Why you should register your small business with government

A woman sitting at the desk of her clothing boutique [Courtesy]

Many people are betting on businesses. And this has seen many micro, small and medium sized enterprises (MSMEs) spring up.

Yet, many others are dying too, some even before getting registered. 

The government, through the Micro and Small Enterprises Authority(MSEA), wants to change this. The authority is carrying out a registration exercise of MSMEs.

MSEA hopes the registration will establish the number of MSMEs in the country, their location and the sectors they trade in so as to inform targeted interventions. 

Enterprise had a chat with MSEA CEO Henry Rithaa to shed light on this exercise that is targeting five million small enterprises. 

The government is passionate about supporting small enterprises yet many are still struggling. What is the challenge in reaching out to these enterprises?

If you look at the small business in the country and their numbers, you realise one thing; unless we seek what I call sector-specific intervention, we will not have any impact.

Their growth levels are different and the sectors have different challenges and opportunities.

Yet, there are very many agencies, public and private, that have packages that can support different segments of the MSE sector.

How will the registration of MSEs re-organise their current structure?

The law in 2012 said we need to create an office that will register MSEs and the same law stipulated that they should be registered under their associations.

That means for instance, if you go to agriculture, you will find a registered umbrella organisation for people in agribusiness.

This umbrella is composed of so many small associations across various sectors, at various stages of growth doing different things.

So at the national level, you will find the national umbrella of MSEs in agribusiness. When you come down, you will find  a national grouping affiliated to the umbrella for dairy farmers, horticulture and even in horticulture.

You may also find other small associations in coconut farming or something else.

How will this new structure make it easier for government to support MSMEs?

For you to support them, you must have a system so that at the click of a button, it will for example tell you the number of Kenyans in coconut farming.

That way, if we have for example a non-governmental organisation that wants to add value to coconut oil, we won’t start struggling looking for them because we will already have them in the register.

If you want to train them for example, you do not struggle. If you want to come up with a credit product for MSEs you do not struggle.

How do you plan to go about this new structure?

We want to have 5,000 MSEs registered under us in the first year to form the foundation.

We will then support these 5,000 fully so that they become our agents for registering others.

Once we do that, we will have an impact on the ground and that becomes the first benefit of the system.  We will be able to know how to support these small firms in a structured way and influence policy.

To what extent will this new structure influence policy?

If we had the numbers, what is happening in Kenya Meat Commission would happen in other sectors.

For example, we would  push under the Access to Government Procurement Opportunities for a given per cent of all grains supplies to a given agency to come from our members.

Two, who operates from the industrial development centre that we are developing? Right now, the system is that the one with more influence has it.

Yet we have invested money and I have seen there is Sh199 million allocated to continue giving equipment and upgrading the facilities. How do you do that if it is the unstainable model of cartel-like tendencies privatising government facilities for their individual gain?

With MSMEs register, it will not be possible for an entity to operate in a government industrial development centre without being registered.

At the height of Covid-19 in 2020, the government came up with an economic stimulus programme that roped in small businesses.  How do you see MSEs benefiting from such programmes in future  once you have MSMEs register?

If there is such a facility, we will go to our data base and say we have this number of associations from our counties and they have the certificate.

We do not want them to be asked for certificate of registration from registrar of companies; it should be this one from MSEA.

The State will then float tenders, limiting them to all the registered MSEs in Kenya.

You will not claim that you awarded tenders to small businesses in Kenya if there is no evidence that  they are registered under us.

How has the lack of numbers or database affected the growth of the sector?

We are making noise here in our small way about the MSME fund delay. What will it be if we had the numbers? We will tell the President that in our data base we have this number of people in small businesses and they are in all the 47 counties.

We will be able to demonstrate for instance that if only you could give a given amount of money to such MSMEs,  their contribution to Gross Domestic Product will rise to a given level. This assists in planning and lobbying for this sector.

What kind of benefits should an MSME owner expect from registration?

They will get support through marketing their product and also support for manufacturing since we will give them space and utilities to make their products.

Through registration, we will also give them a chance to bid for tenders through that aggregator.

For example, if you are in Kariobangi as 10 MSMEs making furniture, and the ministry running affordable housing wants windows for a hospital, you cannot qualify for the tender as a single MSME because your production is say five.

But when you say we are in association X and we can supply these 100 units, you win the tender because you have demonstrated capacity. That becomes an advantage.

The other benefit is that registration will inform good planning. When the government does not know you, it does not plan for you.

For instance, we will be able to say that this year we require Sh10 billion in credit guarantee scheme for MSMEs because we have numbers.

Has this lack of registration affected access to credit?

We had a consultative forum to look at how we can entrench support to the MSMEs under the national credit guarantee scheme.

What came out is that the banks do not know who is doing what. We are making noise that MSEs are not being supported by the scheme but banks are asking us where the numbers are.

How will the authority tackle multiplicity of fees and charges across counties?

That is one of the challenges MSEs are facing.  If we know what each MME does and we enter into a pact with counties to support this sector, we agree on harmonizing and stop some of these fees and charges. 

We may also agree that within the given economic blocs, this is the only certificate we recognise and that becomes our lobbying mandate. We must advocate for favourable working environment.