New business registrations dip 7.6pc on tough economy

Registration of business names largely represents sole proprietorship ventures, owned and operated by one person.

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New business registrations recorded during the year to last December dipped 7.6 percent to 130,527 entities from 141,193 in 2023.

This reversed a growth trend witnessed during 2023 when the new registrations had jumped 2.9 percent from 137,188 a year earlier.

Analysis of data from the Business Registration Service (BRS) shows that last year’s drop was chiefly driven by a 15.3 percent contraction of business names registrations, which reduced to 70,693 down from 83,458 in 2023.

Registration of business names largely represents sole proprietorship ventures, owned and operated by one person.

Other business entities included in the registrations catalogue include private companies defined as organisations whose members’ liability is limited by shares, public companies, foreign companies, companies limited by guarantee, limited liability partnerships as well as limited partnerships.

The data, which points to a subdued business environment during a year of far-reaching and painful taxation measures, further indicates that a total of 1,845 entities were struck off the registry during the year, adding to the 1,861 delistings recorded in 2023.

According to chief economist at business analytics consulting firm Mentoria Economics Ken Gichinga, investor perceptions of the prevailing business environment during the year, coupled with elevated lending rates, are among key reasons that dissuaded people from pursuing business activities.

“By the start of last year, perceptions of a possible economic slowdown were already rife based on the rising interest rates as well as the general operating environment which worked to suppress the Kenyan entrepreneurial spirit, causing many to postpone their investment decisions,” Mr Gichinga told this publication in a phone interview.

“People were also presented with viable alternatives in terms of investment options such as venturing in government securities which were offering very tidy returns.”

Last year, the number of new private company registrations rose by a marginal 3.2 percent to stand at 58,193 up from 56,376 registered in 2023, while registration of foreign firms grew 4.4 percent to 189 up from 181 the previous year.

The BRS describes private companies as entities whose members’ liability is limited by shares.

“A company is limited by shares if the liability of its members is by the memorandum to the amount, if any, unpaid on the shares respectively held by them. A private company is also a company that is restricted from inviting the public to subscribe to its shares,” the BRS states.

During the review period, the number of companies limited by guarantee rose by 327 to reach 833, while newly registered public companies and limited liability partnerships fell by 26 and 68 to stand at 64 and 514 respectively.

BRS records show that a total of 22 firms went into administration within the year, underscoring heightened struggles for companies to stay afloat amid elevated taxes and skyrocketed lending rates witnessed during the period.

Company administration refers to the process where an insolvency practitioner is appointed to restructure a business by ensuring that it remains a going concern with the aim of turning it into profitability by effecting a sale of the business to preserve its value.

The process of administration puts a moratorium on all proceedings against a company, giving it the much-needed breathing space to recover.

BRS, however, does not provide a detailed breakdown of the specific sectors that the impacted firms were operating in.

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