Doing business and graft rankings: EA feels the pinch of corruption and lengthy procedures

The country where you are most likely to encounter bribery in the EAC is Uganda, according to a report by Transparency International.  

 

By Christine Mungai The EastAfrican

In Summary

• Comparing the data from Doing Business 2014 and the East African Bribery Index 2013 reports reveals how pervasive corruption is strangling regional efforts to support entrepreneurship, create a thriving business climate and achieve middle-income status in the next few decades.
• In Doing Business 2014, with the exception of Rwanda, the other East African countries are in the bottom half of the 189 countries surveyed, when it comes to the ease of doing business. Rwanda comes in at position 32, Kenya follows at 129, Uganda is ranked at 132, Burundi at 140 and Tanzania at 145.
• The country where you are most likely to encounter bribery in the EAC is Uganda, according to the East African Bribery Index 2013, followed by Burundi, then Tanzania, then Kenya. Rwanda comes in as the least bribery-prone country in the region.

Salim Khan is the proprietor of a medium-sized food processing factory in Nairobi, set up five years ago. In his office, dozens of framed certificates take up half of a wall, each a licence from one agency or another.

“Let’s see, here I have a single business permit from the City Council, there’s one from the Kenya Bureau of Standards, another from the National Environmental Management Authority, one on Occupational Health and Safety Standards. Then there is another which is a Food and Chemical Substances Registration Licence, another from the Department of Industrial Training, two from the Kenya Revenue Authority — the red tape is truly extensive,” he says.

But the number of licences isn’t the biggest headache — it is the fact that setting up a business in Kenya, as in other East African countries, can be compared to a treasure hunt.

“You actually find out about the different licences you need as you go along; no one advises you on the certifications that you need to secure when you’re setting up. Regulators show up at your business asking you for some licence you’ve never heard of, so they catch you out. The lack of information is a huge loophole that is being used to extort money from businesses,” he said.

And in the process of getting the licences, in most cases, one has to part with a bribe.

Mr Khan’s experience sums up the findings of two reports released last week, Doing Business 2014 and the East African Bribery Index 2013, which, at first glance seem unrelated. But comparing the data reveals how pervasive corruption is strangling regional efforts to support entrepreneurship, create a thriving business climate and achieve middle-income status in the next few decades.

The Doing Business 2014 report by the World Bank and International Finance Corporation paints a damning picture of the regional business climate — with the exception of Rwanda, the other East African countries are in the bottom half of the 189 countries surveyed, when it comes to the ease of doing business. Rwanda comes in at position 32, Kenya follows at 129, Uganda is ranked at 132, Burundi at 140 and Tanzania at 145.

The country where you are most likely to encounter bribery in the EAC is Uganda, according to Transparency International’s East African Bribery Index, followed by Burundi, then Tanzania, then Kenya. Rwanda comes in as the least bribery-prone country in the region.

“For Uganda, the issue of bribery in the judiciary is a sensitive one, because while we have bribery at a business level that tends to increase the cost of doing business, at the same time politics makes it thrive. Many people decide to pay the bribe, especially in the process of registering their business, because they are not aware of the procedures to follow. That is what makes them even pay for what is supposed to be free,” said Issa Ssekito, the spokesperson at Kampala City Traders Association.

Tanzania’s police are ranked as the most corrupt institution in the region, overtaking Kenya’s that had taken the top slot in a number of previous reports.

READ: East Africa's high corruption rates bad for business

The World Bank’s and TI’s latest assessments, while showing some improvement from yesteryear, indicate that East Africa’s standing as one of the continent’s most attractive destinations for foreign investment remains under threat from other blocs.

The World Bank measures a country’s ease of doing businesses in terms of regulations affecting 11 areas; from starting a business, dealing with construction permits, getting electricity, registering property, and getting credit. Others are protecting investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and employing workers.

As individual countries dither over business reforms, frustration has been growing among business executives in the region over the continued erection of non-tariff barriers as well as lengthy licensing procedures.

“Longer periods to obtain necessary documents to start up a business have always increased the costs of doing business. This is worsened by investors moving from one department or office to another to get relevant documentation,” said Sebaggala Kigozi, the executive director of the Uganda Manufacturers Association