Graft, inefficiency increase the cost of doing business

Corruption not only adds to the cost of doing business but also pushes up inflation rate in an economy. FILE 

By William Odhiambo

Every year, the World Bank releases a report on the ease of doing business in different countries and each year, Kenya lags behind.

For me, the bigger surprise was that the World Bank believes it is easier to do business in Rwanda than in Kenya.

In part, this is due to corruption. To get registered, many potential business people are forced to bribe their way and access services. Further, licensing of any kind of enterprise has been difficult as officials require kickbacks before they can give the licence.

But the worst form of corruption is not at the registration level, it is at the procurement level when one needs to access a market.

From the gatekeeper, to the procurement officers to the finance officers, everyone needs kickbacks. So the businessperson is forced to adjust the quotation to cover the interests of the individuals handling his case.

Unfortunately, this is not only the case in the public sector, the private sector and the civil society are also playing ball. Corporate governance is a major concern in businesses. Senior managers are forced to change the procurement team every so often to minimise fraud.

While this is not only a common practice in Kenya, but in other parts of the continent, it is a very costly practice.

First, the cost of rent-seeking will be pushed to the corporate client who might push it further down the economy causing a ripple effect. The resultant effect is an inflamed cost of doing business and a very high inflation rate.

The other greater challenge in starting and running a business in Kenya has to do with efficiency. There is a Swahili saying that hurrying has no blessing. I believe we have taken it too far.

Deals move slowly, assignments take too long and simple processes delay quite a bit. Before the Chinese came, some of the simplest construction projects took five years. But more importantly, there is a need for culture change.

We need to ask ourselves the hard questions as entrepreneurs concerning rent-seeking. As long as businesses continue to pay, the bureaucrats will continue to demand. When asked, is it easy to start a business in Kenya, I would say we are far from the mark.

Mr Odhiambo is the managing consultant at Elim Consulting.