Kenya cedes more ground in ‘Doing Business’ ranking
Ruth wanjiru takes stock of bungles at her beauty shop in Nyeri, central Kenya on August 8, 2011. Kenya has dropped three positions in the World Bank’s ranking for ease of doing business handing other east African peers an upper hand in the battle for attracting foreign direct investments.
Kenya has dropped three positions in the World Bank’s ranking for ease of doing business handing other east African peers an upper hand in the battle for attracting foreign direct investments.
Slow licensing processes, complex taxation procedures and high cost of registering property saw Kenya drop to number 98 out of 183 economies surveyed globally down from last year’s 95.
Rwanda, east Africa’s preferred location for business, improved her global investment ranking to number 58, representing a significant leap from last year’s 67.
“If each east African country was to adopt the region’s best practice for each doing business indicator, East Africa would rank 18, bringing the community closer to the global top performers,” said Sabine Hertveldt, the World Bank’s senior Private Sector Development specialist and co-author of the report.
The survey was launched Wednesday in Arusha by the World Bank’s Private sector lending wing, the International Finance Corporation.
The report shows companies that have invested in Kenya fault a heavy regulatory burden that includes lengthier documentation for exports. It takes an average of 33 days to finalise the 11 procedures for licensing a business in Kenya. It is three days in Rwanda.
Investors have also cited Kenya as the most expensive destination for those aspiring to own property in the region. Investors part with 4.2 per cent of property value to cover cost of registration compared to Uganda’s 3.2 per cent Rwanda’s 0.4 per cent.
These costs have raised the average cost of starting a business in Kenya to 38.3 per cent of the income per capita, compared to Tanzania’s 30.9 per cent and Rwanda’s 8.8 per cent.
Businesses have to endure the lengthiest tax compliance procedure lasting 172 hours per year (compared to 148 and 161 for Rwanda and Uganda respectively). On average, tax liability claims 49.7 per cent of a company’s profit compared to 31.3 per cent (Rwanda), 35.7 per cent (Uganda) and 45.2 per cent (Tanzania). “Although the common market has opened several opportunities for businesses in the region, it still requires an investment climate that is properly suited to catalysing additional trade and investment,” said Ms Agatha Nderitu, Executive Director, East African Business Council.
While investors have also contested the slow process of enforcing contract in Kenya (average of 40 days compared to Rwanda’s 24), the country is ranked highly for its liberalised trade policies which could significantly improve her global rating if implemented. The report shows that many investors see Kenya as the destination with strongest collateral and bankruptcy laws that help to protect the rights of borrowers and lenders.
