The SME sector is the backbone of Kenya’s economy. The sector employs 86 percent of the population and contributes at least 45 percent of the country’s GDP.
According to stats from the Kenya National Bureau of Statistics (KNBS), at least 1.2 million SMEs had shut down businesses in a period of 5 years.
Going with the stats from KNBS, at least 450,000 SMEs shut down their operations annually, 30,000 monthly and at least 1,000 daily.
With the coming of Covid-19 that has seen millions of businesses shut down and millions of Kenyans laid off, the number of businesses shutting down on a daily basis might be higher than the 1,000.
As existing SMEs struggle to remain afloat, and as those who cannot survive shut down and exit the scene, those trying to set up operations are dying even before they start.
The cost of doing business in Kenya is higher than in most countries in the East African region. This is perhaps, the reason why most investors are opting for Uganda and Rwanda.
If you have 1,000,000 shillings, for instance, starting a tangible business will mean giving the government more than half the amount before you even think of setting up the business.
Say you want to set up a water packaging station; you will first need what is called a county single permit that comes at 18,500 shillings, a public health license and testing at 13,000 shillings, a certification from Kenya Bureau of Standards at 102,000 shillings, custom excise bond from Kenya Revenue Authority at 300,000 shillings, custom excise stamp from KRA at a minimum of 50,000 shillings.
There is also a requirement from NEMA at the cost of 33,000 shillings. Even after to wade through the costs and set up the business, you will be required to pay 0.5 percent of your monthly turnover to KRA, 5.75 shillings on every liter of water you sell, and get a distribution permit from the respective county.
There is a need to look into the policies by the government and find a way to harmonize all these deductions.