Making Business Development Services work for SMEs

Making BDS WorkMaking BDS Work

Making Business Development Services Making Business Development Services work for SMEswork for SMEs

Presentation by:Presentation by:

Hon. Ndiritu Muriithi, M.PHon. Ndiritu Muriithi, M.PAssistant Minister for IndustrializationAssistant Minister for Industrialization

Engineers ConferenceEngineers ConferenceKICC May 10KICC May 10thth, 2012, 2012


CONTENTSCONTENTS

The character of small businessThe character of small business Initiatives to improve Business Initiatives to improve Business

EnvironmentEnvironment Programs supporting SMEsPrograms supporting SMEs Opportunities for SME growth Opportunities for SME growth The Value proposition of BDSThe Value proposition of BDS Areas requiring urgent actionAreas requiring urgent action


The character of small businessThe character of small business

Live longer than most think – (Baseline survey, 2008)Live longer than most think – (Baseline survey, 2008)

– 58% were three years or older58% were three years or older

– A full 43% were 5 years or olderA full 43% were 5 years or older

Owner managedOwner managed

– Owners report being over worked and management Owners report being over worked and management reports decision making centralised at the topreports decision making centralised at the top

– Delegation a challengeDelegation a challenge

Growing a middle managementGrowing a middle management

– Culture & close supervisionCulture & close supervision

– Empirical evidence – Hofstede, Blunt & JonesEmpirical evidence – Hofstede, Blunt & Jones


The number of small The number of small businessesbusinesses

MicrosMicros

– 1.9 m (10 years ago)1.9 m (10 years ago)

– 6.0 m? (now)6.0 m? (now)

Small & MediumSmall & Medium

– 50,800 – Statistical Abstract, 2011.. So called 50,800 – Statistical Abstract, 2011.. So called ‘modern sector’, growing at 10%‘modern sector’, growing at 10%

Large: meaning, >49 employeesLarge: meaning, >49 employees

– 12,250 – Statistical Abstract, 201112,250 – Statistical Abstract, 2011

Number of establishments registeredNumber of establishments registered

– As at 2007 – 166,800 companies & 526,000 business As at 2007 – 166,800 companies & 526,000 business namesnames


Incentives to Small BusinessIncentives 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/


INCENTIVES Cont’dINCENTIVES 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


INCENTIVES.. Cont’dINCENTIVES.. Cont’d

Export promotion: tax holidays, duty free importation of raw Export promotion: tax holidays, duty free importation of raw materials under the Export Processing Zones and materials under the Export Processing Zones and Manufacturing Under Bond (MUB)Manufacturing Under Bond (MUB)

KRA has introduced Turnover Tax where businesses with a KRA has introduced Turnover Tax where businesses with a turnover of less than KShs. 5 million will be charged flat turnover of less than KShs. 5 million will be charged flat rate of 3%. rate of 3%.

– to encourage formality and reduce costs for accounts to encourage formality and reduce costs for accounts preparations as firms can use the ETRspreparations as firms can use the ETRs

Tax Remission Export Office (TREO) to promote exports – Tax Remission Export Office (TREO) to promote exports – Input VAT backInput VAT back

– http://www.treasury.go.ke/index.php?http://www.treasury.go.ke/index.php?option=com_content&view=article&id=103&Itemid=112option=com_content&view=article&id=103&Itemid=112


INCENTIVES…. Cont’dINCENTIVES…. Cont’d

The Public Procurement and Disposal Regulations The Public Procurement and Disposal Regulations 20072007 gives preferences and reservations to gives preferences and reservations to benefit local businesses;benefit local businesses;

– exclusive preference to local companies in exclusive preference to local companies in procurements of values below KShs 50 million in procurements of values below KShs 50 million in goods and services and KShs 200 million in works.goods and services and KShs 200 million in works.

– In all other cases Margins of preference on evaluated In all other cases Margins of preference on evaluated tender price:tender price:

15% for locally manufactured, mined, extracted or grown15% for locally manufactured, mined, extracted or grown 8% for local ownership of 25-50%8% for local ownership of 25-50% 6 % for local ownership of less than 25%6 % for local ownership of less than 25%


INITIATIVES TO IMPROVE BUSINESS INITIATIVES TO IMPROVE BUSINESS ENVIRONMENTENVIRONMENT

4K MSE 20304K MSE 2030 initiative that brings together KEBS, KIPI, KIRDI initiative that brings together KEBS, KIPI, KIRDI and KNFJKA for building capacity for mass production and export and KNFJKA for building capacity for mass production and export of quality goods through: innovation, technology transfer, design of quality goods through: innovation, technology transfer, design and product development, standardization and patenting.and product development, standardization and patenting.

