sessional papers

QUESTION

Read the Sessional Papers of 1992 and 2005 on Micro and Small Enterprise and Jua Kali Development in Kenya.

Group the promotional into 2

a. Hardwareb. Software

Evaluate their success against

1. Objectives2. How far have they attained these objectives3. Give reasons why they are not attained

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DEFINITION OF TERMS:-

SMEs: - The term SME covers a wide range of definitions and measures, varying from country to country and between the sources reporting SME statistics. Although there is no universally agreed definition of SME some of the commonly used criteria are the number of employees, value of assets, value of sales and size of capital. In Kenya, these are businesses in both formal and informal sector, classified into farm and non-farm categories employing 1-50 workers.

Jua Kali: - Small-scale craft or artisanal work, such as making tools or textiles.

Promotional Programmes:-

Characteristics of SMEs

a. Small units, often rural-based and family-owned. b. Small independent enterprises, standing alone and producing for a well-defined

market.c. Specialized firm, producing specialized products, selling to the international

and/or local markets.d. Rely on low cost raw materials, low energy costs, low labor costs, low division of

labor.e. Flexible and often small production runs.f. Low capital formationg. Largely labor intensive units with low-level technologies; but note the

emergence of high skill and technology-intensive SMEs, especially in high technology industries.

Benefits of MSEs:-

a. Employment creation at relatively low capital costs.

b. Income generation for the Government in terms of goods and services and

the Kenyan citizens in terms of the salaries and wages.

c. Poverty reduction

d. Development of a pool of skilled and semi-skilled that are the base for

industrial expansion.

e. Contribution of increased participation of indigenous Kenyans in economic

activities of the country.

Although the MSE sector has played a major role, it has experienced many constraints thus have not realized their full potential. Some of which are:-

i. Poor access to markets and financial services

ii. Unfavorable policy, legal and regulatory environment.

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iii. Poor implementation among the co-coordinating agencies

iv. Gender inequality

v. HIV/Aids

vi. Limited access to information

vii. Healthy and safety in work places

viii. Limited Linkages to large enterprises

The Government has committed itself by putting in place promotional measures

geared towards promotional and development of MSE sector. This includes

publication of the Sessional paper No. 2 of 1992 on small enterprise and Jua Kali

Development in Kenya.

1. Sessional Paper No. 2 of 1992 on Small Enterprise and Jua Kali development in Kenya.

This Sessional paper provides a policy framework for promoting Small scale and Jua kali

enterprise development in Kenya based on the work of a special task force established

in March 1987 by the Government . The task reviewed policies to promote the sector.

The paper is divided into six chapters:-

a. Chapter one covers the role of the sector in Kenyan economy in relation to the

overall development policy and strategy.

b. Chapter two highlights policy measures to improve the existing policy and

regulatory environment.

c. Chapter three focuses on Gender Specific Issues.

d. Chapter four discusses policy measures to improve access to credit facilities.

e. Chapter five discusses measures to improve provision of non-financial

promotional programs.

f. Chapters six provides agenda for action within a period of 12-24 months after

adoption of the paper.

The General approach was to encourage MSEs to be involved in providing for its own needs while the government acts as a facilitator by concentrating on creating infrastructural facilities and economic environment in which entrepreneurs can emerge, develop and grow.

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The Promotional Programmes are divided into two broad categories:-

a. Hardwarei. Providing Physical infrastructure and information networks in which small

enterprises can operate efficiently. b. Software.ii. Investment Incentivesiii. Review of Actsiv. Gender Specific Issuesv. Policies that enhance growth of MSEs to be put in placevi. Educationvii. Marketingviii. Information Technology.

a. Providing Physical infrastructure and information networks in which small enterprises can operate efficiently.

This would eventually enhance growth of MSEs. This objective could be achieved by:-

Encouraging local groups of artisans to form associations so as to benefit from Rural

Electrification programme financed by the Government through the Electricity

development fund.

Provision of Industrial Land for construction of industries and installation of

facilities such as machinery.

Ensuring that the constructions of sheds for Jua Kali enterprises are undertaken.

The Government to assist MSEs in preparation of development plans and projects

for improving infrastructural facilities under their jurisdiction.

The Government to some extend has attained its objective of providing physical

infrastructure and information networks in which small enterprises can operate

efficiently .This is reflected by the improved road network in the country, provision of

Jua Kali sheds, rural electrification though they have been hindered by corruption i.e.

land grabbing and misappropriation of funds whereby the individuals entrusted with

funds for the projects use it for their own interests.

b. Investment Incentives by:- Establishing Rural enterprise fund to finance Jua Kali entrepreneur and

construction of the workshops

Investment allowances for establishing new factories outside Nairobi and

Mombasa.

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Exemption from import duties on capital machinery for small enterprises located

in rural areas as long as the cost of machine doesn’t exceed Kshs. 20M.

