Equity, Tullow Oil back tenders portal to link up big companies and SMEs

Small and medium sized enterprises can now access a larger number of tenders following the launch of a new portal that will upload tenders floated by large companies on a single online platform.

The platform launched on Thursday by non-profit organisation, Invest In Africa (IIA), is targeting 1,000 SMEs and 20 large partner firms by the end of the year, bridging the big companies and SMEs’ supply and procurement functions.

The large businesses signed up to the initiatives are expected to post all their procurement notices for goods or services tenders on the platform. The platform is also expected to link the SMEs with financiers, making it easier for them to access credit to finance their orders.

“Small businesses can now find the opportunity to grow their business and access financing. We will be recruiting SMEs, take them through the validation process and all the improvements required to make sure that they meet the standards being demanded by big businesses,” said IIA country director Patricia Ithau during the launch.

IAA was set up in 2012, rolling out its pilot SME business portal in Ghana starting October 2014 where it has so far attracted 1,300 suppliers and seen tenders valued at $540 million (Sh54 billion) awarded through the portal.

Equity Bank and Tullow Oil have signed up as founder members of the Kenyan chapter of IAA, initially targeting SMEs seeking tenders in the upstream oil sector.

Other partners include Ken-Invest, Strathmore University and consultancy firm EY (Ernst & Young).

“Once a partner like Tullow posts all the opportunities in the oil industry, Equity will come in and finance the orders. Other partners like Strathmore will provide assistance in developing capacity of the SMEs, while Ken-Invest would be in a position to lobby for policy changes to develop the sector,” said the Equity Bank CEO James Mwangi.

SMEs have often complained of difficulties in accessing financing for their businesses from the formal financial sector, with banks usually putting a high risk premium on SME lending due to high risk premium on start-up businesses.

They are routinely charged more not just in interest on loans but also in ledger fees by banks, with a survey conducted by Think Business magazine showing that service charges levied on SME customers went up five per cent in the year to March 2015 compared to a 4.5 per cent rise for retail customers.

Large firms also make it difficult for SMEs to survive by delaying payments for goods and services delivered, thus denying the small businesses operating capital required to finance new orders.

A Strathmore University study done ahead of the launch of IIA in Kenya also showed that nearly half of SMEs are unable to access information on when tenders are issued by big companies in the private sector.

In government tenders, a policy exists requiring at least 40 per cent local content in all public projects, especially targeting youth and women, although some internationally funded projects such as the SGR have seen the contractor fail to follow this rule due to contractual loopholes.