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Corporate

Political stability lifts investor confidence in EA

Trucks at the Kenya-Uganda border at Malaba: Administrative requirements at the border points still pose a challenge. Photo/FILE
Trucks at the Kenya-Uganda border at Malaba: Administrative requirements at the border points still pose a challenge. Photo/FILE 

Easing political tensions and the ongoing search for uniform governance standards in East Africa has lifted business confidence in the region and is encouraging investments that could boost employment.

Buoyed by recent peaceful elections, investors in the five EAC member countries said governance based on the rule of law had significantly lowered political risk, creating a stability that has allowed them to engage their expansion gears once again.

Rwanda and Burundi successfully concluded presidential elections last month, a trend that has been crowned by Kenya and Zanzibar early this month when they conducted peaceful referenda.

“It is satisfying for investors — and regional blue chip players in particular — when elections are peaceful the way we are witnessing them,” said Mr Peter Munyiri, KCB deputy CEO in charge of group business.

The bank, which has just raised Sh12.5 billion from its highly publicised rights issue, says it will use part of the money to mobilise savings and create a large pool of credit across the region, “Certainly the political and sovereign risks in the region set an attractive business environment and KCB can comfortably lend more money, with the region also expected to become the home for lots of overseas funds looking for investment destinations,” said Mr Munyiri

The renewed optimism comes just days after the political wing of the EAC integration project concluded its second annual conference in Nairobi on Friday in which participants called for the crafting of a good governance protocol to guide application of uniform laws across the region.

The provisions of the proposed protocol is expected to cover common values and code of ethics for electoral bodies, judiciary, licensing agencies and general public administration
Participants at the three-day forum said their search for uniform standards for governance will extend to cover institutions and good corporate governance that will improve access to quality education, health and other services that underpin human resource base

Ms Beatrice Kiraso, EAC deputy Secretary General in charge of political affairs said shared values of good governance will create trust and commonality of purpose, making it possible for member states to solve disagreements among themselves and intervene in each other’s internal problems.

“For KCB we see more harvest times ahead and lots of glaring opportunities for growth and we will align our ambitious business plans with these developments,” said Mr Munyiri
Analysts said harmonising political governance— which has been relegated to the backseat since the integration began 10 years ago — was crucial in ensuring uniform implementation of agreements reached at regional platforms.

“Generally, any effort aimed at levelling governance landscape across the region needs to look at taxation systems, judiciary process and licensing procedures because these are the three areas that have undermined our competitiveness individually and as a common market,” said Mr John Kiarie, a director at Deloitte Consulting Ltd .

The region entered its second month as a common market but the private sector continues to encounter difference in judiciary procedures, conflicting taxation system and uneven licensing regimes whenever the venture in cross border trade.

Mr Steve Smith, CEO, Eveready Batteries (EA) said a uniform governance protocol will improve the common market’s investment outlook, attracting new investments from other parts of the world.

He sees in the new legal instrument a fresh political goodwill to fight cross border trade in substandard and counterfeit products.

“By the time sector from the region meets in Nairobi on September 6 to discuss the thriving illicit cross border trade in counterfeits, there will be hope that political leadership is finally sealing the loopholes that have encouraged practices,” Mr Smith said.

Last month, the private sector welcomed the launch of the EAC common market in the hope that it would ease their access to the 126 million residents spread across Kenya, Tanzania, Uganda, Rwanda and Burundi.

But regional citizens continue to encounter non tariff barriers, with Kenya being cited at the worst in removing roadblocks while Tanzania and Uganda have been blamed for blocking access of their markets for Kenyan products.

In spite of the governance bottlenecks, optimism is still riding high among investors in the region.

Kenya Airways management has also set its sight on the easier flow of labour, goods and capital among the member states to boost demand for its services.

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