The Kenyan government’s announcement of a proposed law to make it mandatory for all companies to join the Kenya National Chamber of Commerce and Industry (KNCCI) has sparked concerns among small businesses. The policy would require businesses to pay a minimum annual subscription fee of Sh5,000, potentially burdening already struggling entrepreneurs. This article aims to analyze the disadvantages of this policy on small businesses in Kenya.
Financial Burden
The foremost disadvantage of mandatory membership in the KNCCI is the financial burden it places on small businesses. For sole proprietors, the initial cost to join the chamber is Sh1,000, followed by an annual subscription fee of Sh5,000. While larger businesses may have the financial capacity to absorb these costs, small enterprises, often operating on tight budgets, may find it challenging to allocate additional funds for membership fees. This policy imposes an unnecessary financial strain on small businesses already grappling with high operational costs.
Barrier to Entry
Mandatory membership acts as a barrier to entry for new and aspiring entrepreneurs. Startups and small businesses often face significant challenges during their early stages of development, including limited access to capital and resources. By imposing compulsory membership fees, the government indirectly discourages entrepreneurial endeavors and inhibits the growth of the small business sector. This policy undermines the government’s goal of promoting entrepreneurship and job creation.
Limited Flexibility
Forcing all registered companies to become members of the KNCCI restricts the freedom of choice for business owners. Many small enterprises have unique needs and objectives, and they may prefer to allocate their resources to other aspects of their operations rather than joining a specific chamber of commerce. By making membership mandatory, the government undermines the autonomy and individuality of small businesses, hindering their ability to make independent decisions that best serve their interests.
Cost of Doing Business
The government’s assertion that mandatory membership will not increase the cost of doing business overlooks the realities faced by small enterprises. Small businesses often struggle with limited cash flow and operate on slim profit margins. The additional financial burden of joining the KNCCI could strain their already delicate financial situation. This policy adds to the bureaucratic hurdles and costs already faced by small businesses, impeding their ability to grow and thrive in a competitive market.
Lack of Consolidation and Support
While the government aims to strengthen the KNCCI through this policy, concerns remain about the lack of consolidated support for small businesses. Entrepreneurs face multiple licensing requirements from both national and county governments, contributing to administrative burdens and excessive costs. Rather than introducing mandatory membership, the government should prioritize efforts to streamline licensing processes, reduce bureaucracy, and provide comprehensive support to small businesses, including access to credit and resources.
Challenging Economic Environment
The policy’s timing exacerbates its negative impact on small businesses. The COVID-19 pandemic has already dealt a severe blow to the economy, and many businesses are struggling to recover. Rising costs of electricity, labor, and raw materials, coupled with limited access to credit, have created a challenging operating environment for entrepreneurs. Mandating membership to the KNCCI adds an additional burden during a time when businesses need support and flexibility to survive and rebuild.
Conclusion
While the Kenyan government’s aim to strengthen the KNCCI is commendable, making membership mandatory for all registered companies poses significant disadvantages for small businesses. The financial burden, limited flexibility, and the policy’s timing in an already challenging economic environment undermine the growth and sustainability of small enterprises. Instead, the government should focus on implementing measures that reduce the cost of doing business, simplify licensing processes, and provide comprehensive support to enable the growth of small businesses in Kenya.
