Fostering a secure and conducive business environment

All businesses including domestic markets, foreign investment, international trade and private enterprise require a conducive operating environment for growth and development.

These would be aspects like peace and stability, the rule of law, good governance with accountability and transparency, the absence of corruption, adequate infrastructure, an educated workforce, clear property rights and enforceable contracts.

It is therefore vital to understand what businesses require to obtain high rates of growth.

Prior to the onset of the Covid-19 pandemic, Kenya was one of the fastest-growing economies in Africa, with an annual average growth of 5.9 per cent between 2010 and 2018.

With a GDP of $95 billion, Kenya recently reached a lower-middle-income status and has successfully established a diverse and dynamic economy. It also serves as the point of entry to the larger East African market.

However, Kenya continues to face significant challenges to sustainable and inclusive economic growth, which have been exacerbated by Covid-19’s economic disruptions, alongside long-running challenges including corruption and economic inequality.

Consequently, businesses have changed the way they operate during the Covid-19 crisis. Some changes were forced, and others represent the height of innovation in a crisis.

There’s been a reset of the workforce and work itself, employer/employee relationship and the business ecosystem. For most, the business impact of the pandemic has been negative; for some, positive.

The pandemic may have wiped your strategy slate clean (or at least it feels that way), but also created an opportunity for an invaluable experience.

Given the highly disrupted environment, it has necessitated the creation of a minimum viable strategy and the use of adaptive strategy tools and techniques to iterate as the new normal emerges.

Making strategic planning a continual activity to respond quickly to the inevitable changes in the business context has proven the way to go.

Businesses have had to reset by responding to the pandemic, recovering from the effects, and renewing their operational strategies to survive.

To cushion businesses from these effects, the government came up with measures to ease the tax burdens of businesses albeit for a short period.

The pandemic has disrupted labour markets globally. The short-term consequences were sudden and severe; millions of people were furloughed or lost jobs, and others rapidly adjusted to working from home as offices closed.

Before Covid-19, the largest disruptions to work involved new technologies and growing trade links. Now, technology has become the go-to thing.

Perhaps the most obvious impact of Covid-19 on the labour force is the dramatic increase in employees working remotely.

The trends accelerated by Covid-19 may spur greater changes in the mix of jobs within economies than was the case before the pandemic.

Despite being ranked as a leader in e-commerce and digital services, most of Kenya’s major online platforms are still foreign-owned.

The rise of Kenya’s digitally enabled start-ups and the development of local entrepreneurship are pivotal to the success of an inclusive digital transformation journey.

Some of the influential programmes that are cultivating local talent and guiding Kenyans into the digital future include but are not limited to; the Kenya industry and entrepreneurship project, The Presidential Talent Programme, the Co-creation hub, Mastercard and Microsoft’s Global Entrepreneurship Programme. To make these projects a success, there is a need for facilitation by the government.

Across the world, the manufacturing sector has played an important role in driving economic development by stimulating high growth, boosting employment opportunities for semi-skilled labour, and building country competitiveness through exports.

Very few countries in the world have managed to industrialize and develop without the manufacturing sector playing a leading role.

This means that there needs to be a deliberate effort to promote the manufacturing sector by not only giving tax incentives but also creating an enabling environment for the sector to operate.

This can be done by subsidising the cost of electricity, facilitating greater infrastructure, and actively engaging with associations that represent manufacturers with an aim to address matters impacting the sector that would lead to smoother operations.

Access to markets in the region is also crucial to enabling investment growth. With the gradual opening of the economy, the government can aim at facilitating the participation of the local companies in the global expos.

Recently, we have seen companies take part in the Dubai expo which really helped the business recover after a long period of stagnation.

In addition, by simplifying the process of setting up a company and creating an enabling environment for foreign companies, the economic base is expanded.

With the easing of the government’s restrictions on Covid-19, some business that was thriving in the wake of the pandemic might be greatly affected.

To point out, mask manufacturing companies will be adversely affected seeing that masks are not mandatory in Kenya.

This calls for greater agility for businesses to enable them to refocus on the dynamic business environment but also more support from Government to facilitate this adaptability.

In conclusion, the national and county governments need to work together to come up with measures that will foster a secure and conducive business environment, promote investment growth, facilitate business recovery, and create employment.

Apart from the tax incentives that come with every financial year budget, we are looking at what else the government can offer in terms of business facilitation.

Tabitha Ruitururi is a senior tax consultant with Ernst & Young. The views expressed herein are not necessarily those of EY.