Electricity cost not the biggest challenge to small enterprises in Kenya
By James Ngomeli
| Oct 30th 2018 | 3 min read
NAIROBI, KENYA: The debate on the challenges Small and Medium Enterprises (SMEs) face in relation to the cost of power was picked up recently by the president, which underscores the enormity of the matter.
I agree power is a factor but that does not mean if we lower its cost immediately there will be significant growth in the SME arena. There are, however, several areas that the government can work on to lessen the challenges facing SMEs.
With the advent of renewable energy, the cost of power should not be a big challenge to the SME market. The Government should support the SME sector to take the path of renewable energy so that we can reduce the cost of production.
In countries like India there are specific funds to help SMES go green. Here, the task has been left to the donor community and NGOs. This should not be the case as most SMEs are using outdated, second hand machines that consume a lot of power.
These funds can help SMEs import capital goods for manufacturing, even getting Tax breaks or holidays. The big man mentality where policies are driven by the multinationals is still a big challenge for the policy makers.
Secondly the government can uplift millions of SMEs through marketing of their products.
Most policy makers are tired of seeing the same women and men selling commodities during the national days or in malls year after year with no visible improvement.
The government has a role to shore up these businesses and markets abroad and even subside Air tariff or freight charges to conferences and events across the world.
The search for the markets is only for the big SMEs who can afford tickets and freight. A look at the counties that exhibit in shows that they are partly financed by the host country which is impossible in our country.
The country should invest in the last mile of the product life cycle as this does not require a lot in energy costs.
Third, uplifting a million people through agribusiness must be the key priority of the Government while this effort does not require any amount of electric power.
The whole value chain of agriculture can be run through renewable energy hence what is required is government intervention in terms of market access to supermarkets and malls across the world.
While giving tax breaks to corporates that grow the local business where there is backward integration in the value addition chain, certain questions must be posed: For example, does fish production require electricity? No. Does growing mangoes, oranges, avocadoes require electricity? No.
The value addition process of agribusiness does not require electricity and this is where the government can bring in a million young people out of poverty. Getting this products into the international markets should be the biggest headache for government.
The other bigger challenge apart from electricity is county fees and tariffs by the several regulatory bodies
In fact what is ailing the sector is the tens and tens of taxes that we pay several regulatory bodies with the only option of working with SMEs being the cashier’s window with metal grills. So, instead of building capacity they collect as much money as possible.
The government can do much more to overcome the impact of electricity cost by pushing these players and regulatory bodies to access markets within and abroad and allocate finances to ensure that last mile of value addition chain is well funded.
Driving the adoption of renewable energy is the best option to cut down on the cost of electricity. When renewable energy is employed for productive use, there has been significant growth in electricity demand.
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