Kenya’s small and medium-sized enterprises (SMEs) are facing significant obstacles in participating in global value chains due to their low adoption of modern technologies, according to data from the Kenya Institute for Public Policy Research and Analysis (KIPPRA). Only 15 percent of SMEs in the country are currently engaged in global value chains, largely because of poor mechanization and a lack of adoption of digital technologies like artificial intelligence and the Internet of Things. This low adoption of technology hampers the productivity and competitiveness of SMEs, preventing them from producing goods that can match the quality of those from more advanced economies.
One of the main challenges facing SMEs in Kenya is the high cost associated with internet and ICT infrastructure, making it difficult for them to afford and implement modern technologies. However, investing in efficient and affordable technologies, as well as infrastructure, can greatly enhance the productivity of these businesses and enable them to participate more effectively in global value chains. Francis Theuri, CEO of AA Kenya, emphasizes the importance of innovation in this process, particularly in light of disruptive events like the Covid-19 pandemic.
During the pandemic, AA Kenya had to quickly adapt its business model and digitize its services to meet the growing demand for online solutions. For example, the organization transitioned its mileage rates to a digital platform, offered online driving school classes, and launched an AA driving test App. These initiatives not only boosted revenue but also served as valuable resources for students, inspiring other players in the industry.
To improve their chances of success and longevity, SMEs in Kenya should diversify their product offerings beyond traditional sectors like agriculture. Francis Theuri suggests exploring the services sector, such as financial services, which have significant untapped potential. He also emphasizes the importance of forging partnerships with like-minded organizations and learning from established businesses. SMEs should consider sharing best practices and equipping their employees with the necessary skills to enhance their competitiveness.
Furthermore, Kenya’s exports should be diversified beyond primary agricultural products to improve the country’s trade performance. Enhancing the quality of produce and expanding the range of exportable products is crucial for remaining competitive in the global market. Theuri also highlights the importance of road safety and the organization’s collaboration with insurance companies and logistics firms to achieve this objective.
In conclusion, the low adoption of modern technologies is hindering SMEs in Kenya from participating effectively in global value chains. Investing in affordable technologies and infrastructure, promoting innovation, diversifying product offerings, and forging partnerships can help SMEs improve their productivity, competitiveness, and longevity.
