President-elect Uhuru Kenyatta faces a raft of demands from investors hard-hit by the escalating cost of doing business and bureaucratic regulations that impede their competitiveness in local and foreign markets.
Business leaders said they required urgent review of costly inputs such as energy, labour and transport that make it hard for Kenyan goods to compete in key markets, slowing down exports growth.
“The net impact of these costs is reduced sales or high total production costs that make goods and services produced in Kenya uncompetitive. The cost of doing business in Kenya has continued to rise over the last few years, making it difficult for businesses to thrive,” the Kenya Association of Manufacturers (KAM) said in a petition to the new government.
Kenya’s performance in the World Bank driven Doing Business index has declined in recent years partly due to high costs and strenuous business regulations
The World Bank’s Doing Business 2013 report indicates that Kenya dropped to position 121 of the 185 economies surveyed from 109 the previous year.
The survey focuses on regulations applying to small and medium-sized domestic companies in 11 areas of their operations, including starting a business, dealing with construction permits, getting electricity and registering property.
It also assesses access to credit, protection of investors, payment of taxes, trading across borders, enforcing contracts, resolving insolvency, and employing workers.
“We need the new government to prioritise the provision of affordable, sufficient, reliable and clean energy to power industry even as it keeps an eye on quality and affordability,” said Betty Maina, the chief executive of KAM.
The business environment is a key determinant of the volume and quality of investment in an economy, employment, creation of jobs, revenue collection and the general well-being of society.
KAM said the new government would also have to improve infrastructure and technology to ease the flow of goods from the port of Mombasa to the hinterland.
“The new government should prioritise fixing the port of Mombasa to unblock the logistics corridor and increase efficiency and productivity,” KAM said.
“Inefficiency at the port of Mombasa is the single largest contributor to the high cost of doing business on the Kenyan logistics chain.”
Ms Maina described the port as choking with recurrent cases of congestion that are largely caused by system failures and low labour productivity. Mr Kenyatta further faces calls for a harmonised tax system to lower the administration burden that weighs on investors.
“You need to make it less taxing to pay taxes. We need modern, competitive business taxes with reduced complexion and administrative burden,” KAM said.
The industrialists lobby also wants burdensome regulations eliminated through a review of regulations and licensing, especially the power and practice. It particularly wants powers of the various regulatory bodies with overlapping mandates and that of local government to impose charges on small business saying such charges only amount additional taxation.
The Kenya Private Sector Alliance (Kepsa), another lobby group wants the new government to limit the cost of running the 47 counties to avoid a strain the economy.
“Our key prayer is that the government will keep the cost of devolution at the lowest level,” said Patrick Obath, the chairman of Kepsa. “Our resources are currently strained and we must not add more pressure on them.”
A massive shortfall in revenue collection and low disbursement of aid has thrown the outgoing government into a deep financial hole that needs swift responses to keep the economy on track.
A recent report by the Controller of Budget showed that the situation has become dire in recent months forcing the government to dishonour public debt payments worth Sh32.6 billion and to suspend Exchequer requisitions by ministries, departments and agencies amounting to Sh56.7 billion.
Mr Kenyatta is his election campaign manifesto indicated that his government would spend big on programmes targeted at empowering the private sector, youth and women.
The President-elect’s Jubilee Coalition said it would establish a Kenya Development Bank to boost the private sector. It also promised to reduce business taxes and establish enterprise zones in every county.
“We will keep the exchange rate stable and control flow of money into the economy in order to lower interest rates and keep inflation in check,” the coalition said in its manifesto.
Mr Kenyatta’s campaign manifesto further said that it would retain the Youth Enterprise Fund and allocate it 2.5 per cent of the national budget annually.
Youths have also been promised tax holidays and preference in government procurement. In agriculture, the coalition said it will create Agriculture Investment Trusts (AITs) to direct investment into the sector and offer incentives. It also promised to enforce the controversial one-third gender rule in public appointments.