ARE PRIVATE SUSTAINABILITY STANDARDS OBSTACLES TO, OR ENABLERS OF, SME PARTICIPATION IN VALUE CHAINS? INSIGHTS FROM SOUTH AFRICA AND KENYA

This research paper examines how voluntary sustainability standards (VSS) act as both barriers and enablers for small and medium enterprises (SMEs) attempting to enter global value chains (GVCs) coordinated by multinational corporations (MNCs), with a specific focus on South Africa and Kenya as regional economic gateways.

• South Africa and Kenya serve as regional economic gateways and nodal points for multinational corporations (MNCs) to direct investments and develop regional value chains (RVCs) in Southern and East Africa.
• Voluntary sustainability standards (VSS) can function as non-tariff barriers (NTBs) for SMEs due to their complexity and burdensome requirements, which may exceed technical regulations and inhibit GVC development.
• SMEs face significant obstacles in adopting sustainability standards, including a lack of awareness regarding the value of these standards, limited technical assistance, and high costs for implementation and certification.
• Financial constraints are a primary barrier for SMEs, as they are often deemed not credit-worthy by banks; in South Africa, approximately 75% of bank credit requests by SMEs are rejected.
• The impact of MNCs on SME growth varies by business strategy: manufacturing firms like Siemens and Nestlé often provide extensive support to protect their brand, whereas large retailers may create competition among suppliers and impose restrictive contractual terms.
• The VSS landscape is fragmented and constantly evolving, leading to duplicate testing and unnecessary costs for SMEs as they navigate different requirements across borders.
• In South Africa, the South African Bureau of Standards (SABS) is the sole standard-setting institution, while in Kenya, the Kenya Bureau of Standards (KEBS) is the statutory body mandated to provide standardised solutions.
• Case studies demonstrate that MNCs can actively enable SME participation through structured support; Siemens South Africa uses a 'graduation process' with a medal-based system to guide SMEs toward ISO certification, covering all certification costs.
• The paper recommends that the G20 support the investigation of innovative financing options, enhance awareness of standards through the Business 20 (B20), and examine the legitimacy of VSS to ensure they do not act as barriers to entry.

APA

Ngarachu, A., Draper, P., & Owino, K. (2017). ARE PRIVATE SUSTAINABILITY STANDARDS OBSTACLES TO, OR ENABLERS OF, SME PARTICIPATION IN VALUE CHAINS? INSIGHTS FROM SOUTH AFRICA AND KENYA. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2017/09/GA_Th2_DP.pdf

Chicago

Ngarachu, Anna, Peter Draper, and Kwame Owino. ARE PRIVATE SUSTAINABILITY STANDARDS OBSTACLES TO, OR ENABLERS OF, SME PARTICIPATION IN VALUE CHAINS? INSIGHTS FROM SOUTH AFRICA AND KENYA. South African Institute of International Affairs, 2017. https://saiia.org.za/wp-content/uploads/2017/09/GA_Th2_DP.pdf.

Wikipedia

{{cite report |last1=Ngarachu |first1=Anna |last2=Draper |first2=Peter |last3=Owino |first3=Kwame |title=ARE PRIVATE SUSTAINABILITY STANDARDS OBSTACLES TO, OR ENABLERS OF, SME PARTICIPATION IN VALUE CHAINS? INSIGHTS FROM SOUTH AFRICA AND KENYA |publisher=South African Institute of International Affairs |date=September 2017 |url=https://saiia.org.za/wp-content/uploads/2017/09/GA_Th2_DP.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ngarachu2017are, author = {Ngarachu, Anna and Draper, Peter and Owino, Kwame}, title = {{ARE PRIVATE SUSTAINABILITY STANDARDS OBSTACLES TO, OR ENABLERS OF, SME PARTICIPATION IN VALUE CHAINS? INSIGHTS FROM SOUTH AFRICA AND KENYA}}, institution = {South African Institute of International Affairs}, year = {2017}, month = sep, url = {https://saiia.org.za/wp-content/uploads/2017/09/GA_Th2_DP.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }