The President is right, government has failed SMEs

President Uhuru Kenyatta addressing the small and medium entrepreneurs’ forum at Strathmore University recently. [Beverlyne Musili, Standard]

President Uhuru Kenyatta last week berated his administration once again expressing a familiar helpless rage at what he admitted as a failure to deliver.

Dismissing his prepared script as rhetoric, the Head of State spent several minutes apologising to Small and Medium Enterprises (SMEs) gathered at the Strathmore Business School for the 2018 SME Conference.

“I am ashamed after the revelations made here,” he said. I am sorry that we have not fulfilled our promises. We have neglected SMEs that pay taxes and employ 75 per cent of our people. This is not the way we should work.”

The president is right in proclaiming the obvious notion that the Government has failed the SMEs in Kenya but not quite in the ways he described.

Indeed, the prominence given to entrepreneurs in the country is not commensurate to the important role the sector plays in the economy.

At the same time, Kenyan SMEs are harmed by the Government’s policy inaction as much as by active interventions.

In the Finance Bill 2018, the Treasury under instruction from the President introduced new taxes targeted at Internet services, a vital resource relied on by millions of people, the majority of them between the ages of 18 and 30.

This is against research pointing to the needs and benefits of having all citizens gain access to an affordable Internet connection.

Service providers have already increased the price Internet bundles - meaning young people are once again shouldering the burden of the government’s unsound fiscal policy.

Another counter-intuitive move was to introduce an eight per cent VAT levy on petroleum products.

This, coupled with anticipated hikes in global oil prices owing to tension in the Middle East means the cost of fuel and by extension electricity prices will remain high if not increase in the near term despite the president’s directive.

With the new taxes under the Finance Bill 2018, SMEs that might wish to think outside the box find it increasingly difficult to execute grand ideas on shoestring budgets while navigating the state’s punitive system.