Abstract

The purpose for this study is “The Effect of Procurement Practices on the Performance of SMEs in Buea”. Its specific objectives were to determine the effect of ethical practices on the performance of SMEs in Buea, to investigate the effect of selection policies on the performance in SMEs in Buea and to assess effect of tendering practices on the performance in SMEs in Buea.

A descriptive research design was adopted as appropriate study designs were a sample of 80 employees of SMEs in Buea were selected using purposive and convenience sampling techniques. The quantitative methods of data collection were used in this work were a self-administered questionnaire composed of closed ended, and likert scale questions was used to collect data from the respondents.

Data obtained through a structured questionnaire were analysed using analysed using descriptive statistics and the multiple regression analysis with the help of Statistical Package for Social Sciences (SPSS) software. The findings show that procurement practices has a significant impact on the performance of SMEs in Buea.

Ethical practices has a negative and significant effect whereas selection policies and tendering practices has a positive and significant effect on the performance of SMEs in Buea. The study therefore recommends that effective procurement practices should be put in place so as to increase the performance of SMEs.

The study further recommends that for every policy measure taken by SMEs to improve procurement practices, Ethical practices, selection policies and tendering practices should be taken into consideration because failure to do so will lead to detrimental effect on organizational performance.

CHAPTER ONE

INTRODUCTION

1.1. Background of the Study

Procurement practices are considered as the procedures and guidelines or means of acquiring goods, services and works at the best possible cost to meet an organization’s needs in terms of quality, quantity and location (Akech,2005).

Procurement also extends to the ultimate disposal of property at the end of its useful life (Waters, 2004). Sound public procurement policies and practices are among the essential elements of good governance (Kippra, 2006). The processes of procurement should uphold integrity by ensuring there are no malpractices, informed decision making which requires public bodies to base supplier selection on accurate information and ensure that expectations of procurement are being achieved.

Procurement practices are vital functions in the public sector, since procurement process is generally a critical part of open spending in organizations. Carr and Smeltzer (1997) states that procurement practices comprise of the actions taken by the purchasing organization to navigate and integrate its performance in order to increase productivity by reducing cost and time. Procurement is the practice of selecting vendors, strategic vetting, setting up payment terms, selection, negotiation of contracts and actual purchasing of goods (Weele, 2010). Lim (2014) describes procurement as a process which entails acquiring (procuring) goods, services and work that is vital to an organization.

Worldwide, public procurement has become an issue of concern and debate, and has been subjected to reforms, restructuring, rules and regulations (Kabega, Nkule Mbera, 2016).

The linkage of procurement to organizational performance in particular, makes the embracing of best practices important to present organizational success. Procurement is found to be practiced in many industries around the world (Hussein &Shale, 2014).

Kabega, et, al. (2016) reiterated that various public institutions both in developing and developed countries have instituted procurement reforms which involve laws and regulations but the main challenge has been inadequate regulatory compliance.

Public institutions are found to be big spenders and that they deal with massive budgets (Roodhooft Abbeele, 2006). In addition, Mahmood (2010) restates that public procurement was estimated to represent 18.42% of the world Gross Domestic Product (GDP). Public procurement is recognized as essential in-service delivery and it accounted for a high proportion of total expenditure (Basheka Bisangabasaija, 2010).

The theories guiding the research are the principal-agency theory (PAT) and the

legitimacy theory (LT). The PAT concerns with the understanding that is put in place for an individual or entity (agent) to act in another’s interest (principal). The legitimacy theory asserts that an organization has the mandate to explain its activities to the stakeholders, especially, if it is a public entity and should state how society will benefit from it.

The existence of integration of procurement practices in various organizational operations and support functions, harmonizing production with new orders, purchasing with demand, scheduling and shipping with customer requirements, has contributed significantly to the performance of many public organizations (Baily, 2011).

Application of appropriate procurement practices strategically, has the potential impact to the performance of organizations and national economies in general (Keith, Vitasek, Manrodt, & Kling, 2016). However, Singhal (2011) observed that disruptions in procurement practices at any level devastate organizational performance. Poorly coordinated procurement practices do long-lasting damage to organizations’ stock prices and profitability and need to be more thoroughly addressed by supply chain continuity planners (Thai, 2010).

