‘Jua kali’ has key role in manufacturing

Monday February 27 2017

Jua Kali artisans at Kibuye Jua Kali stalls on October 22, 2014. FILE PHOTO | TOM OTIENO | NATION MEDIA GROUP

Jua Kali artisans at Kibuye Jua Kali stalls on October 22, 2014. FILE PHOTO | TOM OTIENO | NATION MEDIA GROUP 

By NDIRITU MURIITHI
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By DAVID MBURU
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A large number of small businesses in Kenya are in the manufacturing industry. Out of the 700,000 micro enterprises captured in the Micro, Small and Medium Enterprises (MSMEs) Report 2016 published by the Kenya National Bureau of Statistics (KNBS), 175,000 or 12 per cent are in manufacturing.

This is one of the biggest findings of the survey, which is a must read to understand the critical role the ‘jua kali’ sector plays in the economy. Not surprisingly, most of the Small and Medium-sized Enterprises (57 per cent licensed and 63 per cent unlicensed) are in wholesale and retail trade, and repair of motor vehicles and motorcycles.

The documenting of the manufacturing segment should lead to rethinking of the term ‘jua kali’ to create greater acceptance and attention among policy makers, bankers, service providers and Vision 2030 proponents to anchor small businesses within the economic pillar for support to harness the massive untapped potential.

The KNBS report indicates that the bigger (2,000) of the small manufacturing businesses are mostly in the medium-size tier, and employ between 50 and 100 people, while the smaller ones (7,000) have 10 to 49 employees.

This the most comprehensive source of the vital data needed in scaling up the micro enterprises at the national and county levels using the normal international standard industrial classification (ISIC) commonly applied globally. Some 42 per cent of the smaller manufacturers are in clothing, 11 per cent in furniture, 22 per cent in food and 12 per cent make fabricated metal products.

Some 900 of the SMEs are in chemicals and chemical products. There are 267 establishments making non-metallic mineral products and 152 manufacturing basic metals.

The figures indicate they deserve better than the pejorative “jua kali” tag, and are increasingly in sophisticated industries.

There are 1,786 MSMEs making leather and leather products. They are either micro or mid-size. The data should help planners of the Athi River Leather Park to target small businesses.

BARRIERS TO REGISTRATION

“Jua kali” manufacturing shows that Kenya has a good base to grow its industrial sector, if we shift focus to small and mid-sized businesses.

It points to a need to realise the objectives of the Kenya Industrial Estates that were mooted to encourage industrialisation at the micro level. It also means we must make it easier for SMEs to get licensed by removing the barriers to registration.

Most MSMEs are in areas with the least barriers to entry yet these easy businesses have least trickle-down benefit to the macro economy.

Most of the SMEs are in the service industry, with the majority dealing in the wholesale and retail businesses. They constitute 62 per cent of all the SMEs (4.57 million). This is evident in the large number of stalls, mitumba markets, kiosks and mini and large supermarkets.

Out of the 4.5 million traders, 80.5 per cent are unlicensed, with rest operating without licences. This shows that there are minimal barriers to entry in trade.

Accommodation and food service is the next large category, with 9.05 per cent of the SMEs (670,500 SMEs). Out of which 20.5 per cent are licensed and 79.5 per cent are unlicensed. The barriers to entry are also few, but due to the additional food hygiene certificate required by the county governments, many are unlicensed.

Transport and storage comes third in the service sector, having 3.16 per cent of all the SMEs. Of these, only 6.5 per cent are licensed. The sector has the highest number of unlicensed businesses.

Mr Muriithi is the chief economist, Metropol Corporation ([email protected]) and Mr Mburu is also associated with Metropol ([email protected])