Medium-sized firms cite funding, taxation woes

Invited guests during the Club 101 networking by Nation Media Group in partnership with KPMG and IFC at Radisson Blu Upperhill on September 29, 2022. PHOTO | DIANA NGILA | NMG

Mid-sized firms that have graduated from the Nation Media Group’s Top 100 competition have highlighted tax management and access to funding as the key growth challenges.

SMEs have traditionally faced funding problems due to difficulty in accessing bank loans and instead rely on alternatives such as private equity and venture capital funds, as well as cash injections from owners and their associates.

However, participants in a forum bringing together a group of previous Top 100 winners whose turnover has now exceeded Sh1 billion — known as Club101 — highlighted the challenges of accessing funds as a concern, given that capital needs have grown and can only be met by deeper-pocketed financiers.

The forum addressed issues around the taxation regime, financial and credit offerings and sustainability. The annual Top 100 competition is run by the Business Daily and financial consultancy KPMG East Africa, with support this year coming from the International Finance Corporation.

It focuses on SMEs that have audited results for the past three years, are not listed on the stock exchange and have an annual turnover of between Sh70 million and Sh1 billion.

KPMG East Africa head of private enterprise Sandeep Main told the firms that after scaling up their balance sheets, they ought to adopt a proactive approach to tax matters, to avoid the shock of hefty tax demands from the Kenya revenue Authority that can spell doom for a young enterprise.

"As you grow your business and look for investors, automation of tax processes is key. Investors are interested in knowing a firm’s tax obligations and so tax planning presents an opportunity for effective and better management,” said Mr Main.

In recognition of the funding problems facing SMEs, which are expected to be key job drivers alongside agriculture, President William Ruto has announced the establishment of a ‘Hustler Fund’ that will provide at least Sh50 billion in affordable credit to these businesses.

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Note: The results are not exact but very close to the actual.