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Participation of Micro and Small Enterprises in the Public Procurement Process in Kenya: Implications for Poverty Reduction

Author: Paul Kamau
Year: 2005
Abstract: The Micro and small enterprises (MSEs) play a significant role in the Kenyan development process. Notably, the contribution of MSEs in the poverty reduction strategy has enormous. These enterprises cut across all sectors of the Kenyan economy and provide one of the most prolific sources of employment creation, income generation, and poverty reduction. Other constraints including poor financial services; unfavourable legal, regulatory, and environmental policies inhibit the realization of their full potential. This study was designed to empirically determine the level of awareness and participation by MSEs in state market within the context of the recently introduced reforms in public procurement process. In addition, the study examined factors determining participation in public procurement process. In order to achieve these objectives, a survey was designed to gather information relating to the awareness and participation of Kenyan urban MSEs in state markets. The survey was conducted in six major towns namely, Nairobi, Mombasa, Kisumu, Nakuru, Eldoret and Nyeri between August and September 2004. This survey entailed conducting face-to-face interviews with entrepreneurs using a pre-designed questionnaire. A total of 144 enterprises were interviewed, of which 104 and 40 were micro-enterprises and small-enterprises respectively. This study revealed that lack of adequate markets was the major constraint facing MSEs in Kenya. Most entrepreneurs alluded that increased competition from well-established business was gradually pushing them out of the operation. It also emerged that most of entrepreneurs (60 %) had slight knowledge of public procurement. In addition their knowledge of public institutions and different tender committees was adequate. Nevertheless, their actual participation in public procurement was low as only 25 % of the entrepreneurs indicated having attempted to submit tender documents. Some of the reasons given for not having participated in public procurement included, competition, rigorous process, lack of transparency, delayed payments, lack of adequate capacity and lack of information on how state markets operate. Surprisingly, most of those MSEs that had ever tendered to public institution were successful in their bids (80 %). Regional variation was evident with regard to awareness and participation in state markets, with those in Nairobi constituting almost 65% of those that participated in public procurement. This is an indication that the level of awareness in Nairobi was significantly higher than in other regions. Finally, the study concludes that although public procurement has undergone significant reforms in the recent past, most entrepreneurs perceive the process as corrupt, inefficient, and time wasting not worthy venturing into. This is mainly due to lack of information relating to the operation. There is a need for Public Procurement Oversight Authority to conduct awareness creation exercise in all parts of the country. It is only through such exercises that member of public would change their perception and in the end more MSEs would participate in public procurement.
Publisher: Not Published
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