By XN Iraki
Kenya’s “ease of doing business” is now ranked 109th out of 183 countries. That was a slip from 106 in 2011. Meanwhile, Rwanda improved from number 50 to 45 for the same time period.
The World Bank’s report ranks countries on how easy it is to open a business and run it, from registering to filing taxes and getting credit. The measures are time taken and the cost.
It takes about 33 days to start a business in Kenya and three days in Rwanda. In Kenya, there are 11 procedures that involve shuffling from one ministry to the other. But in Rwanda, there are only three.
More detailed analysis of the report shows interesting patterns. The cost of starting a business in Kenya is 37.8 per cent of per capital income or about Sh25,000. In Rwanda, the cost is Sh2200.
Our ranking is worse for starting a business, paying taxes, getting electricity, registering property, trading across borders and enforcing contracts. But we are ranked among top 10 in the world in getting credit — an interesting paradox; you get money but find it hard to invest it.
For Rwanda, the worst ranking is in getting construction permits, trading across borders and resolving insolvency. We are at par in getting credit.
Not conducive
All this fog of data tells a simple story of how bureaucracy has held a country‘s economy hostage. It is not that Kenyans cannot invest and develop the country, but the environment is not conducive.
To any ordinary Kenyan, the data is surprising and a paradox; why should it be getting harder to do business with Mpesa, Internet, mobile phones and more graduates than any other time in history? Should life not be getting “easier”?
Anyone who has started a business knows the evils of bureaucracy. The procedures in starting a business involve either the local government or central government; the ranking says nothing about the entrepreneur or the businessperson.
How can starting businesses be so hard in a country whose number one problem is unemployment? What can we do about it? It is possible that our attitude towards businesspeople, better called entrepreneurs is negative. We therefore put roadblocks for them. Any time there are chaos, entrepreneurs bear the brunt.
May be we do not see the connection between setting up a new business, job creation and economic growth. No wonder most people seek employment from established businesses, preferably big corporations. “Someone else” creates the job, not us.
Interestingly, Business Administration is one the most popular courses in our universities. Whose businesses are the graduates supposed to administer?
Needless to say, most jobs in any economy are created by the private sector. Kenya has about 600,000 civil servants including teachers. If everyone in civil service is sacked, only 600,000 jobs would be created, a drop in the Ocean.
For ages, we have talked about a one-stop-shop for investors and entrepreneurs. Rwanda has done that and that is one secret behind her high ranking. You get all permits under one roof — saving you time and shoe wear.
Why not automate some of these procedures? Anyone opening a new Google email account knows the system automatically searches for a similar name.
Automated
Why can’t we do the same for registrar of companies online? Clearly, most of the procedures in starting businesses can be automated, killing lots of bureaucracy.
The local governments must seek alternative sources of funds from permits and licences. Too often the councils see permits not as a means to regulating businesses, but just a source of revenue. We must go beyond permits and facilitate those who take risks to start businesses and pay taxes.
This calls for changes in by-laws to make them business friendly. Economists and not just lawyers should be involved in redrafting the bylaws. Our thinking needs re-booting, a new constitution is not enough.
Devolution should make doing business easier by setting incentives to attract investors. Nakuru, for instance, cut licence fees by half and is now one of the fastest growing towns.
Kenya’s low ranking shows that the fruits of East African integrations are yet to ripen. One of the issues Kibaki’s successor must confront is balancing East African and global integration with devolution.
We are in an awkward position, simultaneously looking inwards, devolving power and hopefully economic growth to the counties while integrating at national level and global level.
Finally, communism is now part of popular history, drowned by the market system, which has private sector as its epicentre. Under the market system, the government is still relevant, ensuring the rules of the game are kept, provide public goods, enforce contracts and resolve disputes.
Invisible hand
The government is visible hand of economic growth, while the market is the invisible hand. That is not about to change. If in doubt, ask the Chinese or Rwandese governments. Both countries are among the top 10 fastest growing economies in the world from 2001-2010.