For leading public organizations like the University of Nairobi to respond to the current dynamic purchasing environment, it is required to embrace procurement. Since the entire procurement processes can work well in the improvement of the responsiveness of the University of Nairobi procurement systems.

 

1.2 Statement of the Problem

Procurement is deemed to be part of principles of management of plans that focus on effective achievement of performance efficient in public institutions as well as growth of the nation.

In practice, when procurement process is well planned and implemented, it can act as an economic instrument for guaranteeing national development (Keith et. al, 2016). Many of the third world countries are challenged by dynamic procurement revolution and this gives them difficulty on the functioning of procurement and performance together with the inside and outside dealings (Wambui, 2013). The Procurement practices are fragile and predisposed to regular to discontinuities (Jeppesen, 2010).

According to (Karanja and Kiare,2015) indicates that the vulnerabilities in the public and private sector evidenced in the erratic shedding and re-employment of staff when faced with downstream and upstream linkage discontinuities, affect organizational performance.

According to (Ejura and Augustine, 2014) noted that the major problem in the current procurement industry is not on the limited regulation models but because of noncompliance and pitiable execution process.

Regardless of the effort by the private and public institutions in Cameroon to improve performance of the procurement function, poor implementation and non-compliance to procurement regulations still pose as key challenges (Hussein and Shale, 2014). They are burdened with delays and occasional inability to deliver the goods to the designated organizations (World Bank, 2010).

This problem has precipitated to a decline of procurement/supply performance of enormous public organizations (Schiel Horn and Vos2011) With the present estimated spending of about 70% in purchasing and the importance of functions of procurement in contribution of profitability of a firm by over 25%, it will be essential for institutions to come up with a decision on how practices of procurement could assist in meeting organizations goals (Jibrin, et al, 2014).

There are various studies conducted on the topic of the effect of procurement practices on SMEs and its relation to organizational performance which have given different findings. For instance, The SMEs in Cameroon has not performed creditably well and hence has not played expected vital and vibrant role in economic growth and development of Cameroon.

This situation has been of great concern to the government, citizenry, operators, practitioners and the organized private sector groups’ year-in-year-out. The government through its budget allocations, policies and pronouncement have signified interest and acknowledgement of crucial role of the enterprise sub-sectors of the economy and hence made policies for energizing the same.

There also have been fiscal incentive, grants, bilateral and multi-lateral agencies support and aids as well as specialized institutions all geared towards making enterprises sub-sectors vibrant. These sub-sectors need to be approached and given seriousness it deserves because it is part and parcel of employment and great contributor to the economic vibrancy.

Despite the efforts by various stakeholders, the sub-sector still faces challenges because there are no proper policies in place and documented information for those who want to venture in to it or find more about it. Perhaps this research seeks to add and enrich the available data and information by investigating the factors leading to growth of small and medium size enterprise industries.

The poor procurement performance of SMEs in the face of numerous policies by different groups like governments, non-governmental organizations and other donor countries means that if Cameroon wants to achieve an appreciable success towards attaining the vision 2035 goals, then one way would be to vigorously pursue the development of its SMEs properly.

The underperformance of SMEs may indeed make Cameroon’s vision be a mirage unless there is a turnaround of our SMEs fortunes sooner than later. The time is now to do something surgical operation to the situation of our enterprises given the aggravating level of poverty in Cameroon and the need to meet up with the vision 2035 goals.

Therefore, the statement of this problem is to investing the effect of procurement practices on the performance of small and medium sized enterprise in Buea.

1.4. Research Questions

The following research questions were formulated based on the problems indicated.

1.4.1. Main Research Questions

What is the effect of procurement practices on the performance of small and medium sized enterprise in Buea?

1.4.2 Specific Research Questions

1. How do ethical practices influence the performance of SMEs in Buea?
2. How do supplier selection policies, influence the performance of SMEs in Buea?
3. How tendering practices does influences the performance of SMEs in Buea?

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