Nurturing an investor friendly regulatory environment

In Summary

• Through PPP’s, it is expected that the four pillars of the Big Four Agenda, that is, affordable housing, universal healthcare, food security and manufacturing, will be effectively delivered to the public.

President Uhuru Kenyatta.
President Uhuru Kenyatta.
Image: FILE

It is now widely accepted that Public Private Partnerships (PPP’s) are necessary to help Kenya meet its development targets.

Through PPP’s, the government can leverage the private sector’s experience and efficiencies to ensure that projects considered beneficial to the public are actualised.

This is particularly important in the face of the current government’s Big Four Agenda. Through PPP’s, it is expected that the four pillars of the Big Four Agenda, that is, affordable housing, universal healthcare, food security and manufacturing, will be effectively delivered to the public.

However, in order to take advantage of PPP’s, it is imperative that a conducive investor friendly environment is nurtured. This includes, but is not limited to, the underlying tax environment.

In order to attract both foreign and domestic investment, it is in the country’s best interest that prevailing tax legislation is not only clear, but also predictable. Clarity and predictability not only boosts investor confidence but also ensures transparency and accountability on both sides of the isle.

In the pursuit of clarity and predictability of the taxation environment, it is important that cohesiveness amongst government institutions is achieved.

Under the current environment,  promises made by one government institution are not adequately considered by other state institutions in the decision making process. This tends to leave the private sector players in uncertainty, which does not bode well when making investment decisions.

This is particularly evident in scenarios whereby the executive arm of the government enters into bilateral and multilateral trade agreements whereby various taxation incentives are offered, but the same are not reflected in the prevailing tax legislation.

This leaves the Kenya Revenue Authority (KRA), tasked with enforcing the tax legislation at a crossroads – unsure whether to enforce the law as contained in the various pieces of legislation, or to adhere to governmental policy, as may be promoted by the Executive.

While it is understandable that government policy may not immediately translate to enforceable legislation, it is important that any time-lag between the two is acted upon quickly. This will ensure that what is preached, and what is practiced, are in sync.

Further, reduced lag between policy and enforceable legislation not only attracts both foreign and direct investment, but ensures that taxation leakages are dealt with as and when they arise.

This is more relevant in the case of Foreign Direct Investment. Currently, the narrative is increasingly being shaped by warnings that multinationals are robbing Africa dry, with the the Organisation for Economic Cooperation and Development recently noting that Africa is losing up to $50 billion in illicit financial flows.

More than anything, this is a call to strengthen our institutions and business practices in order to ensure that from the onset such illicit flows are tackled.

Karen Kandie – MD IDB Capital