VICTOR BWIRE: SMEs contribution to wealth creation requires policy support

Lack of knowledge of laws governing SMSs operations in counties has seen them harassed.

In Summary

• SMEs as regularly referred to need our support, largely to advocate for policies that would allow them to thrive.

• KNBS Statistics in THE 2016 Economic Survey of 2016 said that the informal sector contributes to about 30% of GDP and accounts for 82.8% of persons engaged in 2015.


A section of youth work at ROMIKA shoe facrtory in Ukunda, Kwale county on Thursday, February 2, 2023.
WORKFORCE: A section of youth work at ROMIKA shoe facrtory in Ukunda, Kwale county on Thursday, February 2, 2023.

The elevation of the small and medium enterprises into the state departments with a permanent secretary is once again an affirmation that the informal sector is a critical player in the country’s economic growth.

Also in wealth creation, contribution to taxes and job creation.

Outside the challenges in the definition of the term, it's clear that those involved in the production of goods and services, that might not be classified by certification bodies, are big players in our economy.

SMEs as regularly referred to need our support, largely to advocate for policies that would allow them to thrive, and by extension contribute to widening the tax base in Kenya- assist the Kenya Revenue Authority meet its targets, laws and regulations.

They will also allow them to operate without fear and intimidation that hinges on underground businesses, be respected and modernised to access loans and in most cases allow the documentation of unpaid labour as contributors to wealth creation.

The Kenya National Bureau of Statistics in its Economy Survey of 2016 records that the informal sector in Kenya contributes to about 30 per cent of GDP and accounts for 82.8per cent of persons engaged in 2015.

The informal sector includes small-scale activities of small businesses such as hawkers, retailers, boda boda riders and other service providers.

It is estimated that 66 per cent of workers in the informal sector are women and are engaged in trade (WIEGO, 2011).

The Kenya Kwanza government has prioritised tax payment in its revenue expansion program including those working in the informal economy.

Almost all county governments on assumption of office established task forces to investigate among other things, revenue collection, taxation and income generation.

Many have identified the informal sector as the major contributor to their revenues- This makes a look into improving the working environment for this group important.

It's important for people to understand and interrogate how the various taxes; national and county taxes are affecting small scale traders and business owners differently.

Its very clear that many in the informal sector are not aware of the many tax obligations expected of them, because they are so many, and apply to different sectors differently, and where even they pay, they lack such basic services such as lighting, public toilet and security that many times, they don’t see the benefit of paying the taxes.

The national government must come to the aid of SMSs in terms of working with county governments, harmonising and rationalise taxes on informal businesses, and provision of basic social amenities where they operate.

Together with this, a massive public education and sensitization for informal sector players on the tax obligations, categories and related is urgent.

I am sure this will be through a public participation approach where the players can share with the government the policy and legal challenges they face, and if possible, suggest how to remove or hamrnoise some obligations- so that the sector can grow and contribute to the country.

The lack of knowledge of laws and regulations governing SMSs operations in the counties has seen them harassed, arrested and made to pay officers instead of establishments- this has contributed to revenue loss for national and county governments, and escalated corruption and killing of the sector.

In addition to enacting current and data driven by laws on the sector by the counties, its important that the national government works a proper framework for classifying the various categories and taxation groups, for as its today each county does their own classification and many services are over paid or not included in fees payment.

According to ILO, “informal economy” refers to all economic activities by workers and economic units that are not sufficiently covered in law or in practice. Given that the activities are not included in law they operate outside the formal reach of the law, hence the law is not easily applied or enforced on them.

The informal economy varies by countries, and while it may be viewed as private sector, others consider it synonymous to the ‘underground” economy.

However, the goods produced by the workers are largely legal goods and services, albeit sometimes not complying with the laid down procedures.

The Constitution of Kenya is the foundational legal and institutional framework upon which both national and county taxation are founded.

Under the various Acts and related, SMSs pay among others the registration of a business name fees, stamp duty, compliance fees, incorporation fees, NSSF, PAYE and NSSF levies, PIN, business permit fees, fees under the land and building laws, under the tax and trade laws (income tax, VAT, Custom and Exercise, NEMA among others.

Other requirements under the Employment Act, and Factories Act and Public Health Act- which have a fees and expenditure obligation.

In addition, there are county-based taxation or tax-related laws that are specific to each county but generally include Finance Act, County Tax Waivers Administration Act, County Betting, Lotteries and Gaming Act, County Alcoholic Drinks Control and Licensing Act, County Valuation and Rating Act, Trade Licensing Act and the County Outdoor Advertisement and Signage Control Act.

The other group that requires attention is unpaid care work.

Little has been done to create public awareness on understanding of unpaid care as a public policy issue that requires attention.

Globally, unpaid care has been recognized as a key driver of Women's Economic Empowerment and as a matter that requires public attention and consideration through being integrated into national debates about public services, poverty reduction, women’s paid labour-force participation, and economic development.

While several specific policies on unpaid care, including in the AU Gender Strategy for Agenda 2063 have been developed, these rarely make it to the public realm through the media.

Can for example a domestic worker get a loan on the basis of her/her employment? With the recent court ruling on the distribution of property on divorce, how will women document and monetize their contribution through undertaking domestic cores, that contributed to the overall family wealth,

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