CONTRAST

Kenya's ease of doing business improves but reality on the ground is different’

At least 200 companies are registered every day the government has said.

In Summary

•Businesses however continue to decry a tough operating environment which has seen at least 2,500 people lose their jobs in the last three months as some companies close.

•Kepsa CEO Carole Kariuki says some companies have been forced to layoff not necessarily as a result of unfriendly business environment, but changing business dynamics.

Investing in Kenya has become much easier, according to the World Bank's ‘Doing Business 2020’ index which places the country at position 56 out of 190 globally.

This is five places up from position 61 last year.

However as it becomes easier to set up shop in Kenya, many established firms are  closing down or shedding off employees due to what they describe as a tough business environment.

 

At least three companies have closed operations with seven others announcing redundancy in the last three months.

Yesterday, World Bank pegged the improved ease of doing business on reforms such reliability of electricity supply, ease in paying taxes helped by online filing and payment systems, and strengthened minority investor protections.

However on the ground, investors decry the high cost of power and the high and numerous taxes as some of the factors working against them.

“Kenya is among top reformists in the continent and top ten in the world,” said Augustine Langyintuo-specialist at International Finance Corporation,  World Bank's investment arm.

“Registration of properties, dealing with construction permits, these are areas that have potential to ease doing business further and support growth of investments. I encourage Kenya to continue with these reforms,” he added.

Kenya has however made property registration more difficult because of an additional payment slip generation and increased online consent application and title search fees, World Bank notes.

The country tops globally in protecting minority investors from position 87, the report indicates, while it ranks fourth in access to credit, an improvement from position 32.

This is despite the interest rate cap that has been in place since September 14, 2016, blamed for the private sector credit crunch.

 

Other indicators supporting the improved performance include ease in resolving insolvency where the country is ranked 50 from 92 two years ago, ease in getting electricity at position 70 from 106 and paying taxes ranked at 94 from position 125.

“Kenya strengthened access to credit by introducing online registration, modification and cancellation of security interests, and public online searches of its collateral registry,” the report notes.

Starting a business (licensing and approval) has reduced to five days, according to government, from 34 days, which is however poor compared to Rwanda’s six hours.

Deputy President William Ruto said the government remains focused on facilitating a conducive business environment, while supporting setting up of businesses.

“We want to make registering of companies a twenty-four hour affair so that the process can be continuous. We are certain Kenya has to adopt a robust regulatory framework, this will help attract more investments,” Ruto said when he launched the report.

At least 200 companies are registered every day, East Africa Community and regional development CS Adan Mohamed said, an improvement from 30 in 2014.

The business environment however is proving tough as a number of companies contemplate downsizing staff or outright closure.

Those that have recently shut operations include Sports Pesa and Betin Kenya over tax disputes with government.  

Job cuts are expected at Andela, Ola Energy, Sanlam, East African Portland Cement Company (EAPCC), Telkom Kenya, Stanbic Bank of Kenya and East African Breweries Limited (EABL). BAT Kenya is also said to be sending home staff.

Last week, flower firm-James Finlay announced 1,700 workers will lose jobs when it closes down two farms on December 25, where high labour costs are among its concerns.

This will take the number of persons who have lost jobs in the second half of 2019 to over 4,000, as 2,500 have already gone home in the last three months.

Kenya Private Sector Alliance yesterday expressed satisfaction with the ease of doing business in the country, even as it acknowledged challenges in some sectors.

CEO Carole Kariuki said some companies have been forced to make redundancy decision not necessarily as a result of unfriendly business environment, but changing business dynamics.

“We need to look at why these companies are closing, maybe they are looking at other markets or the company has changed focus or maybe it is a business environment issue which we can pick up and address it in terms of competitiveness and ease of doing business,” Kariuki said.