Taxation of SMEs in Africa and Kenya

There is increasing pressure in Kenya to give better concessions for MNCs (not just international ones but regional as well as homegrown multinationals) but the biggest question for a newly emerging country like Kenya remains development, poverty and raising the standards of living . So where does the SME and micro-business fit in? How does one ensure that the small businesses succeed and prosper. The African Tax organisations are  studying SMEs and interesting facts continue to arise for the Micro enterprise in Africa. These SMEs or micro enterprises are numerous and include both registered and unregistered business. The unregistered  ones continue to use illicit means to work through the system: so how are the legitimate small and micro enterprises fairing?

In a globalised world where everyone is pushing the MNC concept the modest businessperson is having great difficulty which means that if we do not protect and nurture these cottage industries and small-scale businesses we will not have a diverse economy with innovative business practices that suit our context. So where are the problems and what can government do to assist?

Firstly, with the tightening of Anti-money Laundering laws the SMEs are having more difficulty setting up bank accounts. Some banks are shutting down the accounts of the entire groups of SMEs without exception and the result is that SMEs stop functioning sometimes for more than 6 months. In addition they are not able to get loans easily and are placed under a higher level of scrutiny, The fact there is no sieving mechanism within the banks that are closing all accounts means that if you are a MNC or big company you escape the added scrutiny.

Secondly, the movement of goods and services into and out of the country. Several SMEs I deal with long delays at the port as well as the difficulties in assessment. This means that perishables expire and that the cost of doing business is prohibitive. In the world of the franchisees where local businesses are expected to maintain global standards through use of the same source of products and raw materials, this almost guarantees failure.

Finally, there is a need to recognised that in developing countries like Kenya the majority of business is small business and by giving preference to larger businesses you are ensuring that there is no emerging small scale and potential MNC from within the country.

There are many other reasons and I would love to hear your opinions on this all I can see is that the small businessperson cannot survive int he current climate unless they remain unregistered!