Proper policies are needed to devolve SMEs

Business Daily Africa, August 05, 2013

By Samson Odhiambo

Small and medium enterprises (SMEs) have the capacity to achieve rapid economic growth, while generating a considerable extent of employment opportunities.

SMEs create about 85 per cent of Kenya’s employment but only contribute about 20 per cent of the total GDP. This confirms a dismal performance of the subsector. An effort to revamp the subsector is therefore necessary given the current regime on devolution in Kenya.

A well formulated devolved system of governance is expected to promote favourable macroeconomic environment for economic activities which benefits the sectors with greater multiplier effects on local economic development, where SMEs are known to constitute larger percentage of economic activities.

The current constitutional framework and the Medium and Small Enterprise (MSE) Act, 2012 provide a window of opportunity through which the evolution of SMEs can be fostered under the devolved governance system.

However, the impact of devolution on SMEs development depends on the architecture of the regulatory and institutional framework inclined to support SMEs in an economy.

The institutional frameworks proposed under the new SMEs Act are important developments that can lead to further evolution and success of SMEs in Kenya, if properly implemented.

The authority is envisaged to focus on policy articulation, promotion, development and protection of SMEs. It is also expected to monitor the execution of the formulated policies and the effectiveness in their implementation.

It will thus be important for the SMEs authority to directly work with the relevant departments at the county governments.

Such consultative mechanism will ensure that devolution framework works for SMEs at the county level. There also need for the overall and county specific government policies for SMEs to emphasise on building alliances in the various SMEs sub sectors.

To support the private-public dialogue mechanism, there is need for the county government to establish a formal consultative mechanism to support the open policy development process and transparent government activities to support the SMEs.

Each county should also evolve its own policies and packages of incentives based on the county’s economic competitiveness.

The writer is a competition officer, CUTS International Nairobi

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