How far they attained:-

This has been attained because all the entrepreneurs even in the rural areas are

enjoying the funding through the Government’s Youth and Women Enterprise funds and

Financial Institutions such as Kenya Women Financial trust and Faulu Kenya. Banks

branches have been opened up such as Equity Bank which offers loans to the people

who want to start their business and have no enough capital.

c. Review of Acts; by relevant ministries in consultation with AGs Chambers e.g. the

Ministry of Trade, Ministry of Planning and National development. These acts are

the Employment Act, which restricts access by women in certain industries except

for medical and environmental reasons. Review of pertinent Acts which have either

direct or indirect impact.

Review of Licensing, agreements and building codes that hinder MSEs businesses.


d. Gender Specific Issues

Female entrepreneurs operating small businesses face a number of constraints which cal l for urgent remedial action. Some of which are:-

Small Scale Enterprises development institutions need to adjust operations to take

note of women’s needs.

Most Financial institutions are in urban areas and there is need to provide smaller

institutions in rural areas for revolving funds and mobile funds.

Appropriate technology to diversify women entrepreneurial activities should be put

in place.

Women to be organized into groups so that they can support each other and benefit

for development from development initiatives.

Women should be educated on their rights, on inheritance and how to form and get

into groups through legal awareness seminars.


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The objectives have been achieved and more opportunities for entrepreneurial women have been put in place. This is through the Maendeleo Ya Wanawake initiatives, the Women Enterprise Fund, Kenya Women Finance Trust among others.

More women are now empowered through education which is done through seminars and the media.

e. Policies that enhance growth of MSEs should be put in place;These are:- Enhancing import restrictions in favor of tariffs

Formulating a national export policy for SEE products and services.

The government to see public procurement procedures and regulations to

support MSEs find markets for products in the public.


This has somehow succeeded as Licensing of SMEs has been simplified and licenses can

be attained at the District levels. Employment policies have been changed to

accommodate women. Also women now can access bank loans as compared to the past

where the spouse had to sign for them.

f. EducationThis is the training on specific business topics by providing a new venue through

which large firms can provide training and credit to the small enterprise with whom

they deal with.


It has succeeded because so many Institutions have been opened that offer courses on specifically on entrepreneurship education.

g. MarketingMarketing is done through:

Linkages between large and small enterprises

Exploitation of export market opportunities

Entry of small scale enterprises into the service sector.


They have not succeeded because we are still importing products from other countries such as cotton wool and phones from China which have flooded our market.

h. Information Technology

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Market related information will be widely disseminated by District Industrial Development officers (DID) in a manner that ensures that the target groups are reached.

Ministry of Industry to undertake studies on the implementation modalities of subcontracting between large and small enterprise.


They have succeeded because the price of computers have been reduced as well as tax

2. Sessional Paper No. 2 of 2005 on Development of Micro and Small Enterprises for Wealth and Employment Creation for Poverty Reduction.

This paper is divided into four chapters:-

1. Chapter 1: Introduction, an executive summary to the paper which gives the thrust

of the policy framework.

2. Chapter 2: Profile of Micro and Small Enterprise in Kenya

3. Chapter 3:Challenges to the Development of Micro and Small Enterprise Sector

4. Chapter 4: Policy for Development of Micro and Small Enterprise.

The promotional Programmes are categorized as below:-

A. Hardware

i. Infrastructure Development

B. Software

ii. Facilitating Business Registration through reduction of Cost and Time

iii. Local Government Reformsiv. Review of Land Lawsv. Review of Labor Laws

vi. Arbitration and Dispute Resolution vii. MSE Act

viii. Markets and marketingix. Business Linkagesx. Policy framework for development of Skills and Technology

xi. Ensuring Gender Equity

xii. Business management and Entrepreneurial Skill Acquisitionxiii. Information Management and Dissemination

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xiv. Tax regimexv. Formal and Informal Entry Barriers

xvi. HIV/AIDS

1. Facilitating Business Registration through reduction of Cost and Time

The Government will decentralize registration of businesses starting from the

provincial levels then at the District levels. The Government will also undertake to

computerize the process and network activities in all relevant offices.


2. Local Government Reforms Amendment of Local Authority Act (Cap. 265) to reflect limited and essential

regulatory powers by Local Authorities.

Urban and town councils in collaboration with traders and relevant stake

holders will be required to develop clear guidelines for enforcement of the

measures.

Local Authority by-laws will be reviewed and standardized to make them

supportive to promotion of business.


3. Review of Land LawsThe review will continue for simplification and harmonization with the relevant

pieces of legislation. Physical planning Act, 1996, will be affected to encourage

Local Authorities to earmark land for MSE development.


4. Review of Labor LawsThe review will continue to make them more dynamic, supportive and responsive

to the needs of both employers and employees i.e. Employment Act (Cap. 226) and

the Regulation of Wages and Conditions of Employment Act. (Cap.229),


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5. Arbitration and Dispute Resolution MSE court will be established to dispense justice, and deal with small but non-

trivial claims emanation from the sector.


6. MSE Act The Government will formulate and enact an MSE specific legislation, the Micro and

small Enterprises act to give the sector legislative recognition and provide an

appropriate legal framework supportive to its growth.


