A big challenge for MSMEs remains lack of awareness of existing policies and legislative frameworks, which limits their ability to participate in policy formulation.
It reported a judgement of the High Court that upheld an April 2020 Competition Tribunal determination, that found that Majid Al Futtaim Limited, trading locally as Carrefour Supermarkets, possessed buyer power against Orchards Limited, a yoghurt producer, and had abused that position.
This matter was borne of an appeal by the retailer against a determination of the Competition Authority of Kenya (CAK) that had concluded as much.
Three days later, another article was published in the same paper, this time under the headline ‘The woman who took on supermarkets giant Carrefour – and won’, featuring an interview with Njeri Njoori, the proprietor of Orchards, a small business. The conversation starkly highlighted the challenging terrain that Kenya’s Micro, Small and Medium Enterprises (MSMEs) operate in.
In her words, “. . . business is not an easy task, especially if you are a micro enterprise.” Some of the challenges she faced in this supplier-buyer relationship, she stated, was exorbitant listing fees and rebates, forceful returns of goods nearing expiry, and contract termination without notice, leaving her with dead stock.
These issues, when combined with cash-flow issues occasioned by delayed payments from other retailers she was engaged with, collapsed the business.
The word ‘micro’ can be deceptive. It is no wonder then that some Kenyans I speak to, are quick to overlook the value of these enterprises to the economy, dismissing them as simplistic ventures.
The story of Orchards debunks that myth. Ms Njoori is quoted as saying that while she lost the business, her biggest regret was letting go of 10 direct employees and severe ties with scores of contracted milk farmers.
Given that the average household size in Kenya is 4.25 members, it is likely that Orchard’s former employees each had another 3.25 persons relying on them for sustenance and/or support.
The micro-enterprise’s untimely closure negatively impacted 43 persons. This is over and above the devastating domino effect on the local farming community, given that agriculture employs more than 40 percent and 70 percent of the total and rural population, respectively.
This reality underscores the importance of effective enforcement of competition policy in supporting MSME sustainability.
Competition regulation is but one tool to tackle what is a multifaceted problem. Kenyan MSMEs face varied challenges. An oft cited example is the regulatory burden.
Multiple levies, taxes and licences, involving multiple regulatory institutions at county and national government levels, increase the cost of doing business.
Indeed, Sessional Paper No 05 of 2020 identifies business environment constraints as the third main constraint experienced by micro (15 percent) and small (13 percent) enterprises in Kenya.
Instructively, the paper also highlights poor co-ordination in implementation of policies and programmes and weak synergy within government institutions as contributors to duplication of roles and policy implementation gaps.
Therefore, a collaborative approach is essential if we are to enhance productivity and sustainability of MSMEs. And there are great benefits to be reaped.
For instance, a big challenge for MSMEs remains lack of awareness of existing policies and legislative frameworks, which limits their ability to participate in policy formulation.
During the last financial year, the CAK partnered with the Micro and Small Enterprises Authority and Kenya Bureau of Standards to build the capacity of MSMEs in three counties – Nakuru, Machakos and Kisumu.
This joint institutional approach is not only cost-saving, but also efficient since it ensured that stakeholders were engaged on a broad array of regulations and support available from government, in one stroke.
Collaborations can also be achieved through Memoranda of Agreements.
However, such agreements on their own are of no value, unless implemented, monitored and evaluated. For quick wins, these agreements can be incorporated into the performance contracting cycle, with quantifiable indicators for co-working in policy implementation, regulatory initiatives and joint engagement with stakeholders.
This will contribute towards policy coherence and cure gaps and overlaps in MSME policy, while saving on implementation costs.
The writer is a Manager, Buyer Power Department, Competition Authority of Kenya (CAK)
