Small businesses are at the risk of incurring an additional expense if the government passes a law that will make it mandatory for all companies to join the Kenya National Chamber of Commerce and Industry (KNCCI).
According to Moses Kuria, Investment, Trade and Industry Cabinet Secretary (CS), during the launch of the 3rd Kenya International Investment Conference held between 29th-31st May at Safari Park Hotel, Nairobi, the government is working on a law that would have small businesses pay a minimum Sh5,000 mandatory subscription to the Kenya National Chamber of Commerce and Industry (KNCCI) in a bid to strengthen it.
“We are working on the National Chamber Bill which has to go to Cabinet within the next 30 days. We are going to have the Kenya Chamber that is truly reflective of Kenyan businesses, In the bill, it will be mandatory for every registered company in Kenya to be a member of the Chamber; it will not be an option, it will be mandatory,” added Mr Kuria.
The CS states that failure to join the lobby will mean one folds mandatory membership of the not-for-profit private company limited by guarantee, which promotes the commercial and industrial interests of Kenyan businesses. This comes at a time that many SMEs are struggling with the rising cost of business. Despite SMEs constituting 98% of all businesses, creating 30% of the jobs and contributing 3% of the GDP, there contribution to production is minimal.
This is attributed to lack of access to credit due to the high domestic borrowing, high electricity costs and increase in the price of raw materials that increases the cost production further. Access to credit has especially been the cause of many businesses closing down over the recent years. And this is the case, even though the government established the credit guarantee scheme (CGS) in December 2020 to deal with this exact issue.
However, the scheme has underperformed so far with only 2,997 MSMEs (those with sales of below Sh50 million) accessing Sh4.64 billion, a mere 38.67% of the Sh12 billion goal the Treasury had set for the scheme. And even though, small businesses (with 10-49 employees) accounted for 57% of the credit accessed, there is still much improvement to ensure more small businesses can access the loan through the participating commercial banks.
According to Henry Rithaa, Micro and Small Enterprises Authority (MSEA) chief executive, it is still difficult for small businesses to acquire credit. “For example, if you go to the bank and the requirement is that you should have a turnover of Sh1 million, it means almost all our micro-sized enterprises cannot access the loan. And so, they are not eligible,” he said.
Currently, to join the KNCCI, sole proprietors are required to pay Sh1,000 to join and annual subscription fee of Sh5,000, while partnerships pay a member fee of Sh1,000 to join and an annual subscription fee of Sh10,000, business associates and groups pay Sh1,000 and Sh15,000 p.a., small and medium enterprises (SMEs) pay Sh2,000 and Sh15,000 p.a., Local public companies pay Sh5,000 and Sh50,000 p.a. and corporate pay Sh5,000 and Sh100,000 p.a.
The mandatory subscription is expected to increase the cost of business, going against the agenda of the government, which is to improve the ease of doing business to create more opportunities. However, the CS has dismissed this growing concern. “Some people will start crying that this will increase the cost of doing business. If you think it is expensive to have to pay to be a member of the chamber, then be an employee,” he said.
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