How new set of import rules are taking heavy toll on small traders

Kisumu Deputy Governor Ruth Odinga (second right) inspects a receipt issued to traders for revenue collection at Holo Market. The November directive issued by the Kenya Bureau of Standards (Kebs) and the Kenya Revenue Authority requiring all imports to be accompanied by a certificate of conformity came into force in January 2016. FILE PHOTO | NATION MEDIA GROUP

What you need to know:

  • “It is very difficult because it takes more time to obtain goods and as you can see stock is hard to dispose and storage space is scarce. We don’t even know how to pass the cost to the customers who don’t understand these changes
  • Import documents seen by Money showed that SME bring in as low quantities of items as a package of table clothes, a package of plastic hair combs and four motor cycle side mirrors.
  • Mr kariuki says SMEs in many parts of the world fuel economic growth because they create new jobs, expand the tax base, and are drivers of innovation.

In downtown Nairobi, near the River Road-Tom Mboya Street junction, business is a buzz. Scores of small scale traders run shops, popularly known as stalls, selling mostly office and home electronic appliances. Competition is stiff as evident by traders who jostle to catch the eye of potential customers.

Mr Franklin Njorua is one of the traders. His small shop is almost bursting at the seams with wares. However his business prospects are not as bright as they seem.

He told Money that the fortunes of small businesses have changed dramatically after government implemented new rules that require all imported cargo to have a certificate of conformity.

The small traders like Mr Njorua who used to bring several varieties of goods in small quantities are now forced to buy in bulk in partnership with other importers or alone and bear the huge cost of inspection in China and Dubai.

“I had to bring all these computers because we have to pay for inspection in China while seeking the COC (certificate of conformity) which we pay per item type. The cost of this may sometimes be even higher than what you are bringing in considering that we bring items in very small quantities,” Mr Njorua said.

“It is very difficult because it takes more time to obtain goods and as you can see stock is hard to dispose and storage space is scarce. We don’t even know how to pass the cost to the customers who don’t understand these changes.”

The November directive issued by the Kenya Bureau of Standards (Kebs) and the Kenya Revenue Authority requiring all imports to be accompanied by a certificate of conformity came into force in January 2016.

Kebs requires every item type to bear a unique Harmonised System (HS) code to have the certificate that was previously issued to an importer after all goods are inspected and given a clean bill of health.

The standards watchdog is now relying on agents stationed at the source of the products to do the job of inspecting and certifying every item. Some of the international firms contracted by Kebs to carry out the inspection are SGS, Bureau Veristas and Intertek.

SMEs say the new rules are disruptive to their business model and highly skewed in favour of large scale traders.

No cargo is allowed into Kenya without conformity certificate, which is required before imports are cleared by Kebs and the revenue authority. “This requirement has been found necessary in order to protect the safety and health of Kenyans in addition to securing tax revenues (with) key concerns that have arisen in the past including cases of cargo misdeclaration and under-valuation,” Kebs says.

Previously, traders would order small packages of different items and their agent in China would consolidate them and ship them in one container. The SMEs would then proceed to the Port of Mombasa and pay a 15 per cent surcharge on the value of items and their goods were cleared.

Quality imports

China, Dubai Traders Group Chairman James Kariuki says while the traders are not opposed to the need for quality imports, the new system is hurting their businesses which can neither afford the high fees for inspection nor ship in full containers with a similar commodity.

“The nature of the SME is that you bring small quantities as you respond to market demands. These people have no space or the financial muscle to ship in a whole container with items of the same HS code,” Mr Kariuki said.

“The inspection costs between $200 and $500 while most SMEs bring small packages with value of items that are even lower than this. The government is slowly turning its back on such a critical sector for the economy and after many neglects, this may be just the final blow to most start-ups.”

He said most of the neighbouring countries like Uganda and Tanzania have not introduced such drastic measures hence forcing some SMEs to source goods across the border points. The concern here, he says, is that poor quality of goods are likely to seep through into the country as there are no mechanisms for detecting and inspecting them.

Import documents seen by Money showed that SME bring in as low quantities of items as a package of table clothes, a package of plastic hair combs and four motor cycle side mirrors.

Traders who have traditionally shipped these small quantities are now forced to consolidate similar goods in one container for smoother acquisition of the COC from the country of import.

However, the challenge the importers face is getting enough similar goods to fit a container. This is because traders deal with a wide variety of goods which they source from different countries. The competitive nature of business also discourages the traders from disclosing their business secrets to rivals.

The appointed agents are also alleged to be absent in some countries where the SMEs source for goods from, hence imposing an ‘unofficial ban’ on goods from those countries.

Mr Kariuki says Kebs should have tightened inspection in the previous system which was favourable to small traders.

“What this directive is doing is completely disruptive for start-ups who are fast being driven out of business by these stringent rules. We really need a forum to address this issue with the relevant authorities who have always excluded us in decisions that affect us,” he said.

Hurt job creation

He said the regulations have impacted negatively on the importation of items like sewing machines and motor cycle parts. This, he said, is bound to hurt creating jobs and hence cause a negative ripple effect in the economy.

The traders say Kebs and KRA should institute measures that will foster the growth of small traders.

Mr kariuki says SMEs in many parts of the world fuel economic growth because they create new jobs, expand the tax base, and are drivers of innovation.

Kenya which  improved 28 positions in the World Bank’s ease of doing business index last year boosted  by reforms in business and property registration, electricity connections and access to credit may need to relook the issues affecting this crucial sector including poor working environment and lack of representation in various government forums.

The country ranked at position 108 out of 189 countries globally compared to 136 last year, making it the third most improved economy.