Kenya scores poorly in ease of doing business ranking

Politics and policy

Ruth Wanjiru takes stock of bungles at her beauty shop in Nyeri. The Doing Business 2015 ranks Kenya’s ease of doing business at position 136 out of the 189 economies surveyed globally. PHOTO | FILE 

By GEORGE OMONDI and SANDRA CHAO-BLASTO

In Summary

• The Doing Business 2015 shows businesses spend an average of 125 days to secure a construction permit and 72 days to get property registered.
• Overall, the report ranks Kenya’s ease of doing business at position 136 out of the 189 economies surveyed globally.

Investors on average wait for 158 days to get electricity connection and queue for 202 hours yearly at the Kenya Revenue Authority (KRA), a World Bank survey says.

The Doing Business 2015 shows businesses spend an average of 125 days to secure a construction permit and 72 days to get property registered.

Overall, the report ranks Kenya’s ease of doing business at position 136 out of the 189 economies surveyed globally.

While the ranking marks a marginal improvement from position 137 of last year, it shows Kenya retained last year’s scores on most of the parameters but slipped in some.

“Kenya made dealing with construction permits more costly by increasing the building permit fees,” the World Bank Group said on Thursday in apparent reference to a raft of levies by the National Construction Authority and county governments for new projects. 

The statement added: “And it made paying taxes more costly for companies by increasing employers’ social security contribution rate.”

By Comparison, Rwanda—East Africa’s top reformer ranked at position 46 globally—takes only 34 days to connect firms to electricity, 32 days to register property, 107 hours per year to pay taxes and 77 days to grant construction permits.

In Tanzania, firms spend an average of 181 hours a year to taxes, 67 days to register property and 109 days to connect firms.

Rwanda and Tanzania (ranked number 131 globally) are members of the EAC Common market directly competing for investors with Kenya.

The World Bank report says an investor requires a total of 30 days to start a company in Kenya compared to only 6.5 days in Rwanda and 26 days in Tanzania.   

The findings bring to question reforms the State Law Office has been claiming to have made at the company registry including digitisation of records.

Early this year, the State Law Office promised 24-hour company registration under a deal signed earlier with Safaricom. Company registration is the lengthiest of the 10 procedures that one undergoes to start a business, accounting for 50 per cent of the time taken.

READ: Registering a company to take one day as AG office goes digital

KRA reforms have seen firms filing and paying taxes online which is not given significant weight in the report. Court orders that blocked implementation of new NSSF contributions and the construction levies are equally ignored.

The report, however, commends Kenya for enacting strong insolvency and credit information laws where it is ranked 134 and 116 respectively.
 Kenya improved its credit information system by passing legislation that allows the sharing of both positive and negative credit information and establishes guidelines for the treatment of historical data,” it added.
 

 

On Wednesday, officials from Industrialisation ministry and the Kenya Private Sector Alliance (Kepsa) disputed the report saying it did not capture a lot of reforms implemented over the last six months.

“This survey is normally done in the first quarter of the year and it is really historical data. Because of the timing most of the things implemented since then have not been included in the report,” said Industrialisation secretary Adan Mohammed. 

“Businesses are, for instance, being connected to electricity grid in an average of between 21 and 30 days, not the 158 suggested in this report.”

He said it did not capture reforms that include the National Electronic Single Window System, Mombasa Port Community Charter, reduction of weighbridges to four and the introduction of in-motion weighbridges.

Carole Kariuki, the Kepsa chief executive, urged companies not to ignore such reforms whenever they are asked to submit responses.

“We are working closely with the government to implement the reforms and hoping they will be reflected in the 2016 report,” said Ms Kariuki