Access to public sector contracts by micro and small enterprises: a study of Kisumu city, Kenya

Abstract

It is generally accepted that Micro and Small Enterprises (MSEs) are increasingly important in terms of employment creation, industrial transformation and poverty reduction. However, their competitiveness and growth prospect in the access to public sector contracts is far much below the expected thresholds. This is despite an affirmative policy by the government of Kenya reserving at least 30 per cent of all public contracts and tenders to MSEs. This study examined access to public sector contracts by MSEs in Kisumu city, Kenya. The following were the study objectives: to evaluate how background - business ownership, gender, position in enterprise, number of employees, area of operation, experience, skills – impact on MSEs access to public sector contracts in Kisumu city, toexamine the determinants of access to public sector contracts by MSEs in Kisumu City, to assess the practices adopted by MSEs in access to public sector contracts in Kisumu City, to establish the challenges in the access to public sector contracts by MSEs in Kisumu city and to examine the significance of access to publicsector by MSEs as a means to boosting their business in Kisumu city. The study adopted a case study research design where a questionnaire was used to collect data from respondents. Using a simple random sampling method, a 10% sample size was selected from the available list of 680 registered MSEs operating in Kisumu‘s Central Business District (CBD) as at the year 2010. Data captured were quantitative in nature which were analyzed using descriptive statistics where tables, figures frequency distributions, percentages and cross tabulations were used to show the distribution of the responses. The study found out that despite their immense contribution to economic development, MSEs are faced by daunting tasks in accessing public sector contracts. These included: lack of adequate working capital, Non-Tax Compliance, lack of information on existing public sector contracts, and inadequate policy framework. However, in their access to public sector contracts, the strategies that were most practiced by MSEs in Kisumu city were, compliance by registration, sourcing for funds from Financial Institutions, friends and own savings, Partnering with other MSEs to increase their Capacity, by participating in competitive bidding, and by the use of the existing government incentives . The study is significant to both the Central and County governments, civil society, business community and the academia, involved in the promotion of MSEs for national economic development. The study recommends: MSEs should be enlightened on issues of business registration and compliance as its the basic requirement for accessing public sector contracts, there should be a clear policy framework nurturing MSEs, cost of tender documents and other processes should be made affordable to MSEs wishing to take part public sector contracts. Further study should be done on the future of Micro Small Enterprises towards sustainable development in Kenya