SCALE UP YOUR OPERATIONS IN ORDER TO GROW, EAC MICRO, SMALL AND MEDIUM ENTERPRISES TOLD
Micro, Small and Medium Enterprises (MSMEs) in the East African Community are increasingly lagging behind in growth and affecting the economic growth of the region.
This was the revelation made by Rwanda’s Minister for Trade and Industry, Soraya Hakuziyaremye, while opening the 20th EAC MSMEs Trade Fair at the Gikondo Expo Grounds in Kigali, Rwanda on the 17the of December 2019.
According to the Minister, majority of MSMEs are unable to attract capital for growth from both local and international sources, revealing that the MSMEs in the region lag behind for not being creditworthy.
MSMEs face many obstacles that restrict their long term survival. The rate of business failure is alarming with only a few businesses surviving a few months to one year, the mortality rate of MSMEs among African countries remains very high with five out of seven new businesses failing in their first year.
The MSMEs contribution EAC
The East Africa Community, a regional intergovernmental organization of six (6) Partner States, comprising Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda, still finds itself heavily reliant of MSMEs, 20 years after its inauguration.
Ms. Hakuziyaremye revealed that MSMEs represent more than 90 percent of businesses in East Africa, across all sectors of the regional economies. This trend arises because 75% of the East Africa population relies on natural resources. Traditionally, the main productive sectors have been agriculture, livestock, horticulture, wildlife-based tourism, forestry, and fisheries.
The huge representation of the MSMEs in East Africa has no doubt raised great concern for the regional governments and development partners, to try and scale-up the sector into large enterprises that will be competitive at regional and international levels.
What are MSMEs, who are captured?
In Uganda, as described by the Uganda Investment Authority, a ‘Micro-Enterprise’ is an enterprise employing up to four people, with an annual sales/revenue turnover or total assets not exceeding Uganda shillings 10 million.
On the other hand, Small Enterprises employ between 5 and 49 and have total assets between, Uganda Shillings 10million but not more than 100 million
The Medium Enterprise, therefore, employs between 50 and 100 with total assets more than 100 million but not exceeding 360 million.
Proposed EAC Interventions
Speaking at the event, the EAC Deputy Secretary-General in charge of Planning and Infrastructure, Engineer Steven Mlote, re-echoed that “Managed well and with a supportive policy and regulatory environment, MSMEs can promote value addition to our natural and agricultural resources thereby increasing the region’s share in continental and global trade,”
The Treaty establishing the East Africa Community envisages a regional effort to scale-up MSMEs as engines to spur rapid economic growth, in addition to creating employment for EAC citizens.
The Minister, however, emphasized that the solution lies in key areas of capacity building for MSMEs, which are the tenants of economic integration; standards, cross border trade regulations, metrology, business licensing and registration, and the elimination of Non-Tariff Barriers to Trade (NTBs).
To contribute and build on the achievements registered by each member state, Ms. Hakuziyaremye disclosed that the long term goal of the EAC was to increase the contribution of MSMEs to Partner States’ GDPs from the current 20 percent to 50 percent.
She urged EAC Partner States’ governments, to do all in their powers to address challenges faced by MSMEs to enable them to create employment and reduce the high poverty levels.
Strategies devised by the member states
The regional governments, in their effort to improve and increase the competitiveness of MSMEs within each member state, and internationally, have recently adopted the “Made in Your Country Policies.”
These policies lean more on Domestic Market Recapturing Strategy (DMRS), through value chain development and capitalizing on the organic nature of the regional agricultural products with the aim of capturing a greater share of the consumer segments in the developed countries of the world.
Made in Rwanda
The campaign for Rwanda is called “Made in Rwanda” which aims to contribute to the country’s efforts to reduce its trade deficit and upscale local manufacturing.
