Kenya business reforms key to new Africa growth

The renaissance narrative of a sub-Saharan Africa rising like the proverbial phoenix has been a persistent storyline. Rightfully so; Africa’s economic throb has accelerated, infusing the continent with a new commercial vibrancy.

Africa enters its 20th consecutive year of economic expansion, with the World Bank forecasting that the region’s GDP growth will remain steady at 5.1 per cent through to 2016.

Africa’s collective GDP is now roughly equal to Brazil’s or Russia’s, and the continent is among the world’s most rapidly growing economic regions.

The performance has been underpinned by improving macroeconomic indicators and business environment; diversified trade; demographic dividends; rising middle class and urbanisation; private sector participation and investment ties with emerging economies ,among other factors.

With a GDP of $55 billion (Sh5.4 trillion) and per capita income of $1,246 (Sh121,800), Kenya is one of the African economies at the steering wheel of this transformation.

While today we are one of the fastest growing economies in the world, others are apprehensive about whether our steadily expanding economy is sustainable and inclusive.

Creating an enabling environment for business through instituting legal and regulatory reforms is critical to realising Kenya’s goal of sustainable industrialisation and inclusive growth.

Indeed, the second medium term plan (MTP) of Vision 2030 identifies key policy actions, reforms, programmes and projects that the government will implement in the 2013-2017 period in line with its priorities to revitalise economic growth and put the economy on a high, broad based, inclusive and sustainable growth trajectory to achieve double digit growth rate within the five-year period.

In that regard, the government has identified cross-cutting reforms to improve the business regulatory environment under the platform of ease of doing business reforms agenda.

In collaboration with the private sector, concerted efforts have been made to measure and track changes in regulations affecting 10 areas in the life cycle of a business, namely starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting investors; paying taxes; trading across borders; enforcing contracts; resolving insolvency and employing workers.

Indeed, the reforms in specific economic indicators are heralding good tidings for the Kenya’s ease and cost of doing business reforms and setting a foundation for the sustainable development of the private sector and creating a competitive and diversified economy in the long term.

For instance, greater focus on supply of electricity has translated into an average reduction in consumer power bills by 25 per cent in the period between August 2014 and February 2015.

Reductions of electricity costs in industries have also fallen, making the country a more competitive location for the manufacturing sector.

The total number of users connected to electricity has grown by over 41 per cent between March 2013 and today, increasing customer base to 3.15 million Kenyans – a 37 per cent increase in the national electrification rate.

In the last three months of this year alone, the government has connected over 385,000 Kenyans and is now targeting a record one million by the end of December 2015.

To ease transportation, Kenya has modernised and expanded regional sea port in Mombasa strategically to boost intra-regional trade.

The ongoing administrative port reforms have reduced average transit cargo clearance time by two days down from five. It also takes three days for goods to transit from Mombasa to Kampala, and four days to Kigali, down from 18 days and 20 days respectively.

Coupled with implementation of the single customs window, an electronic platform enables Kenya to clear import cargo – mostly destined for the neighbouring countries – cheaper, faster and more efficiently.

Red tape and ineffectual procedures have been greatly reduced to improve delivery on registering a business, registering property, dealing with construction permits and paying taxes.

This year alone, Kenya’s efforts have been vindicated by respected global voices.

In February, The Eurasia Group, a New York-based global political risk research and consulting firm named Kenya as the best African emerging economy to invest in due to accelerated infrastructure development and a stable political and macroeconomic environment.

This attractiveness arose from a diminished threat of political and economic turmoil affecting other large African economies.

According to this survey, Kenya stands to leverage on a stronger services sector that is increasingly attracting inflows compared to other large African economies which are supported to a large extent by commodities such as oil, gas, metals and minerals.

Markets

In that same period, a Washington DC-based advisory firm, Frontier Strategy Group (FSG), through its Frontier Markets Sentiment Index tracking investment sentiment by leading executives of multinationals placed Kenya alongside Nigeria as the best investment destination in Africa.

Citi Bank and the World Bank had earlier this year highlighted a positive macroeconomic outlook for Kenya’s growth. Citi’s report, opined that the growth could be unrelenting by investment in infrastructure, fiscal discipline and political stability.

Ernst and Young’s Attractiveness Survey for Africa for 2014 placed Kenya among the three top most attractive investment destinations in sub-Saharan Africa, together with South Africa and Nigeria and the most preferred in East and Central Africa.

According to this survey, the three economies make up for over 40 per cent of the total foreign direct investment (FDI) projects in Africa.

Nairobi’s infrastructure, consumer base, local labour cost and productivity and a skilled workforce were ranked as the third most attractive city after Johannesburg and Cape Town, indicating important factors that cities needed to consider to attract foreign investment.

A few weeks ago, Bloomberg Business and Fortune Magazine have also released surveys projecting Kenya to be the third-fastest growing economy in the world in 2015, behind China and the Philippines and one of the seven top investment destinations to watch in emerging markets respectively.

More than anything, Kenya’s improvement of the investment climate will help to set a foundation for sustainable development of the private sector and create a competitive and diversified economy.

This will nip paradoxical social challenges like poverty and unemployment in our era of robust growth.

Mr Mohamed is the Cabinet secretary of Industrialisation, Enterprise and Development.