Letters

Balancing small firms’ growth, competition

sme

Samson Biwott, General Manager of Tarakwo Dairies in Tarakwo, Uasin Gishu County shows Lala milk, which they produce on September 28, 2021. PHOTO | JARED NYATAYA | NMG

Summary

  • Unfair exclusive agreements imposed by big players foreclose the distribution chain by creating barriers to entry and expansion, while price fixing contraventions render certain services inaccessible to MSMEs.
  • Governments may also affect the operations of these firms through their regulatory regimes including licensing.
  • The Competition Authority of Kenya (CAK) aims to, among other things, extinguish these challenges facing MSMEs, including advising the national and the county governments to pass regulatory regimes that support investment climate.

Discussions on reinvigorating the business environment in Kenya usually pivot to the fact that Micro, Small and Medium Enterprises (MSMEs) contribute about 34 percent of the country’s Gross Domestic Product and employ approximately 15 million people.

Unfortunately, a fifth of these small firms fail in their first year and just a third survive past their tenth birthday.

This low survival rate is attributed to the hurdles disproportionately facing MSMEs, such as unfair competition practices, including incidents where buyer firms with superior bargaining power delay payments, impose unfair contract terms, or transfer costs when dealing with suppliers.

Additionally, unfair exclusive agreements imposed by big players foreclose the distribution chain by creating barriers to entry and expansion, while price fixing contraventions render certain services inaccessible to MSMEs.

Governments may also affect the operations of these firms through their regulatory regimes including licensing.

These costs add to the financing strain facing MSMEs purchasing equipment for expansion, thereby stalling their growth.

The Competition Authority of Kenya (CAK) aims to, among other things, extinguish these challenges facing MSMEs, including advising the national and the county governments to pass regulatory regimes that support investment climate.

The CAK has intervened in various sectors which support MSMEs, including agriculture and manufacturing.

Additionally, interventions against big businesses disenfranchising their smaller supplier partners has occasioned the release of more than Sh2.5 billion to MSMEs operating in the retail and insurance space.

The CAK has supported the bargaining position of MSMEs entering into agreements with buyers by developing template contracts to guide the process.

Such interventions and more resonate with the theme of this year’s World Competition Day — Competition Policy for an Inclusive and Resilient Economy — marked on December 5.