State, counties in deal to spare SMEs from levies

The national government is working with counties to cut cess and levies charged to small and medium-sized enterprises (SMEs) with the aim of harmonising regulations to reduce costs and make it easier for small entities to thrive.

Interior Secretary Fred Matiangi said Monday that multiple taxes across the 47 counties were eating into the margins of SMEs and blunting their ability to grow and create jobs.

“We are looking at the regulatory environment of the SMEs sector to see how we can harmonise regulations to make it easier for them to do business,” said Dr Matiangi.

“We met governors last week as the first step and struck an agreement on harmonisation of cess and levy rules across the counties. Nobody pays a greater price than SMEs in moving goods across the counties,” he said.

County governments introduced cess charges for products moving between the devolved units and refused to accept permits issued by other counties.

For instance, a maize trader sourcing maize from West Pokot County to Kitale in Trans Nzoia for drying and re-bagging before selling in Nairobi or Mombasa market incurs three levels of cess.

Dr Matiangi explained that the counties may for instance start working under regulations that will give exemptions to certain levels of SMEs when it comes to cess and levies payment.

He was speaking during the launch of a two-day SME conference and exposition in Nairobi. The forum has been organised by the Nation Media Group #ticker:NMG (NMG) and the Kenya National Chamber of Commerce and Industry (KNCCI). It is being attended by more than 80 SMEs.

The Treasury has in the past put county governments on the spot over their haphazard imposition of levies to raise own source revenues.

This has seen SMEs pay more to sell goods across the counties.

The conference is seeking to offer solutions for the SMEs at a time when the country is facing increased unemployment and with many firms struggling to grow revenues.

“SMEs are the engine of the economy and NMG is proud to hold the first expo to power the country for growth. Next year, we should convene to share success stories,” said NMG Chief Executive Stephen Gitagama. NMG Chairman Wilfred Kiboro said supporting the SMEs would help the government easily achieve its objective of distributing wealth and alleviating poverty given the role they play in diverse sectors.

He noted that it was startling that more than 400,000 SMEs in the country were shutting down after only two years in business, pointing to challenges in the regulatory environment. “The mortality rate of SMEs is very high and we believe this conference will offer solutions. We don’t have jobs for people leaving schools and SMEs are the only way to create jobs. Hungry and idle youth is a time bomb,” he said.

He urged the government to address the cumbersome regulatory environment to help SMEs rise above other challenges such as insufficient capital, high taxes, corruption and limited managerial capacity.

KNCCI President Richard Ngatia said policy lapses had left SMEs with little room to grow and venture into new areas as is the case with well-established entities. “We have to rein in the unco-ordinated policy making since the law tends to favour large enterprises, leading to a lack of conducive environment for SMEs,” he said.