Aggregate volumes to benefit from AfCFTA, MSMEs told

The fragmented nature of micro, small, and medium enterprises (MSMEs) in Kenya, with many operating in isolation, may put them at a disadvantage as the country integrates into the African Continental Free Trade Area (AfCFTA).

At a recent workshop aimed at educating small businesses on how to leverage digital tools to capture the African market, experts emphasised the importance of MSMEs adopting formal structures and aggregating their efforts to succeed beyond Kenya's borders.

Joseph Rotich, AfCFTA Chief Negotiator from the Ministry of Trade, highlighted that many MSMEs in Kenya have lost clients due to an inability to meet demand.

Meanwhile, Jas Bedi, Chair of the Kenya Export Promotion and Branding Agency (Keproba), indicated that the government is ready to lease warehouses across Africa to help MSMEs enter new markets.

Speaking at the workshop in Nairobi, organized by GIZ-Kenya and the East African Business Council (EABC), Rotich pointed to the recent success of Kenya's tea export to Ghana under AfCFTA. This export, aggregated from smallholder farmers through the Kenya Tea Development Agency (KTDA), should serve as a model for increasing exports.

"Most of those small-scale farmers don't even know what AfCFTA is or where Accra is, but they are now making money," Rotich said.

He explained that the AfCFTA is designed to ensure that every small trader can participate. The Rules of Origin protocol, in particular, encourages local production and enhances value chains.

"The value chain now connects everyone to the marketplace. This is where you (MSMEs) become important. If you do not participate in AfCFTA, it will never be realized," Rotich emphasized.

He added that the government is establishing aggregation centers in counties to facilitate exports. However, MSMEs must utilize their cooperatives to aggregate volumes, making it easier to export and serve clients.

"Don't remain fragmented. When I look for a product made by an MSME, I should be able to find it, not struggle because they are scattered all over," he said.

Rotich recounted the challenges faced during the East African Community (EAC) trade protocol, particularly in the furniture industry, where manufacturers were scattered, making it difficult to protect local producers.

"If someone needs a million pieces of furniture, are you going to get it? People are disintegrated. We need to come together so that when someone requests 20,000 pieces of something, you can direct them rather than sending them to different locations," he said.

He also noted numerous instances where MSMEs lost opportunities because they couldn't meet the volume requirements of potential clients.

"This is the challenge I am giving to the private sector, particularly small businesses. You have an opportunity in AfCFTA, but you must be identifiable, visible, and capable of aggregating volumes. If you only have one or two pieces of furniture, no one will buy," Rotich urged.

According to the Kenya National Bureau of Statistics (KNBS), Kenya has 7.5 million small businesses. However, the State Department for MSME Development estimates that the number of MSMEs could be as high as 18 million, as many are not formalized.

Geoffrey Kamanzi, EABC's Manager in charge of Trade in Services, said that the East African Community (EAC) is approaching AfCFTA as a bloc to aggregate volumes, giving the region greater bargaining power compared to individual countries.

"The EAC decided to do this deliberately in order to consolidate volumes," he said.

AfCFTA aims to give Kenya and other participating African countries access to a market of 1.4 billion people, valued at Ksh 420 trillion (USD 3.5 trillion).

Jas Bedi, Chair of Keproba, reaffirmed the government's commitment to working with small businesses to help them access the continental market.

He revealed plans to facilitate access to warehouses in major markets across the continent, which will be crucial as businesses aggregate volumes.

"I am willing to empower our SMEs to seize the opportunity that lies ahead of us. As the Chair of Keproba, we are seriously considering how we can take you to the marketplace," said Bedi.

He added that the government is ready to lease warehouses in key markets such as Kinshasa in the Democratic Republic of Congo, Ghana, South Africa, and Senegal.

"We will lease these facilities, and you (MSMEs) don't need to own them. The government will lease and sub-lease to all manufacturers. Go and start testing the market. We will take you there and make your life easier," he promised.