Leveraging on MSMEs to enhance international trade footprint

In Summary

• MSMEs stand to learn crucial lessons from competitive external markets,

• MSMEs share of employment stood at 84% in 2018

KAREN KANDIE
KAREN KANDIE

 

Keeping with our focus on matters trade, this week’s piece specifically touches on the role played by micro, small and medium enterprises (MSMEs) in Kenya’s trade agenda, and ultimately in support of the achievement of the Big4 Agenda. It is no secret that the advent of the 21st Century has seen the tide turn, with global markets increasingly focused on SMEs as avenues for growth, as opposed to well established multinational corporations.

This is all too true in Kenya, where, per the 2019 Economic Outlook report recently released by the Kenya National Bureau of Statistics, MSMEs (comprising of the informal sector and self-employed individuals) share of employment stood at 84% in 2018. Similarly, SME’s were noted as contributing approximately 25% to the Kenyan economy in the same year. Given the weighty contribution to our economy directly attributable to MSMEs, it is only fair to say that leveraging on our MSMEs to bridge the trade deficit and ultimately achieve our developmental targets is the smart play.

 

With the relative success experienced by MSMEs in job creation, direct contribution to the economy, technological innovation, inter alia, resultant of the significant strides made in the local market, achievement of the same success in the global markets is not only plausible, but attainable.

Without understating the value of local trade, supporting Kenyan MSMEs access global markets comes with a raft of benefits. From increasing the country’s competitiveness in the international context, to the acquisition of foreign technologies through knowledge spill-overs, expanding MSMEs market access is likely to have trickle down effects that stand to benefit Kenya as a whole.

Indeed, as highlighted in the World Bank’s 2009 World Development Report, market access is becoming increasingly important in shaping global and regional economic development, with a direct link being noted between a country’s economic footprint and its access to markets.

Consequently, it is imperative that our MSMEs are equipped with the right skills, tools and information to be able to identify opportunities for growth in global markets. This includes the ability to secure financing in order to enable market expansion, and similarly leverage their own experience and expertise to tailor products to a market’s specific needs.

Provided that a conducive regulatory atmosphere exists, and that such growth is supported from legislative and diplomatic angles, access to foreign markets will likely lead to increased sales and notable productivity gains. MSMEs stand to learn crucial lessons from competitive external markets, which, given patience and perseverance, will result in higher quality products. Additionally, such market diversification is likely to act as a protective tool against markets shocks – lessons learnt from our over reliance on the agricultural sector in past years, which has made us vulnerable to climate change.

With 80% of global trade occurring through global supply chains, it is high time that Kenya taps into the potentials of MSMEs in order to participate in these value chains.

Karen Kandie – MD IDB Capital