KPMG East Africa CEO Josphat Mwaura. A recent survey by the firm shows that Kenyan CEOs are worried about the rising cost of doing business. Photo/FILE
What you need to know:
High cost of power and poor roads are cited as some factors expected to make 2014 a difficult year.
KPMG says local businesses need to tap more into regional and global businesses since the local population of 43 million is not large enough market to support the country’s ambitious economic goals.
More than half of chief executives in Kenya say their biggest headache this year is the rising cost of business, according to a new survey by consultancy firm KPMG.
Respondents said it was becoming more difficult to run business because of costs arising from government policies or inaction.
Half of the of respondents (51 per cent) cited the high cost of power and poor roads as some factors expected to make 2014 a difficult year.
“The government has not made the situation any better with the changes to the VAT Act and the introduction of the Railway Development Levy, which have all contributed to the cost of production,” said the respondents.
They said new taxes should be deferred.
The changes were made last year to enable the Kenya Revenue Authority to collect and refund taxes more efficiently.
Treasury secretary Henry Rotich introduced the 1.5 per cent levy on all imported goods in last year’s Budget to pay for the standard gauge railway.
The levy was meant to mobilise Sh15 billion for the railway from Mombasa to Kisumu but there has been intense lobbying for exemption of military, diplomatic and transit goods.
Mr Rotich said the project would significantly reduce the cost of freight on completion in 2017, thereby saving businesses huge resources.
The rail levy had already collected Sh10.05 billion as at the end of last year indicating that the KRA will meet its collection target.
The survey also found that 19 per cent of respondents said new markets for their goods would be a priority this year.
“Many companies are faced with reduced demand as a result of depressed economic activity and one of the pressing needs for business is getting new markets for their products,” said the survey.
KPMG said that local businesses needed to tap more into regional and global businesses since the local population of 43 million is not large enough market to support the country’s ambitious economic goals.
“Kenya does not have adequate market to spur investments, which are necessary for economic growth and development,” said the survey.
It found that for 13 per cent of CEOs their main concern this year will be improving productivity and the quality of their labour force, followed by managing the impact of the global economic environment (7 per cent), access to finance (9 per cent) and investing in technology (2 per cent).
