Private Sector Urges State to Act on High Cost of Doing Business

The government is determined to address the high cost of doing business in the country as a measure to spur regional trade.

East African Community Principal Secretary Kevit Desai says the move is intended to make the country more attractive and competitive for local and international investors.

He said there is a need to reduce the cost of doing business in the country to facilitate local and foreign investments.

The PS says Kenya being the hub for regional and international trade is pushing to tackle barriers to trade by streamlining its import and export processes through implementation of reforms geared to addressing the high trade costs besides cumbersome and time-consuming border procedures.

Dr Desai says the government is alive to the pain and hurdles facing the business community and added his ministry was out to engage stakeholders and address the bottlenecks.

He said these hindrances include the existence of a multiplicity of licences, bureaucracy, cost and time consuming red tape in processing of business licensing applications, permits and other authorizations.

The PS further said existing licensing system bottlenecks affect the business environment and increase cost of doing business in the country.

“There is a need for public officers to act with a sense of urgency in the provision of services to Kenyans and inspire confidence in investors,” he said.

Dr Desai was speaking in Kwale County where he held talks with members of the private sector and local officials of the Kenya National Chamber of Commerce and Industry (KNCCI).

As the cost of doing business escalates in the country, the KNCCI has warned that Kenya could miss out on the expected benefits from the much-touted EAC federation.

The PS highlighted the government’s commitment to make it easier for investors and companies to do business in Kenya by investing heavily in the road, railway and port infrastructure and energy supply.

Dr Desai noted that investors and manufacturers have for long been lamenting about the high cost of doing business in the country and reiterated that ‘the government is committed to remove any hurdles that exist which drive away investors’.

“Communication is the first step to solving any business problem and that is why we are going round the country convening meetings to engage business stakeholders,” he said.

The PS who was accompanied by the Director of the Department of Business Reforms and Transformation Odede Kidenda and KNCCI Kwale chapter branch Chairman Salim Mwayogwe, later toured the Lunga Lunga One-Stop Border Post.

Kidenda says his directorate is working in partnership with relevant government agencies in streamlining the legal and regulatory environment, conducting business process reviews, capacity building and stakeholder engagement to reduce the time and cost associated with importing and exporting of goods.

The PS said now more than ever, there is a strong need for more action oriented public-private dialogues, partnerships, advocacy, and knowledge sharing to continue to reduce red tape and ensure the success of small and large businesses that are the lifeblood of the economy.

Dr Desai said that the Lunga Lunga one-stop border post will unlock Kenya’s business opportunities and boost intra-regional trade.

The Lunga Lunga border post lies between Kenya and Tanzania and it facilitates cross border movements between the two neighbouring countries.

He said the government is out to facilitate regional trade and deepening of the East African Community (EAC) integration.

The PS noted that the plan to construct one-stop border posts at borders in EAC is in line with the regional integration plan to help ease movement of people, goods and services across the community.

He said the EAC has upgraded all border-crossing points to ‘one stop border posts’ operating 24 hours in a bid to spur cross border trade.

Dr Desai said significant investments have been made in trade facilitation such as the automation of ports, weighbridges, customs departments and other agencies that manage the region’s key transport corridors and border points to increase efficiency of transactions and reduce the cost of doing business.

Chief Operations Manager of Josef Seibel Africa Ltd Tom Gichangi noted that the initial setting up of their factory in Kwale was derailed by demands for bribes and kickbacks.

Kwale’s first shoe factory opened its doors in 2020 in the Mvindeni area of Ukunda Township in Msambweni Sub County.

Josef Seibel Group, a German shoe making giant has started operations and is rolling out the shoes under the brand name ‘Romika’.

“Our Ksh 50 million investment has been beset by delays as officials demanded Sh500,000 kickbacks before we were connected to electricity of which we had paid Sh.800,000 for the same,” he said, adding that the high cost of doing business has often proven to be one of the biggest disincentives for investors.

Gichangi at the same time noted that more needs to be done in the provision of stable electricity supply, portable water and fixing of roads to reduce the cost of production for manufacturers.

He said there are too many regulations in the country that are unduly complicated, costly and difficult to comply.

“This prevents companies from growing and creating jobs so we ask the government to work towards improving the business environment for companies of all sizes through a dedicated capacity to reduce red tape,” he said.

He also decried weak standardization in industry and commerce by the Kenya Bureau of Standards (KEBS) that is responsible for governing and maintaining the standards and practices.

“When we started rolling out our leather shoes we had to take them to the European Federation of Standards whose mission is to foster the economy of the European Single Market and the wider European continent in global trading because KEBS lacked the capacity for the same,” he said.

KNCCI Kwale Chapter Branch Chairman Salim Mwayogwe said foreign investors, industries and companies have the choice of relocating to neighbouring countries if Kenya doesn’t work towards bringing down the cost of doing business and improving efficiency in service delivery.

Mwayogwe noted that high borrowing costs, multiple taxation, currency volatility, infrastructure shortfalls and red tape all make doing business in the country difficult.

He said it is indisputable that government red tape and overregulation has long limited potential investors and stifled the growth of the local economy resulting in increasing costs of compliance and doing business, reducing healthy market competition, impeding new entrants into these markets.

“There is a need to improve the business climate and reduce the cost of doing business as a critical step in the revival of investments,” said Mwayongwe, adding that the chamber will champion the cause of members of the business community and create the enabling environment for all businesses to excel.

He said there is a need for the East African Community to embark on a series of sensitization and awareness raising activities of the economic bloc to the local and the regional business community.

The KNCCI regional official said despite earlier sensitization efforts ignorance was still widespread among Kenyans and other East Africans about the EAC integration process such as Customs Union, Common Market Protocol, Monetary Union and the ultimate step of Political Federation.

He said the lack of awareness in the EAC integration process was a major barrier and added that a shift in awareness was necessary to realize fuller benefits that come with deeper cooperation among the partner states of Kenya, Uganda, Tanzania, Rwanda, Burundi, South Sudan and the Democratic Republic of Congo.