Kenya must address ease of doing business

The National Assembly in session. A United Nations spokesman responded on Tuesday to the Kenyan Parliament's recent approval of a polygamy Bill by citing a UN group's call for prohibition of polygamous marriage. PHOTO | FILE 

In Summary

•  As a country, we score badly as far as resolving insolvency is concerned at 123 out of 185, down from 101 in 2013.
• In terms of doing business with our neighbours, we score badly at 156 out of 185, which shows the true picture of our so-called EAC.

By Steve Biko
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Any keen investor wants to invest in a country where it’s easy to set up, where the legislative framework and court system respect and uphold the tenets of doing business.

The Ease of Doing Business index was created by World Bank to guide interested investors on how to invest in developed, emerging and frontier markets with limited risk to their capital. Higher rankings indicate better, usually simpler regulations for businesses and stronger protections for property rights.

The index averages the country's percentile rankings on ten topics ,and ranks economies from 1 to 185, with the 1 being the best and 185 being the worst.

Kenya has for long been vaunted as the economic hub of the region, but the numbers coming out differ with this notion.

In the recent past, traders from all aspects of the revenue net in the country have demonstrated in the streets at the passing of laws and policies that are nothing but death sentences to businesses. We have seen county governments coming up with finance bills that are not only archaic but are insensitive to the principles of fairness.

Kenya has scored badly on the ten topics that World Bank uses. Out of possible 185 positions, the country is ranked 129 as of 2014 by the index, a drop of 7 places. This means that since the administration of Uhuru Kenyatta took power, doing business in Kenya has become more difficult for Kenyan and foreign entrepreneurs.

Kenya is ranked 134 out of 185 in starting a business in 2014, down from 128 in 2013. This reflects a drop of 6 places. .

We are ranked 166 out of 185 in getting electricity, which explains why the cost of production is so high. We are ranked 163 out of 185 in registering property, which probably means that unless you are connected or corrupt, developing and growing your firm in this nation is a nightmare.

Interestingly, we have improved when it comes to paying taxes, up to 166 from 171. This is great in as much as it shows KRA is up to the task, but are these taxes well or they are ending up in the pockets of well-connected men and women of this country?

RESOLVING INSOLVENCY

In terms of doing business with our neighbours, we score badly at 156 out of 185, which shows the true picture of our so-called EAC, This comes in the wake of a scathing article by Charles Njonjo calling for a review of the EAC unity, terming it untenable. If we can't do business with our neighbours, how will foreign investors feel then? Moreover, as a country, we score dismally on the aspect of enforcing contracts at 151 out of 185.

Every business has its trying moments and that is why the law is designed to ensure that all is done to secure and save a dying business. As a country, we score badly as far as resolving insolvency is concerned at 123 out of 185, down from 101 in 2013.

To set up a business in Kenya, one must go through 10 procedures over 32 days, more than the average 8 over 29.7 days in any other sub-Saharan African country. It takes one in Kenya 3 days to reserve a unique company name at the Companies Registry and 5 days just to have the Memorandum and Articles of Association stamped. These things should take minutes.

It takes an entrepreneur 7-14 days to register with the Registrar of Companies at the Attorney-General’s chambers when this could take hours if the process were computerized. One must wait for 5 days to just apply for a business permit and 1 day to register for taxes at KRA when in essence all these could take minutes.

As a country if we want to sort out the issue of unemployment, create wealth, balance the ratio of exports and imports, reduce crime and above all attract FDI, then we need to re-look at the laws that govern business.

We need to abolish all unhelpful laws that have been passed by County governments and the national government and streamline the issuance of licenses into a single one to make it easy to start off. We need to do better than any other market in facilitating business.