Many small businesses have over the years restricted themselves to supplying basic items to State corporations.
This way, they end up jostling for crumbs at the bottom, while many of them could be rolling in big money, supplying high-value goods and services.
It is the case in the local electricity sector, where many businesses led by women, youth and persons with disabilities (PWDs) have been scrambling to supply items such as stationery or cleaning services to companies, while they could be making a lot more doing technical work.
Kenya Power in the current financial year has reserved Sh3 billion for these businesses, but to exhaust this money, the firms need to offer more than the supply of ‘common use items’.
They instead need to bid for the supply of technical goods and services such as the laying of underground power and fibre cables as well as restoration of electricity when there are outages
Why firms fear big bids
Andrew Ashene, acting general manager for supply chain and logistics at Kenya Power, says it is a tall order for the firm to achieve the 30 per cent procuring quota reserved for these cadres of businesses when they keep supplying common use items while the bulk of the money is spent on engineering and other technical contracts.
He said though the high-value services have more demands on the expertise of companies and their employees, many firms have the qualification but do not bid largely due to lack of awareness.
The preferential treatment of businesses led by women, youth and PWDs by the procurement laws gives them a chance when bidding for these jobs.
“We are a technical firm and so we need technical expertise. The misconception has however been that the preference and reservation tenders are for common user items such as stationery, items that you can easily get. If we approach it like that, we will never get to 30 per cent,” Mr Ashene told Enterprise.
“The spend on the technical jobs such as cabling is high, unlike the common use items.”
He said Kenya Power has recently made deliberate efforts to reach out to small businesses to increase awareness and at the same time tried to transit certain firms with potential from supplying basics to the more technical aspects of its business.
While there has been a degree of success, the firm still has a long way to go and keeps negotiating with the National Treasury to give it time before it can get to the point where 30 per cent of the value it contracts in a year goes to the preferential groups.
Lack of awareness
Among the biggest challenges the firm cites is the lack of awareness among businesses.
Many small firms have worked with other technical firms such as telco companies in laying cables and managing transmission sites and could easily do some power infrastructure jobs, but many tend to shun the electricity sector.
“There is also little awareness internally among the entities. We are changing this from within such that when the different departments are doing their budgets, at the back of our mind we are keen on what we will be reserving for these businesses, which is 30 per cent of the spending,” said Mr Ashene.
“This has been a gap but many procuring entities, not just Kenya Power, are appreciating this.”
Not business ready
The other big challenge with these groups is whether they are business ready.
“Among the factors at play here include the fact there is a lot of financing required. So we are planning to engage bankers and create awareness and they can access financing.”
Mr Ashene added that the company has a policy whereby it does not delay payments to small businesses and that “they are paid promptly on delivery.”
Over the current financial that runs to June 2023, the firm said it has reserved Sh3 billion. This is a growth from around Sh800 million in the initial years after the enactment of the Public Procurement and Assets Disposal Act (2015).
This is expected to grow over time but needs companies to increase uptake.
“We started with Sh800 million, grown to Sh1.6 billion over the last financial year and this year, we are looking at Sh3 billion. There is an opportunity. The money is there but there are few companies taking it up,” he said.
“What has happened in the past is that we would reserve but the uptake was initially poor. We took a step back and decided to do it differently including understanding why the uptake has been low. It started slow but it has been catching up.”
Preferential treatment of groups of people who have in the past been disadvantaged by unfair competition is outlined in the Constitution.
The Public Procurement and Asset Disposal Act (2015) dictates that “all procurement and asset disposal planning shall reserve a minimum of 30 per cent of the budgetary allocations for enterprises owned by women, youth, PWDs and other disadvantaged groups”.
The procurement regulations also include small and micro businesses among the societal segments that have been disadvantaged in the procurement processes.
The disadvantaged enterprises need the Access to Government Procurement Opportunities (AGPO) certificate from the National Treasury to get preferential treatment from the procuring entities.
“You could be young and a woman but the law is such that whichever gives an advantage is the one that you should be awarded. Treasury issues these certificates and the regulations have made it easier,” Mr Ashene said.
“The moment Treasury gives you that certificate, a procuring entity is compelled to bring you on board.”
He also sought to offer clarity on allegations that small businesses are usually shut out of certain cadre of works as they offer low-quality products.
“Quality starts from the specifications. Let us not blame the business. If the user department gets the specifications wrong, the item that you will receive will be wrong,” said Ashene.
The businesses also need to meet certain minimums including being solvent, having professional requirements for their key personnel and fulfilling their tax obligations.