EDITORIAL: Statutory deductions will poison enterprise space

Investors are highly sensitive to cost of doing business and tend to avoid destinations they deem hostile. FILE PHOTO | NMG 

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Summary

• Increased cost burden on employers is not the smartest way to run the economy.

The manner and alacrity with which bureaucrats are loading businesses with additional costs in the form of statutory deductions is, to say the least, appalling.

Take the latest plan to have employers match the workers contribution to the National Hospital Insurance Fund (NHIF) for instance.

The proposal, which comes just days after a similar one requiring employers to contribute to their workers savings to buy homes appear ill conceived and its full impact not thought out.

In the past five years, the Kenyan economy has performed in a manner that has left a conundrum in its wake, growing at an average of five per cent but with corporate profits falling and companies letting go of thousands of workers to remain afloat.

Chalking up more costs in the form of statutory deductions will have only one sure outcome — making it harder for employers to keep some of the workers they have as well as making it difficult to grow their workforce.

Implementing these new proposals will certainly raise the cost of doing business for employers whose plight the bureaucrats do not seem to care about.

This situation cannot be wished away and any proposals that have a potential knock-effect on cost of doing business needs to be handled with care.

READ: Employers face additional NHIF burden

While employee welfare is critical, the government must also stay alive to the fact that increased cost burden on employers is not the smartest way to run the economy.

This means proposals with cost implications on businesses requires better think-through and smarter application to achieve the desired goals without unsettling enterprise.

Most important, such policy changes must be done with the participation of all stakeholders as the Constitution demands.

Incentives to employers — not the other way round — would help limit the weight of increased business cost.

The race to attract investment is quiet intense globally and the government must resist any policy decisions or steps that would hurt the country’s competitiveness.

Investors are highly sensitive to cost of doing business and tend to avoid destinations they deem hostile.