Standards breach to lock SMEs out of continental trade, warn lobbies

A worker in a warehouse preparing goods for dispatch. [iStockphoto]

Private sector lobbies have cautioned that Small and Medium Enterprises (SMEs) risk being locked out of the opportunities in the African Continental Free Trade Area (AfCFTA) due to poor absorption of specified standards.

A meeting to discuss standardisation issues among SMEs in the region acknowledged the difficulties these businesses face in trying to adopt the standards set for the products or services they trade-in.

These difficulties have been compounded by the slow process of harmonisation of standards across the several markets or economic blocs in the region.

Similarly, even countries affiliated with different economic blocs end up shifting to their local standards for protectionism purposes to prevent some businesses from exporting into their markets.

Agricultural goods are said to be the most affected, with SMEs not aware of the needed certifications and which agency issues the same.

Trade and Investment Officer at Kenya Private Sector Alliance (Kepsa) Levi Injendi said while Kenya’s exports have grown from Sh873 billion in 2022 to cross the Sh1 trillion mark in 2023, SMEs still do not feature prominently.

“Interestingly, SMEs contributed just about 25 per cent of these exports,” he said.

Mr Injendi noted the supply chain as one of the challenges SMEs face when it comes to utilising AfCFTA. The available logistics are also expensive and unreliable.

He also cited a lack of value addition by many Kenyan businesses, particularly in agricultural produce. 

Mr Injendi said Kenya, for example, imports a lot of peanut butter from Uganda, yet it is something that local businesses can invest in for export as well.

“This is something we really need to look into. Most businesses want to export, but products do not cross the border due to compliance issues,” he said.

“Value addition is something that needs to be aggressively addressed.”

One way of addressing it, said Mr Injendi, is to make access to market information available.

“The available information is very scattered. Businesses don’t know where to start,” he said, adding that businesses sometimes do not know if it is Kebs (Kenya Bureau of Standards) or if another agency needs to certify their products for export.

“We (SMEs) are contributing 50 per cent of Africa’s Gross Domestic Product (GDP) but we can do 70 per cent,” said the Kepsa official.

Moses Kanyesigye, head of SMEs, Women and Youth at East African Business Council, a regional private sector lobby, noted that SMEs constitute 80 per cent of businesses in the region.

He said EABC has signed a Memorandum of Understanding with the African Organisation for Standardisation (Arso) to train SMEs on standards, compliance, and regulatory issues.

“From our research findings, we found that most SME products do not cross borders. It’s not about regulatory and legal requirements, but it’s related to compliance and standards,” said Mr Kanyesigye.He said meeting the set standards has been a challenge for businesses to execute cross-border trade, referencing the aflatoxin menace whenever maize moves across markets. 

He said if the compliance issue is sorted across the African markets, businesses would not depend only on the European market but would utilise the AfCFTA.

“That is what informed the development of a programme with GIZ to train SMEs how to plant, harvest, store and package,” he said.

The poor absorption of standards has also been mentioned in a policy document by the Micro and Small Enterprise Authority (MSEA), which said it hinders these businesses from accessing markets.

“Further, there is low uptake of intellectual property protection amongst MSEs such as trademarks. Other factors include limited access to market and export information, low compliance with standards, certification and export market requirements, and high costs of doing business contributing to low competitiveness,” reads the policy document in part.

Arso Project Coordinator Lillian Kamanzi noted how regulatory differences between regional economic blocs or countries hinder SMEs from utilising the AfCFTA.

“The full potential of AfCFTA to be attained requires more than just signing the agreement. It requires a more harmonised and strategic approach to address challenges such as tariff and non-tariff barriers and regulatory differences,” she said.

Ms Kamanzi said the potential of AfCFTA is immense as it will not only increase market access and enhance competitiveness but also spur the creation of jobs, terming standardisation the backbone of industrialisation.

“By harmonising the standards, we can ensure products and services across Africa meet the quality and accepted requirements therefore boosting consumer confidence, enhancing competitiveness of African goods on the global stage,” she said.