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Export Opportunities for SMEs in the Regional Markets
Small and Medium Enterprises (SMEs) have over a long time been recognized as boosters of the economy in both developed and developing countries. These enterprises constitute a major source of employment and generate significant domestic and export earnings for the country. Despite their critical role in economic
development, these enterprises continue to face enormous challenges such as low quality products, low levels of technological input in their operations, inefficient export knowledge and the major one being access to affordable financial accessibility or credit.
According study findings conducted (OECD, 2004), 43.2 per cent of the respondents indicated that provision of loans to entrepreneurs at low interest rates could help the growth of their businesses. While low interest rates can not be the solution to all the challenges related to financial accessibility, 23.7 per cent of the respondents suggested that increasing the number of micro-financial institutions could also help in transforming the sector. Other approaches included an overall reduction to loan formalities and conditions and formulation of sound SMEs policies. These are indeed critical findings that assist in establishing support mechanisms that needs to be put in place to ensure better or maximum output from the SMEs in the areas of employment creation, poverty eradication and increase in the supply of goods and services both in the local and international markets. However, there is need to address other challenges (besides financial accessibility) that contribute to stagnation among SMEs especially in kenya. These include but not limited to unfriendly legal and regulatory framework, lack of managerial skills among aspiring and practicing enterprenuers, poor and unreliable infrastructure, poor business linkages (network), low purchasing power in the market and competition from imports among others.
The effects of these challenges to the export market development has been, low foreign exchange earnings, reduction in the purchasing power, high levels of dependency for external support, increased unemployment and negative balance of trade.
Regardless of these challenges, Kenya still stands out to be the leading economy in the region though other emerging economies like Ethiopia and Rwanda are making commendable progress by registering higher economic growth rates as compared to Kenya. This looked at positively is an indication that the purchasing power of the people living in these countries is higher than Kenya thereby suggesting a need to target these markets as prospective buyers of Kenyan goods and services. It is anticipated that the revival of East African Community (EAC) is expected to create numerous opportunities for the growth of Small and Medium Enterprises (SMEs) not only among the member states but in the region. Such opportunities include but not limited to the growth and expansion of workers, free movement of goods and services,  equal business operating  ground and  fair legal and regulatory environment.
 
The growth and expansion of workers
The introduction of the East African Common Market provides an opportunity for business and entrepreneurship to flourish through the movement of workers. People and Workers are dealt with in the Protocol which identifies four types of East African citizens who can enter, stay, work and reside in another East African state. These include people who wish to travel for any purpose other than earning money (such as visitors, students, medical tourists, people in transit), self-employed persons, intra-corporate transfers of managerial and  supervisory personnel and workers. Professionals will be able to cross borders, increasing their employment opportunities, while businesses will have a wider field to choose from when recruiting or expanding. The increased competition amongst people from members states can lead to much better personal and business performance, which may then be multiplied across the economy.
 
Free movement of goods and services
The common market protocol allows for free movement of goods, labour, capital and services among others hence the SME will benefit from the market, skilled labour and capital. This might be the time for small and mid-sized enterprises originally locked-out from accessing markets in other states because of the high costs involved in exporting, importing and establishing businesses in other partner states’ territories, to venture into those markets. A single trading area eliminates barriers like complex and difficult national laws, high taxes, work permits, bureaucratic and discriminatory tendencies to give both small and big businesses a competitive edge in the region.
 
Equal business operating  ground
Businesses will now be able to be set up in other EAC Countries and be treated the same as domestic firms. They will be able to bring over their supervisors and managers to work in that business and will have a right of residence to live in the EAC country in which their business is established. Many service providers will be able to supply services from their home country across the border to another EAC country and be treated the same as domestic providers in that country.

Fair legal and regulatory environment
The Common Market Protocol provides for work permits to still be a requirement for working in another Partner State. The Protocol is a foundation on which the Common Market is built. This does not mean that every EAC country does require a work permit, it only means that countries are allowed to maintain a work permit scheme if they wish to.  It is up to each individual that wishes to cross the border to find out if a work permit is required and to produce the documentation required to obtain one. Workers will enter Partner States by presenting their passports or national identification documentation at the point of entry, declaring the usual information and providing a contract of employment. For Jobs that will last less than 90 days, workers will need a Special Pass and for jobs lasting longer than 90 days, a Work Permit. Special Passes and Work Permits require different supporting documentation. Spouses and children may be allowed to travel with the worker if they apply as well. Although work permits are still in place, the Protocol does make it easier to know how much time and effort is required to acquire one: the timeframe for obtaining a work permit is now limited to 30 days across the region, and applicants are entitled to know within 30 days whether you have been given one or not.  If you are not successful, you are entitled to know why in writing and to challenge this decision.  EAC countries have also agreed to harmonise the fees for work permits, and this is part of the ongoing negotiation process. Furthermore, the EAC provides an opportunity of not using the work permit.
 An entrepreneur that sees there is a market for his skills or business products in another country within the EAC Common Market can move or supply services there because there are no barriers to working, supplying a service or establishing a business in another EAC Partner State.  People are free to chase the highest wage and the best returns, and in doing so, each country will specialise in those goods, services, and labour that it produce more efficiently than its neighbours.
Revival of East African Community will not only mean good for the  Small and Medium Enterprises, but also for large enterprises and governments too. Although surrounded by some fears and suspicion, the integration of the region is meant to bring about social-political and economic stability in the region.
With a combined population of 126.6 million people, the EAC is seen as presenting an expanded market for enterprising East Africans with Kenya, which has a comparatively more advanced enterprise sector, expected to take the lead. The SME sector employs close to 80 per cent of Kenya’s total workforce and contributes about 20 per cent to the gross domestic product, according to the Kenya National Bureau of Statistics. The joining of the EAC is a indication of a rapid expansion of the client base for SMEs and the biggest challenge is on how to make good use of the opportunity as it presents itself.

