Optimism over cutting cost of doing business

By Nicholas Waitathu

The local business sector is set for major realignment. This follows assurances by President Uhuru Kenyatta that his government would streamline business registration process to spur high growth.

The business community says Uhuru’s remarks demonstrate the State’s willingness to reform the business sector with the view to attracting high investments.

Kenya Private Sector Alliance chairman Eng Patrick Obath said on Thursday on phone that the country has over time lost huge investment opportunities due to lack of good will from State agencies.  

“The statement shows the willingness by the Government to tackle the setbacks the business community has been struggling with for long.  We have been facing challenges in terms of acquiring business licences leading to increase in cost of doing business and lack of appetite as well,” he said.

Uhuru, during his inauguration speech early this week assured Kenyans that the process of starting business in the country will be restructured to make it receptive and lucrative to investors.

More bureaucracies

Kenya lags behind in terms of business registration among other hindrances owing to bureaucracies.

“We will make the procurement process faster, more accessible, and transparent. We will simplify the process of starting and running a business, in order to make it friendly and cost-effective to do business in Kenya,” Uhuru said.

Owing to the laborious business registration process, most business players, especially micro and small medium enterprises prefer operating informally. This denies the Government huge revenue and equally the traders fail to get international exposure.  According to the World Bank report Doing Business 2013, Kenya is ranked at position 126 out of the 185 economies compared to Rwanda, which takes position eight.

An investor interested in building a warehouse in Kenya has to undergo nine procedures — a process that takes 125 days and costs 211.9 per cent of income per capita.

Obath stressed that more efforts needs to be committed in  instituting a one-stop-shop mechanism with the view of easing cost of doing business.

For the last decade, some progress has been made for example, cutting down on the number of days an investor requires before registering a business. Overall, however, the process still remains cumbersome.

Since 2004, the number of days for registering a business have been reduced from 60 to 32 while procedures have only been reduced to 10 from 12. While Kenya’s Foreign Direct Investment (FDI) has been on upward trend, its ranking has slipped further.

Investment climate

Kenya Investment Authority last month launched a 100-day Rapid Results Initiative that will ensure the investment climate is favourable for both local and foreign investors.  “Key component of the one-stop-shop is equipping it with digital system to shorten period used in filing manual investment forms,” says Dr Moses Ikiara, the agency managing director.  Kenya attracted Sh60 billion worth of FDI last year compared to Sh156 billion registered in 2011. Rwanda since 2004 with only a population of 10 million people has recorded tremendous growth largely due to reforms government has undertaken especially in the business sector. 

Globally, Rwanda is position 52 compared to Kenya, which is 121 among 185 economies. In Africa, it enjoys position three after South Africa and Tunisia respectively.

 Rwanda has over the years, simplified the start-up process by consolidating of name checking, registration fee payment, tax registration and company registration procedures. This has reduced the time required to process completed applications.