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Making Business Development Services work for SMEs
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  1. 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

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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&view=article&id=103&Itemid=112 Making BDS Work

  8. INCENTIVES…. Cont’d • The Public Procurement and Disposal Regulations 2007gives 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

  9. 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

  10. INITIATIVES TO IMPROVE BUSINESS ENVIRONMENT…Cont’d Making BDS Work

  11. 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

  12. 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={41481481482} Making BDS Work

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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