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We can’t wait to start earning dividend for corporate Kenya with the New Constitution

COMMENTARY
By | August 10th 2010

By Sammy Onyango and Tom Ipomai

Kenyans voted overwhelmingly to endorse the Proposed Constitution. Against a background of the contentious 2007 elections and the violence that followed it, there was a justified level of anxiety that the referendum vote could also end in chaos.

The very peaceful passing of the document and the impending implementation has significantly changed the country’s business environment.

The new constitution has ushered in a warm investment climate, and it is time for the business community and Kenyans to plan to reap the resultant dividends – business growth and employment.

Goodwill

From what we have read and heard in the Media, congratulatory messages to Kenyans have come in from the most important people in the world.

This is in addition to the wide coverage of the poll by leading international Media like CNN, Al Jazeera and BBC.

The positive coverage during and following the successful referendum should already be positioning the country in an advantaged perspective, with potential visitors and investors arriving sooner or later.

The world should have noted that Kenya can hold peaceful elections and investors should soon start ignoring elections as a point of concern in the investment calendar.

We are certainly going to see increased Foreign Direct Investments and tourism.

With the improving perception of the country, the international financial markets should start viewing the country’s political risk as moderated. And there is a strong basis for this.

The document strengthens institutions of governance, including creating checks and balances for the Executive, ensuring independence of the Judiciary and Legislature and devolution of power to the counties.

While the institutions are yet to be rolled-out, one would expect that realisation of the envisaged benefits should lead to a re-assessment of the country’s sovereign rating.

It is reasonable to look forward to an upward revision of the country’s credit rating, which will open avenues for the country to access more capital needed to speed up economic growth.

The structures in the new constitution engender a strong governance structure that should reduce incidents of corruption and improve the business climate.

A technocratic cabinet will be appointed after rigorous vetting, implying that only persons of acceptable track records are going to lead Government dockets.

Excessive politics

With this structure in place, professional running of Government shielded from excessive politics should see a more predictable business environment focused on timely delivery of programmes.

This will further assist in solving Kenya’s recent problem of failure to absorb resources allocated to various projects due to delays in implementation.

Further, county governments will be accountable to the electorate at that level of delivery of priority and planned programmes. Compare that to the current provisional administration, which is not accountable to the citizens at the division, district or even provincial level.

"Feel Good Factor"

In the run up to the referendum, it was not lost on observers that a number of corporate captains openly backed the new constitution with very visible newspaper and television advertisements.

You can imagine what would have been the mood in Corporate Kenya had the referendum vote turned nay. With the constitution having been approved by Kenyans, it appears corporate leaders are feeling good.

But while it might not be easy to quantify when a "feel good factor" takes hold in a country, many important consumption and investment decisions will be made. With the corporate captains feeling good, we should be seeing a boom in critical investment decisions soon.

Such investments decisions will not be based only on feeling good, but also on strong rational grounds. Consider that now we will have 47 counties on average spending approximately Sh2 billion in the various corners of the country.

This creates substantial effective demand for goods and services. In addition, the Equalisation Fund should see even more effective demand in the ‘less developed’ parts of the country.

Businesses in the country will be assessing their own positioning to take advantage of this large demand for goods and services that will be created by county governments.

Empowered citizenry

The new law, if implemented, should see an enlightened and empowered citizenry. Such a citizenry will be in position to acquire skills and take advantage of the opportunities that will open up.

When citizens engage in the economic opportunities, we should see more growth, rapidly expanding middle-class, increasing demand and sophistication in consumption.

While it is too early to assess the benefits of the new constitution, without doubt, the new framework of national governance heralds an era of more accountability, professionalism in management of public affairs and hopefully, a future of stable, sustainable and rapid growth.

— Sammy Onyango is the CEO, Deloitte East Africa while Tom Ipomai is Associate Director of Corporate Finance in the same firm. Views expressed in this article are the authors’ and not necessarily those of Deloitte.

Public WatchDog returns next week.

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