Regulatory and legislative reformRegulatory and legislative reform: Detailed review of 1,325 : Detailed review of 1,325 licenses undertaken in 2007 with 424 licenses eliminated; 607 licenses undertaken in 2007 with 424 licenses eliminated; 607 simplified; and 294 retained. Further rationalization of local simplified; and 294 retained. Further rationalization of local authority licenses is ongoing authority licenses is ongoing

The Single Business Permit (SBP)The Single Business Permit (SBP) - - lowering administrative lowering administrative costs: And now Doing Business for Sub-nationals.costs: And now Doing Business for Sub-nationals.

The Business Regulatory Reform Unit (BRRU)The Business Regulatory Reform Unit (BRRU)


INITIATIVES TO IMPROVE BUSINESS INITIATIVES TO IMPROVE BUSINESS ENVIRONMENT…Cont’dENVIRONMENT…Cont’d


INITIATIVES TO IMPROVE BUSINESS INITIATIVES TO IMPROVE BUSINESS ENVIRONMENT…Cont’dENVIRONMENT…Cont’d

The Registrar of CompaniesThe Registrar of Companies has computerized the process and networked has computerized the process and networked registration activities:registration activities:

– 3days for Ltd companies, 7 days for business names; 200 business name registration per day3days for Ltd companies, 7 days for business names; 200 business name registration per day– Mombasa & Kisumu in 15monthsMombasa & Kisumu in 15months

Incubator Programs:Incubator Programs: Development of Business and Technology Development of Business and Technology Incubator leading to establishment of incubators through Kenya Kountry Incubator leading to establishment of incubators through Kenya Kountry Business Incubator (KeKoBI); Kenya Industrial Estates (KIE) incubator Business Incubator (KeKoBI); Kenya Industrial Estates (KIE) incubator program; Kenya Industrial Research and Development Institute (KIRDI) program; Kenya Industrial Research and Development Institute (KIRDI) incubation facility and Export Processing Zones Authority (EPZA)incubation facility and Export Processing Zones Authority (EPZA)

The Enactment of the Micro-finance Act and SACCOs Act has The Enactment of the Micro-finance Act and SACCOs Act has enhanced framework for lending to MSMEsenhanced framework for lending to MSMEs

2 Credit Reference Bureaus licensed. 2 Credit Reference Bureaus licensed.

Introduction of SME Solution Centre to improve business operations of Introduction of SME Solution Centre to improve business operations of SMEsSMEs


PROGRAMS SUPPORTING SMESPROGRAMS SUPPORTING SMES

Provision of financial resources through:Provision of financial resources through:– DFIs – KIE, IDB, DBK, EADB, PTADFIs – KIE, IDB, DBK, EADB, PTA– Funds - the Joint Loans Board Scheme, Youth Fund, Women Fund, Funds - the Joint Loans Board Scheme, Youth Fund, Women Fund,

Micro Enterprise Support Programme Trust (MESPT), Micro Enterprise Support Programme Trust (MESPT),

MSME Competitiveness Project MSME Competitiveness MSME Competitiveness Project MSME Competitiveness ProjectProject– Value chain matching grantValue chain matching grant

‘‘One Constituency One Product’ One Constituency One Product’ – Constituency industrial development centersConstituency industrial development centers

Jitihada – Business plan competitionJitihada – Business plan competition– http://www.kim.ac.ke/news/newsarticle.asp?http://www.kim.ac.ke/news/newsarticle.asp?

newsid={41481481482}newsid={41481481482}


Women specific programsWomen specific programs

Women Enterprise Fund– Ministry of Gender; 11th floor NSSF building– http://www.gender.go.ke/; [email protected]

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


GROWTH OPPORTUNITIES FOR GROWTH OPPORTUNITIES FOR MSMESMSMES

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


BDS Value propositionBDS 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?


Building BDS CapacityBuilding 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?


Urgent action requiredUrgent 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


Where to find usWhere to find us

– www.industrialization.go.ke

– [email protected]

– Tel: +254 20 315001-4

– 11th, 17th, 18th & 23rd floor Teleposta Towers, Kenyatta Ave.

– www.laikipiawest.org

Documents

Making Business Development Services work for SMEs