From 1 March 2009 onwards, all locally manufactured products have to bear the Kenya Bureau of Standards (KEBS) Standardization Mark – a regulatory requirement that had a particularly negative effect on small enterprises.
Gotta Have Standards
Exacting phytosanitary and other standards in industrialized countries have been a recurrent concern for exporters in developing countries like Kenya, who have repeatedly complained that exaggerated product standards act as informal trade barriers to their exports to Europe and the US. So it is with a degree of irony that the Kenya Bureau of Standard (KEBS), from 1 March 2009, requires all locally manufactured products to carry the Standardization Mark (or S Mark): In principle, KEBS’s standards system applies to all products indiscriminately, whether they are produced by a large manufacturing concern or a small ‘jua kali’ workshop, even though the fees are staggered according to the number of products a company produces. KEBS state that the ‘Standardization Mark scheme is intended to facilitate fair trade, eliminate sub-standard goods and assure consumer protection.’
The reality, however, is different. Especially for small and medium-sized enterprises (SMEs), the KEBS requirements have created not only a bureaucratic headache, but also a not insignificant financial strain in what is already a high-cost business environment:
A local manufacturer of food stuffs (who, unsurprisingly, did not want to disclose his name to avoid harassment from KEBS) found the impact of the KEBS procedures so drastic that he ended up reducing his staff to around one third of his previous employees – hardly a positive move in an economy with already high unemployment. The fee for obtaining the standards mark – KES25,000 plus VAT in his case – is not just due for every single product, but also has to be renewed every year, even if the product remains unchanged. In addition, he found that KEBS did not have standards for some of his products: Rather than let him sell the products, he had to halt the sale of these products to wait for KEBS to develop the missing standards. Some of his products had been rejected for their composition, even though imported products with same content were freely on sale in the supermarkets. In order to find some sort of accommodation with KEBS – and keep his company a going concern -, he eventually resorted to the payment of some ‘facilitation’ with KEBS.
There are general capacity constraints, he says: KEBS does not have enough staff, and not sufficiently competent staff, to rapidly process all the applications, including those that require the development of new standards. And these bottlenecks – as well as the often significant costs involved – create avenues for corruption.
For anyone wanting to sell through the supermarkets, the standard mark is a must. This effectively turns KEBS into a lucrative cash cow. However, the above-mentioned manufacturer emphasizes that the introduction of the standard had been counterproductive for the country not only with regard to the jobs lost, but also because his VAT remittances had also fallen markedly after he had to put several product lines on hold.
Goodie, who runs a small crafts-shop-cum-design-office in Westlands, has been in a prolonged struggle with KEBS to obtain an exemption for her products, and not just for financial reasons: ‘Getting an S Mark for a mug or a pair of beaded sandals really makes no sense’, she argues: There is very little standardization in these products, not the least because it is their individuality that is often an attraction. How, for example, do you develop a standard for beaded leather bags - or for a bouquet of flowers to be sold at Nakumatt?
Perspectives: Consumer Protection or Overregulation?
It is clear that some products and sectors need to be more carefully regulated than others. Few would object, for example, to tighter controls on drugs. Yet ironically, counterfeit drugs are a notoriously widespread phenomenon – because the profit margins for organized crime are so high, and law enforcement so notoriously lax.
For other, non-critical products, the market acts as a corrective, weeding out substandard products over time. A government body will necessarily struggle to maintain such an efficient and sensible quality control system, not the least because government bodies, however well intended (and good intentions cannot always be assumed), will be challenged to fully understand the enormous variety of products that exist. Effectively, for a broad range of other products, the standardization work has been done elsewhere already: A manufacturer of fridges, for example, has gone through a lengthy development process that satisfy international requirements, and offers a warranty for those cases when the quality has been impaired. In many industrialized markets, consumer organizations review products, and industry organization have set industry standards. In addition, vendors such as Amazon offer clients a platform to comment on product quality. To protect consumers, the Kenyan government would do better to review legislation around consumer protection, and harmonise this with legislation on labour, health and environmental protection.
This is even more acute as in a developing market, government institutions are typically weaker, and the need to stimulate broad-based growth should temper regulatory efforts: To create an environment in which enterprise can thrive, unwinding red tape is a far more pressing concern in Kenya than creating new regulations – especially where the regulations create an ineffective administrative process rather than address the underlying issue, consumer protection. In much of the rhetoric of both government and aid agencies, SMEs are held up as the economy’s backbone, and there is a multitude of programmes intended to nurture this segment of the private sector. Nudging small enterprises operating at the upper end of the informal sector into a more formalised incorporation would be useful all around: If they acquire a formal status, they will find it easier to e.g. obtain financing, and expansion creates more employment. Government benefits from being able to levy taxes. The S Mark, however, does little to encourage small ‘jua kali’ outfits to move into the formal sector.
Incidentally, on the KEBS website, the page on the ‘Benefits of the Standardization Mark’ throws up an error message.
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