MSME Bill
The Government will soon create a special agency to facilitate and develop micro enterprises through technology transfer, provision of funds and information sharing. This comes after the president assented to the Micro and Small Enterprises (MSE) Bill 2012, handing the country’s small and medium entrepreneurs a lifeline.
The new law is the first legislative attempt in recent times to streamline and standardise the SME sector, and bring it to par with shifting dynamics in the country’s economy. Under the new law, firms with an annual turnover of below Sh500, 000 and employing less than 10 people will be classified under “micro enterprises”, while those with an annual turnover of between Sh500, 000 and Sh5 million and employing between 10 to 15 people classified under “small businesses”.
This new law will enhance the profile of small and medium entrepreneurs in the country because it addresses issues like lack of finance and a sound regulatory framework that have been hurting growth of the sector.
The new law also calls for the creation of an MSE Fund, where traders can source for funds to support growth of their businesses. Under the new legislation, traders will have access to finance through a MSME fund to be created and extended at a rate of eight per cent. It’s expected that by accessing the fund, traders will grow their businesses and thus lead to broader expansion of the economy.
According to the economic survey, the SME sector’s contribution to the Gross Domestic Product (GDP) has increased from just 13.8 per cent in 1993 to about 40 per cent in 2008.
With unemployment levels in the country at a high of 40 per cent, eight out of ten employed Kenyans works in an SME while the sector accounts for 92 per cent of new jobs created. The opportunities availed by the expansion of the market to the regions would go a long way in addressing not only unemployment, but also the much needed foreign exchange earnings that would lead to increase in GDP and stability of the Kenya shilling against the strong foreign currencies.
Export Opportunities
The East African region is the single most important export destination for kenyan exports. Export oportunities for Kenyan SMEs in the East African Community Market (EAC) lie in both value added products and services.
Small and medium enterprises (SMEs) play a significant role in Kenya’s economy. In 2011 the SME sector employed close to 80% of Kenya’s total workforce and contributed 20% to GDP. The sale of goods and services in neighbouring Uganda and Tanzania was the main driver of revenue growth in 76% of all the SMEs. However while Kenyan firms have rushed to exploit opportunities in the region, experts have advised that partnerships with locals in foreign countries will be critical to building trust that is needed for successful entry into new markets in future. The impediments to growth in the SME sector still remain the high cost of finance and lack of targeted government policy to boost small and emerging businesses in Kenya.
Having for a long time relied on the traditional exports (Tea and Coffee), the country with the support of financial institutions (Banks), Academia (technical colleges & universities), state corporations (KIRDI, KEBS, EPC) have now resorted to focussing on value added agricultural and livestock among other products that attracts high demand from the regional markets. All these institutions have invested immensely in technical training and development of skills in value addition and support in securing the relevant tools and equipment through trade missions to foreign countries with high and cheap technological advantage besides linking the manufacturers to export markets through trade fairs and exhibitions in the regions.
Export Promotion Council has remained on the forefront in exposing the manufacturers to various trade fairs and missions besides coming up with different training programs that are all aimed at building the capacity of SMEs in increasing the levels of their exports. The Center for Business Information in Kenya (CBIK) provides prospective and exisiting exporters with free market intelligence through business counseling and trade information that leads these groups directly to the relevant markets in the region.
The East African region is the single most important export destination for kenya exports with vast export opportunities for SMEs in both value added products and services.
Its worth noting that all member states are nearly at the same level of economic development though Kenya is viewed as the most advanced in terms of manufacturing and economic development. All the 5 East African Community member countries share the same geographical positioning and close proximity in terms of location.
Products emanating from Kenya are always prefered by consumers and perceived  to be superior in quality when compared with similar products from other East African member countries. In addition to high demand for locally manufactured goods, regional markets are accessible for Kenya’s manufactured goods owing to its membership to two key regional economic blocs, the East African Community (EAC) and Common Market for East and Southern Africa (COMESA).
Its therefore important for SMEs in Kenya to realise the investment opportunities that exist for direct and joint-venture investments in iron and steel industries, manufacture of fertilizer, agro-processing, machine tools and machinery like is the case in Kariobangi, manufacture of spare parts for agro-processing, manufacture of garments and manufacture of plastic products for both domestic and export markets for which Kenya stands advantaged as compared to other countries in the region.
Making good use of the existing support institutions for both information and technical support will be an added advantage in ensuring optimum utilization of available resources for business development that is clearly lacking in other countries in the region and easily available and accessible here in Kenya.
 
 
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