The City Small & Micro Enterprises Development Bureau is drafting a directive to compel small and micro-enterprises (SMEs) to upgrade themselves to medium level after five years of programme participation.

The Bureau has been working on three different directives that focus on three areas - upgrading enterprises, creating market linkages and formation and registration of the enterprises.

The draft directive, in preparation for almost a year, states that enterprises that fail to upgrade themselves in five years will see their licenses revoked. The Bureau will grant a three-month grace period at the expiration of their participation to allow companies to upgrade.

The process of achieving medium-level involves three certification stages.

The directive is the result of observations by the city administration that many of the 30,000 companies spread across different sectors are disinterested in upgrading themselves, preferring to stay in a programme that offers them privileges and assistance as SMEs, according to Awol Mohamed, director of Enterprise Transformation & Support at the Bureau.

"Many enterprises have failed to upgrade themselves, some for over a decade," said Awol.

The new directive defines micro enterprises as those that employ at least five employees with a capitalization of 100,000 Br for industries, and 50,000 Br for service providers. Small enterprises are categorized as those who employ six to 30 workers and are capitalized with up to 1.5 million Br for industries, and 500,000 Br for service providers.

"We are not accepting new applicants as the existing SMEs are not leaving their spots in the programme," said Awol.

Since the launch of the city’s micro, small and medium-enterprise classification system in 2010, over 30,000 enterprises have registered. However, only about 1,500, or four percent of the businesses, have graduated to the medium-enterprise level.

The cause for these low results is attributed to fears that the benefits and incentives the city programme offers businesses will be cut off, according to Awol.