Since its launch in 2015, the industrial growth average was 7 percent per annum, while Rwanda’s total exports have increased by 69 percent, from nearly 559 million USD in 2015 to nearly 944 million USD in 2017. In addition, total imports decreased by 4%, from nearly 1.849 billion USD in 2015 to a little more than 1.772 billion USD in 2017. Since 2015, Rwanda has experienced a 36% decrease in its trade deficit, according to the Statistics from Rwanda’s Central Bank. The Made in Rwanda policy was closely followed by Made in Rwanda Expo that takes place from 28th November to 11th December every year and now in its fifth year.
Buy Uganda Build Uganda (BUBU)
In Uganda “BUBU Policy or Buy Uganda Build Uganda” was launched in 2015, this policy aims to increase the consumption and procurement of goods and services produced locally.
Its targets by 2020 included;
- 20% of Government procurement by value should be of local products and services.
- 50% of shelf space in supermarkets should be populated by local products.
- All MDAs strictly abiding by the PPDA Act during procurement processes.
- 50% of local products conforming to national standards.
- 50% of local resources and raw materials being utilized in production.
In 2013, the Parliament of Uganda in view of the BUBU policy amended the Public Procurement & Disposal of Public Assets (PPDA), to provide for the application of preference and reservation schemes under public procurement.
The BUBU policy is supplemented by the BUBU Expo an annual three (3) day event held in March every year. The BUBU policy is, however, in a way the implementation of the National Trade Policy of Uganda
The Made in Kenya Initiative
Kenya’s manufacturing has no doubt been strong in the EAC, but because a majority of their goods and services bore no identity mark of origin, increasing competition from imports of goods and services is a threat to locally produced ones. Thus without a unique and distinct differentiator, Kenyan goods were losing their originality and to an extent, their preference in the local and global market.
To create more value proposition to enhance competitiveness for Kenyan products and services in local and global markets, BrandKE Board created in August 2019 in conjunction with other stakeholders developed a “Made in Kenya Brand Mark” to help identify and authenticate locally-manufactured products on local and global markets.
The Made in Kenya initiative is thus aimed at among other things;
- Enable consumers locally and abroad immediately identify a product as Kenyan and then associate the product with quality and authentic Kenyan value.
- Strengthen Kenya’s position as a made-in country Brand in light of the Big Four Strategy where Kenya seeks to position itself as the Industrial Hub for Africa.
- Enable the implementation of section 155 of the Public Procurement and Asset Disposal Act 2015 which gives preferential procurement to manufactured articles, materials and supplies partially mined or produced in Kenya or where applicable have been assembled in Kenya. Brand Kenya
The vision is to transform Kenya into a Top Global Brand, through branding the products and services of its people which in turn, rebrands Kenya.
The Future of MSMEs, what is the Game Changer?
Ms. Hakuziyaremye recognized that growing MSMEs would, therefore, be the backbone of the regional economy, adding that the long term goal of the EAC was to increase the contribution of MSMEs to Partner States’ GDPs from the current 20 percent to 50 percent.
However, with the discovery of huge deposits of oil, gas, mineral resources and rare earth elements in the EAC, the Extractive Industry is set to grow, enabling the region to become major income earners and thus boost Gross Domestic product of each county in the EAC. MSMEs will need to be capacity built, as major suppliers to the extractive industry, in following the trend set by the procurement laws to provide for the application of preference and reservation schemes for local companies, if the region is to see meaningful economic growth and competitiveness.
On his part, the EAC Director General for Customs and Trade, Mr. Kenneth Bagamuhunda, said the EAC was building digital platforms that would promote e-commerce in East Africa.
“We want to digitalize MSMEs in the region so that we can have a virtual exhibition that goes beyond the once a year trade fair,” said Mr. Bagamuhunda.
With the increase in financial services in the Region, small group saving schemes and the many national government initiatives to support MSMEs in collaboration with international bodies and NGOs, perhaps the only thing left for the scaling up operations by the MSMEs, is for MSMEs to realign themselves to the opportunities available.