The youth form the fastest growing percentage of Kenya’s population. Their numbers, unlike any other time in the history of our country, have surpassed the working age population as well as available formal and informal jobs.
While the trend has implications on unemployment rates in the country, it creates an avenue for productive opportunities especially for the entrepreneurial youth.
As the government actualises the preferential procurement policy; which has reserved 30 per cent of public procurement for small enterprises owned by the youth, women and the disadvantaged, the question as to whether inclusion of the youth in the supply chain will secure them jobs remains pertinent to public debate as well as the policy discourse.
It is demoralising to be young, energetic, with an education or in possession of a set of skills yet be unemployed for years. Yet this is the current reality among many of the youth in Kenya today.
The government is alive to this fact hence the public procurement policy direction which targets to create income earning opportunities and employment for the youth by reserving a proportion of public procurement for small enterprises owned by this group.
The new law states that “a procuring entity shall allocate at least 30 per cent of its procurement spend for the purposes procuring goods, works and services from micro and small enterprises owned by youth, women and persons with disability.”
Accessibility to the multi-billion shilling public procurement market in Kenya has remained a mirage for small and typically informal enterprises. The enterprises are mostly owned by young Kenyans who, after finishing their formal schooling, are confronted with an arduous task of looking for ‘‘white-collar jobs’’ to no avail.
The SME segment is estimated to contribute over nine per cent of the Gross Domestic Product (GDP) in Kenya, with public organisations forming a huge component of the market.
Additionally, the objectives of the public tender awards have the potential to contribute towards creating the one million jobs envisaged by the government. However, the success or failure of this programme will not only depend on how quickly the government includes it in the development agenda but also largely on how the targeted group responds to this government policy which is now grounded in law.
Theories on public sector procurement as they relate to SMEs suggest a principal-agent dilemma. Transaction costs for both the public agent and the seller are much higher when the seller is small and largely informal.
Such transaction costs include the costs that entail registering in order to qualify as a government supplier, the costs of accessing procurement information, bid preparations, supplying the required guarantees and the costs related to complying with inspection at various stages of the process.
To these are added the costs of financing the goods and services supplied until the public agency pays its dues. While public agents are extremely slow payers, small enterprise capital- stock flow has a very short time span.
These enterprises too find it strenuous to enter into any litigation against public entities and would rather not engage in public procurement.
Arising from past misuse of public procurement, Kenya’s public procurement process tends to be skewed towards tendering methods that seek to make the process transparent and less fraud-prone.
The overall effect has been to make the process more complex, time consuming and expensive. Eventually these requirements have created perfect conditions for rent seeking. This way, most jua kali enterprises are discouraged from participating in the process.
By Peter Njiraini and Hannah Wangombe