Areas requiring urgent action
Making BDS Work
The character of small business

Live longer than most think – (Baseline survey, 2008)
– 58% were three years or older
– A full 43% were 5 years or older

Owner managed
– Owners report being over worked and management
reports decision making centralised at the top
– Delegation a challenge

Growing a middle management
– Culture & close supervision
– Empirical evidence – Hofstede, Blunt & Jones
Making BDS Work
The number of small businesses

Micros
– 1.9 m (10 years ago)
– 6.0 m? (now)

Small & Medium
– 50,800 – Statistical Abstract, 2011.. So called
‘modern sector’, growing at 10%

Large: meaning, >49 employees
– 12,250 – Statistical Abstract, 2011

Number of establishments registered
– As at 2007 – 166,800 companies & 526,000 business
names
Making BDS Work
Incentives to Small Business

Investment Certificate:
– Issued by the Kenya Investment Authority
– 100% investment allowance in Nairobi and 150% in smaller
towns
– Duty and VAT remission on capital goods
– Immediate start – in lieu of licenses for one year

http://www.investmentkenya.com/
Making BDS Work
INCENTIVES Cont’d

Making it easier and cheaper to raise Capital:
– By listing without raising additional capital, on the NSE
enjoy deductions in legal and incidental costs of IPOs. The listing
company is also exempted from paying stamp duty and VAT on
transfer of listed securities.
– Employee Share Ownership Plans (ESOPs)- enabling
employees in a listing company to benefit from the growth of
the firm. This contributes to a vibrant and highly motivated
workforce.
– Newly-listed companies also pay corporation tax at a lower
rate of 20% for a period of 5 years.
– Technical assistance grants for investees of venture capital given
by MoI’s MSME competitiveness program
Making BDS Work
INCENTIVES.. Cont’d


Export promotion: tax holidays, duty free importation of raw
materials under the Export Processing Zones and Manufacturing
Under Bond (MUB)
KRA has introduced Turnover Tax where businesses with a turnover
of less than KShs. 5 million will be charged flat rate of 3%.
– to encourage formality and reduce costs for accounts
preparations as firms can use the ETRs

Tax Remission Export Office (TREO) to promote exports – Input
VAT back
– http://www.treasury.go.ke/index.php?option=com_content&vie
w=article&id=103&Itemid=112
Making BDS Work
INCENTIVES…. Cont’d

The Public Procurement and Disposal Regulations
2007 gives preferences and reservations to
benefit local businesses;
– exclusive preference to local companies in
procurements of values below KShs 50 million in
goods and services and KShs 200 million in works.
– In all other cases Margins of preference on evaluated
tender price:



15% for locally manufactured, mined, extracted or grown
8% for local ownership of 25-50%
6 % for local ownership of less than 25%
Making BDS Work
INITIATIVES TO IMPROVE BUSINESS
ENVIRONMENT

4K MSE 2030 initiative that brings together KEBS, KIPI, KIRDI
and KNFJKA for building capacity for mass production and export
of quality goods through: innovation, technology transfer, design
and product development, standardization and patenting.

Regulatory and legislative reform: Detailed review of 1,325
licenses undertaken in 2007 with 424 licenses eliminated; 607
simplified; and 294 retained. Further rationalization of local
authority licenses is ongoing

The Single Business Permit (SBP) - lowering administrative
costs: And now Doing Business for Sub-nationals.

The Business Regulatory Reform Unit (BRRU)
Making BDS Work
INITIATIVES TO IMPROVE BUSINESS
ENVIRONMENT…Cont’d
Making BDS Work
INITIATIVES TO IMPROVE BUSINESS
ENVIRONMENT…Cont’d

The Registrar of Companies has computerized the process and networked
registration activities:
–
–

3days for Ltd companies, 7 days for business names; 200 business name registration per day
Mombasa & Kisumu in 15months
Incubator Programs: Development of Business and Technology
Incubator leading to establishment of incubators through Kenya Kountry
Business Incubator (KeKoBI); Kenya Industrial Estates (KIE) incubator
program; Kenya Industrial Research and Development Institute (KIRDI)
incubation facility and Export Processing Zones Authority (EPZA)

The Enactment of the Micro-finance Act and SACCOs Act has enhanced
framework for lending to MSMEs

2 Credit Reference Bureaus licensed.

Introduction of SME Solution Centre to improve business operations of
SMEs
Making BDS Work
PROGRAMS SUPPORTING SMES

Provision of financial resources through:
– DFIs – KIE, IDB, DBK, EADB, PTA
– Funds - the Joint Loans Board Scheme, Youth Fund, Women Fund, Micro
Enterprise Support Programme Trust (MESPT),

MSME Competitiveness Project MSME Competitiveness Project
– Value chain matching grant


‘One Constituency One Product’
– Constituency industrial development centers
Jitihada – Business plan competition
– http://www.kim.ac.ke/news/newsarticle.asp?newsid={414814
81482}
Making BDS Work
Women specific programs

Women Enterprise Fund
– Ministry of Gender; 11th floor NSSF building
– http://www.gender.go.ke/; wefsecretariat@yahoo.com

GOWE
– US10 million guarantee program, 38 deal 350 trained
– Banks: K-Rep, CFC and CBA
– Run by AMSCO

Banks have tailored programs – Fanikisha, Diva,
Malkia
Making BDS Work
GROWTH OPPORTUNITIES FOR
MSMES

East African Common Market- 120 million people.
– http://www.epckenya.org/

COMESA customs union provides a market access for over 400
million consumers.

Coming soon: EAC-COMESA-SADC FTA and later customs

35% Local content verification and certification
– http://www.kra.go.ke/customs/customsdownloads.php
Making BDS Work
BDS Value proposition

Low uptake of Incentives:
–
–
–
–

130 investment certificate in 2008, for approx KShs 200Bn
350 certificates of origin in 2007 & 2008
KShs 500 million in TA funds – not a single customer!
Only two ‘SME’ listings
Do service providers know about these incentives & programs?
– The service provider is expected to be a coach, guide, mentor & advisor, with
superior knowledge
– But how does the provider gain this knowledge?
Making BDS Work
Building BDS Capacity

BDS outside Nairobi
– How do we get BDS into smaller towns – Narok, Thika, Nyeri
Eldoret etc. ?
– What positive role can engineers play?

Who is training / developing BDS providers
– IMCK?
– SME Consulting Course?
– Academic institutions – JKUAT, KIM, USIU?
Making BDS Work
Urgent action required

Programs to assist engineers to provide wholesale BDS.
– Train them
– Create area specific / regional wholesale BDS programs

Programs to:
– Develop supply side, particularly outside Nairobi: train thousands of SME
business services providers
– Create certification / accreditation , to both improve and assure quality

Communication:
– Disseminate existing information & knowledge

Eg. Baseline survey report, Capacity constraints
Making BDS Work
Where to find us
– www.industrialization.go.ke
– nmuriithi@industrialization.go.ke
– Tel: +254 20 315001-4
– 11th, 17th, 18th & 23rd floor Teleposta
Towers, Kenyatta Ave.
– www.laikipiawest.org
Making BDS Work