Columnists

Increasing charges in counties will hurt business, revenues

tomato

Traders sell tomatoes in Molo. FILE PHOTO | NMG

Summary

  • Before Covid-19, businesses were struggling under the weight of permits and licences. The new proposals are set to cause more strain to an already grim situation in the aftermath of the pandemic.

Devolution heralded a new era for Kenya as some government functions were decentralised. As a result, many parts of the country opened up, leading to increased trade, job creation and wealth. These benefits have, however, come at a cost to many businesses.

Understandably, since counties could not entirely depend on budgetary allocation from the national government, they had to create own revenue. Enter county fees, levies and charges.

Recent Nairobi County proposals will inrease the cost of living as well as the cost of doing business. The Nairobi City County Finance Bill, 2020 proposes a raft of charges, eyeing revenue targets.

Some of the proposals include charging offloading fee for various agricultural produce. Transporting construction materials and storing liquified petroleum gas (LPG) will also attract charges.

Before Covid-19, businesses were struggling under the weight of permits and licences. The new proposals are set to cause more strain to an already grim situation in the aftermath of the pandemic.

A tomato farmer moving the produce from top growing areas Kirinyaga, Kajiado, Taita Taveta, Laikipia and Bungoma to Nairobi shall pay county fees from the source to the factory.

This, coupled with the cost of production, makes it more expensive.

Eventually, farmers are forced to increase the price without necessarily adding value to it, making our products less competitive in the local and regional markets.

This is the same case for manufacturers involved in value addition, to produce goods such as tomato sauce and paste.

While both national and county governments require revenues to provide services, the country is facing a pandemic, which has severely affected the economy. Businesses have been hit hard, they faced severe cashflow problems and struggled to meet their day-to-day financial obligations.

Imposing additional costs shall only rub salt on an open wound. This might even force them to completely shut down, leading to loss of jobs and sources of revenue for government.

In his State of the Nation address, President Uhuru Kenyatta announced that the government is considering a waiver on single business permits for new businesses as it seeks to ease the cost of doing business. If implemented, this shall, albeit a little, improve the ease doing business.

County governments should work towards implementing the Unified Single Business Permit, to streamline their revenue collection streams and make it less cumbersome for businesses to pay fees.

Additionally, they should have a one-stop online platform which shall encompass all regulatory permits.

Businesses are struggling to pay different business permits; it is painfully bureaucratic and hinders expansion.

We should recognise that this is a year of survival, it is business unusual. Our focus as a country now should be building back our economy to ensure competitiveness and resilience such that if we are faced with shocks such as a pandemic in future, we can reduce the damage.