Kippra pushes for contracting policy to boost small business

Work colleagues discuss a business idea. [Getty Images]

The Kenya Institute for Public Policy and Research Analysis (Kippra) has emphasised the development of a national sub-contracting policy to expand the base of small enterprises.

Having this policy in place, it noted, would enable micro and small enterprises (MSEs) to play a significant role in Kenya’s ambition to be part of the fourth industrial revolution (4IR).

A sub-contracting policy would also give room for small businesses to acquire knowledge from larger corporations, which the State think tank opines is in line with President William Ruto’s Bottom-up Economic Transformation Agenda (BETA).

Kippra, in a policy monitor document released this month, for the July-September quarter, details the strides the country has made over the past decades in its quest for industrialisation take-off.

It also documents the challenges this sector of the economy is encountering including access to funding, skills gap and informality being included.

The document titled, Kenya @60 and Industrialisation Prospects under BETA, breaks down the important role MSEs have in industrialisation citing that they consist of about 95 per cent of the manufacturing sector enterprises in the country and employ 14.9 million individuals (as of 2016).

“MSEs are important drivers for the industrialisation agenda owing to their labour-intensiveness, efficiency, geographical dispersion, and ability to nurture entrepreneurs,” reads the policy document in part.

Kippra states that even in the wake of significant policy developments, that seek to solidify their role in industrialisation, MSEs still face challenges relating to high levels of informality.

This limits their access to affirmative platforms, skills, linkages with medium and large enterprises, coordination by MSE support institutions, and low-value addition.

“To increase the probability of success for MSEs, the formation of innovation-driven enterprises at the pre-seed stage is an important consideration,” says Kippra in the policy document. 

Additionally, the think tank says, that strengthening the coordination of MSEs support organisations, and state agencies in communicating various opportunities can enhance the uptake of affirmative action platforms.

“Moreover, the rationalisation of business licenses may lower formal set-up costs,” it says. 

“The industrial sector is capital-intensive relative to other sectors; therefore, affirmative action funds can allocate a greater proportion of disbursements towards this sector.” 

Kippra states that funding can be targeted towards MSEs at various incubation centres across the country that have proven to be innovation-oriented. 

Incubation centres can also collaborate with key knowledge specialists such as universities to offer expertise to MSEs on proposed business models.

“There is need to have a national sub-contracting policy that will corroborate efforts to increase knowledge-sharing and entry into value chains as proposed in Sessional Paper No. 9 of 2012 on the National Industrialisation Policy Framework for Kenya 2012-2030,” the Kippra document states

MSEs skills can also be developed by having the Kenya National Qualifications Authority (KNQA) in line with the Recognition for Prior Learning Policy enhance efforts to increase certification of skills acquired through informal settings.

“This initiative can promote the uptake of formal skills training once certification is obtained and encourage the development of highly specialised skills required in the industrial sector,” Kippra says.

The think tank documents Kenya’s policy interventions for small enterprises prior to the BETA agenda since independence, starting with the Development Plan of 1964-1970 that provided a roadmap towards the implementation of Sessional Paper No. 10 of 1965 on African Socialism and its Application to Planning in Kenya.

This paper emphasised African ownership of enterprises, skills, and cooperative

“The plan revolved around directing resources towards rural areas to provide equitable and balanced economic development as the nation adjusted from colonial rule,” the policy document recites.

There is also the Sessional Paper No. 9 of 2012 on the National Industrialisation Policy Framework for Kenya 2012-2030 which denoted the foundation that MSEs provide towards the goal of enhanced industrialisation.

The MSEs-specific policy interventions targeted in the paper include the development of incubation centres, supporting sub-contracting linkages, the establishment of industrial parks, access to public procurement, access to market information, and the establishment of an industrial development fund.

“Sub-contracting, though proposed as a strategy to enhance MSE productivity, has not been thoroughly defined with specific interventions,” Kippra notes.

Other policy interventions towards MSEs include the National Trade Policy of 2017, which champions MSEs’ participation in global trade and the Digital Economy Blueprint of 2019 which underscored the importance of information technology in presenting MSEs with new business opportunities.

There is also the Cooperative Development Policy of 2019 focused on strengthening and modernising cooperatives to support the financing needs of MSEs.

“The policies discussed have paved the way for specific programmes to address the challenges faced by MSEs and continue to champion initiatives to harness their potential,” the document states.