7. Markets and marketing The Government will allocate 25% of its procurement requirement to the SME

sector so as to encourage growth. The Government through public-private sector partnership and in

consultation with MSE operators and stakeholders will encourage sub-contracting arrangements between large and medium firms and the MSEs through provision of incentives such as tax rebates and duty waivers to encourage the large firms to participate in the arrangement.

Government will restrict dumping of Goods into the country and within the framework of Economic Recovery Strategy will increase the per capita of the citizenry that are the ultimate source of increased aggregate demand.

Government will facilitate marketing of MSE products in both local and International market through Export Promotion Council and Kenya Missions abroad.

Local Authorities to continue to implement creative approaches aimed at promoting marketing of MSE products e.g through marketing in public parks on specific days.

How far have they been attained:-

8. Business Linkages

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The Government will provide incentives to the private sector to invest in areas

that enhance development of business linkages between MSEs and large

enterprises.

The Ministry of Finance will work out modalities for providing appropriate fiscal

incentives to both large and small firms to encourage market/supply linkages to

MSEs.

To encourage linkages between the MSEs and large enterprises, the Government

will identify suitable zones with basic infrastructure, which will serve as

incubators to improve the image of MSEs and their visibility.

The Government will put in place mechanisms that will promote linkages between MSEs and Agricultural sector to increase rural incomes and reduce poverty


9. Policy framework for development of Skills and Technology

The policy framework will seek to enhance their ability to adopt and adapt new

technology, improve the capacity of institutions that support technology

development, increase overall access to information on available technology and

acquisition of technological skills.


10.Ensuring Gender Equity The policy framework will galvanize the creative and productive potential of

women.

Government will pursue gender responsive policies that increase equal access to

financial services for both men and women.

Government will build institutional capacity of ministries, parastatals and

Government departments for gender integration and promote greater access to

education, entrepreneurship and technological development.

The Government will pursue policies to empower women, increase their access to

credit and build institutional capacity of support organization for gender

mainstreaming.10

11.Business management and Entrepreneurial Skill Acquisition The Government will encourage Universities, Polytechnics, technical institutions

and other MSE support organizations to develop certified demand driven courses

for entrepreneurship and business management.

Government will introduce entrepreneurial development programmes in schools

and other training institutions in order to develop a widespread entrepreneurship

culture.

A new policy framework to promote cost- effective Business Development Services

(BDS) programmes that are tailor made to specific range of needs of a range of MSE

entrepreneurs and business sectors.


12.Information Management and Dissemination The government will encourage private sector investment in information centers

for MSEs and support stakeholders’ initiatives targeting dissemination of

information generated within the sector.

The Government will support periodic baseline of the sector.

Measures will be put in place to strengthen existing institutions and documentation

centers that specialize in MSE related information.

The Government will encourage and provide incentive on private sector initiative

towards establishment of an information clearing house that will ensure that

relevant information about MSEs sector is collected, organized, processed and

disseminated according to the needs of different stake holders.


13.Tax regimeGovernment will continue will Tax reform aimed at improving transparency and

efficiency of taxation, strengthening tax collection and harmonizing the tax system.

Mechanism will be put in place to ensure that the MSE can pay tax that allows them to

fulfill their tax obligation and thrive at the same time.


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14.Formal and Informal Entry Barriers

The Government will work closely with the private sector to and other stake holders to

ensure promotion of good governance, ethical trading and rule of law thus the capacity

of the MSE associations will be strengthened to be able to play a self-regulatory role

more effectively.


15.HIV/AIDS

MSEs will be facilitated to take advantage of the all prevention, care and control

programmes under the National Aids Control Council (NACC) strategic plan.

MSEs will be encouraged to participate fully in HIV/AIDS activity es at constituency

AIDS Committee levels in their respective localities.

Measures will be put in place to encourage insurance companies to develop

schemes for MSEs e.g. health insurance.

MSEs will be encouraged to insure their properties.


16.Infrastructure Development

The Government in collaboration with relevant stakeholders will encourage

more private sector participation and management of market stalls and

worksites for MSEs through leasing of land to developers at concessionary rates

and granting tax incentives to such developers.

Government will introduce measures to privatize existing sheds in order to

facilitate their efficient management and utilization.

The Central Government in collaboration with the local Authorities will promote

the issuance of Temporary Occupation Licenses for a longer period of time to

overcome insecurity of tenure of land allocated to MSEs.

Issuing of short- term leases to the individual MSE entrepreneurs.

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MSE associations will be encouraged to adopt a Community Land Trust

arrangement for the benefit of the members so as to promote investment and

infrastructure development within MSE sites.


Conclusion

In conclusion, although much has been done by the Kenyan Government to promote SMEs, achievements have been minimal and many SMEs have collapsed. This is due to the rampant corruption and lack of proper training of the entrepreneurs in the Country. The Government should introduce courses which mould students right from primary school to the Tertiary level so that they learn to be self reliant and do not depend on white collar jobs only.

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sessional papers

Documents

gender specific issues

build institutional capacity

providing physical infrastructure

jua kali development

small enterprises

stake holders

private sector

local authorities