Kenyans eye self-employment in 2019 despite past failures, looming higher taxes

Close to 50 per cent of Kenyans are planning to set up own businesses in 2019, according to a new survey, despite history showing that only a handful see such plans through.

Many abandon the entrepreneurial journey even before embarking on it.

Other than the usual factors such as high cost of doing business that has in the past dimmed prospects for entrepreneurs, this time they will face a harsher taxation regime as presumptive taxes on small and medium enterprises (SMEs) take effect beginning January 1, 2019.

The tax will be tied to licences issued by county governments and while growing revenues, it might result in a reduction in the number of people that take the entrepreneurial road.

According to the survey by research firm Trends and Insights for Africa (Tifa), 44 per cent of Kenyans plan to set up their own businesses, part of their resolutions for 2019.

The survey also found a high degree of apathy among Kenyans, with many of those that participated in the survey opting not to make any resolutions - perhaps disillusioned by experiences over the previous years where the objectives have not been met due to a mix of factors.

“In 2019, four out 10 Kenyans (44 per cent) intend to set up a business. This is followed by getting a new job (33 per cent) and achieving work-life balance (28 per cent),” said Tifa in the report yesterday.

“Notably, it’s observed that almost a third of Kenyans (28 per cent) still do not have New Year resolutions.”

The researchers did a comparison on the number of people that had resolved to venture into business last year and those that were able to actualise the plans. It found out that though 52 per cent of the people that were surveyed towards the end of 2017 said they would set up businesses in the course of 2018, only 28 per cent had succeeded.

In 2019, other than the usual challenges such as lack of access to capital and linkages to markets, the new start-ups will have to grapple with presumptive tax.

Kenya Revenue Authority said the new taxes are expected to bring more of informal sector players into the tax bracket.

The SMEs are supposed to pay the tax at a rate of 15 per cent of the business permit or trading fee paid to county governments.

There are however concerns that while the taxman might increase revenues and bring in more people into the tax net, it might not be sustainable as it is a heavy load on SMEs, many of them just start-ups.

Treasury has been urged to reduce this to between 1.5 and three per cent in line with what Uganda taxes SMEs.