SMEs in Kenya to benefit from Government’s special economic zones (SEZs)

According to the Ministry of Industrialisation, Trade, and Enterprise the government is eager to incorporate local Micro, Small, and Medium Enterprises (MSMEs) into Special Economic Zones (SEZs), 

As the government pushes for additional investment and job development, Chief Administrative Secretary David Osiany has indicated that there are also unexplored prospects at Export Processing Zones (EPZ) that have been presented to investors.

The Micro and Small Enterprises Authority (MSEA), in collaboration with the United Nations Development Programme (UNDP), is now conducting a registration push for small enterprises .

A comprehensive database for MSMEs

The project’s goal is to provide a comprehensive database for Micro and Small Businesses, as well as a central reference point for information dissemination and market access.

“SMEs face stiff competition from established large enterprises. Large enterprises have a cost advantage of SMEs as they produce in higher volumes. Due to this factor, SMEs find it hard to compete in the market with the established enterprises,” David Osiany 

The administration hopes to formalize at least 15 million SMEs in the medium future, which would be a significant step toward growing the country’s tax base.

In Kenya, a micro-business is defined as one with fewer than ten employees and a turnover of less than Sh1 million, while a small business is defined as one with ten to 49 people with a turnover of between Sh1 million and Sh5 million.

According to the Micro And Small Enterprises Authority (MSEA), a medium enterprise has 50-99 employees and a monthly turnover of between Sh5 million and Sh20 million .

According to the authority’s chairman James Mureu, the registration process, which began in November, has attracted more than 20,000 SMEs so far.

SEZs in Mombasa, Naivasha, and Machakos

The government is promoting at least nine special economic zones (SEZs) in Mombasa, Naivasha, and Machakos, totaling roughly 9,000 acres.

It is relying on SEZs as part of its post-Covid-19 economic recovery strategies to boost both local and foreign direct investment (FDI).

SEZs have designated locations where both domestic and foreign investors can make export-oriented investments.

These zones are also deemed to be outside of Kenya’s customs area and hence function under a jurisdiction that exempts them from certain taxes and regulatory burdens.

Benefits of the SEZs

One of the tax benefits offered by SEZs is the exemption from paying excise duty, income tax, customs duty, and value-added tax on all special economic activities by licensed firms, developers, and operators established within the zones.

To help small businesses, the government is relying on the MSE Fund (MSE Act of 2012), which aims to finance the promotion and growth of micro and small firms, as well as providing inexpensive and accessible loans and finance research, and development, innovation, and technology transfer.

For SMEs, credit limits are a serious problem. SMEs are unable to make necessary investments for growth due to a lack of sustainable sources of working cash, resulting in stagnation.

“Improving access to credit is thus crucial if SMEs are to reach their potential and allow businesses to move from start-ups to established businesses with growth potential.” 

The MSME sector lies at the heart of Kenya’s Vision 2030 and Big Four Agenda. It is crucial in terms of generating cash and creating job possibilities.