CHALLENGES FACING MICRO AND SMALL ENTERPRISE ACCESS TO PUBLIC SECTOR CONTRACTS IN KENYA: A SURVEY OF MICRO AND SMALL ENTERPRISES IN KISUMU CITY, KENYA

Abstract

Micro and Small Enterprises (MSEs) have been recognized throughout developing countries as an engine to development and a vehicle towards fulfilling the Millennium Development Goals (MDGs). In Kenya MSEs plays an important role in the socio-economic development of the country. Its significance can be seen in terms of contribution towards economic growth, employment creation, poverty reduction and development of an industrial base. They are also breeding grounds for entrepreneurship, innovations and inventions. Although public procurement is huge, it is dominated by large enterprises at the exclusion of local MSEs. This is despite an affirmative policy of reserving 25 per cent of all government procurement to MSEs. The main objective of this study was to analyse the challenges facing MSEs in Kisumu city, Kenya in accessing public procurement and contracts. Specifically, the study sought to: examine the practices adopted by MSEs in accessing public contracts; examine how the challenges facing MSEs affect their access to public contracts and; to test for the challenges facing MSEs in access to public contracts. The study adopted a descriptive survey since this allowed for the study to define variables as they are during the time of the study. A sample size of 68 (10%), was selected from a population of 680 MSEs. The theoretical framework was based on Wuyts (2001) theory, which considers the nature of policies on the sector to depend on the extent to which the sector is demand or supply constrained. A structured questionnaire was used to collect data from proprietors of sampled MSEs. By use of simple random sampling, data captured were both quantitative and qualitative in nature. Quantitative data were analyzed using descriptive statistics where tables and figures were used. Frequency distributions, percentages and cross tabulations were also used to show the distribution of the responses. Inferential statistics was by chi – square test of independence. Qualitative data was analysed using content analysis by extracting themes from the responses. The study found out that despite their immense contribution to economic development, MSEs in Kisumu city are faced by daunting tasks in accessing public contracts: high tender purchase prices, lack of adequate working capital, Non-Tax Compliance, stringent pre-qualification procedures, lack of information on existing public sector contracts, and inadequate policy framework. The study concludes: majority of MSEs are unable to access public contracts as represented by 62 (91.17%) of respondents. The study recommends: need to review the definition of MSEs by basing it on the number of staff to the net worth of the business, and MSEs to form consortiums from which their participation in the public sector is to be enhanced. 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