What the 2021 Kenyan budget means for SMEs

Kenya's Treasury Secretary, Ukuri Atani, is set to release the 2021-2022 fiscal year budget statement amidst a challenging economic environment. With SMEs being hit hardest by the COVID-19 pandemic, the focus is on what this budget holds for small and medium enterprises. In a recent interview with CNBC Africa, Victor Otieno, Managing Director at Vifa Consult, shed light on the potential impact of the budget on SMEs. Last year, Kenya faced a recession, and only a fraction of the budget was allocated to the COVID-19 stimulus package. Otieno emphasized the importance of examining the budget policy statement, which outlines government's strategic goals. He pointed out that the post-COVID-19 economic recovery strategy includes pillars such as SME support through capacity building, ICT platform onboarding, and credit guarantee schemes. However, questions remain about the effectiveness of these strategies in truly supporting SMEs. The conversation delved into the issue of taxation, with the government opting for higher taxes and the removal of incentives to reduce borrowing. Otieno highlighted the potential negative impact on SMEs, especially if the economic rebound assumption does not materialize. He expressed concerns about the lack of an effective economic stimulus program tailored to SMEs, worsening the situation for small businesses. Otieno also raised the issue of resource allocation, noting the government's dilemma of balancing loan obligations with economic recovery strategies. Despite the allocation of significant funds to infrastructure and education, questions remain about the prioritization of projects and the lack of an evaluation framework to assess the returns on these investments. With stalled projects and a lack of clarity on the benefits to the economy, there are doubts about the government's budget priorities. In conclusion, the 2021 budget presents both challenges and opportunities for SMEs in Kenya. While there are strategies in place to support SMEs, questions linger about their effectiveness and alignment with the needs of small businesses. The focus on higher taxation and infrastructure spending raises concerns about the impact on SMEs and the overall economy. As the budget is unveiled, stakeholders will be closely watching to see how it addresses the pressing issues facing SMEs and whether it sets a solid foundation for economic recovery.