Corruption and a lengthy legal process remain the biggest barriers for the US firms doing business in Kenya.
In a Foreign Trade Barriers report released by the Office of the United States Trade Representative (USTR), Joe Biden's regime chides Kenya for not effectively implementing its anti-corruption laws.
"U.S. firms continue to report challenges competing against foreign firms that are willing to ignore legal standards or engage in bribery and other forms of corruption,'' the report reads in part.
These are perhaps some of the reasons that has seen foreign investors take a back seat, with Foreign Direct Investment (FDI) in Kenya reducing since 2010.
According to the United Nations Conference on Trade and Development (UNCTAD), Kenya’s flow of inward FDI decreased year-on-year from $1.1bn (Sh147.3 billion) in 2019 to $717 million (Sh96.1 billion) in 2020 to $448 million (Sh15.2 billion) in 2021, maintaining a general pattern of decline since 2010.
The number of greenfield investments also shrunk by nearly 60 per cent over the same three-year period, from 95 in 2019 to 39 in 2021.
The decline in foreign investment deals is opposite of the trend seen elsewhere in East Africa, where average FDI inflows increased by 35 per cent between 2019 and 2021, to a total of $8.2 billion (Sh1.1 trillion).
This year, Kenya dropped three steps in the Corruption Perception Index by Transparency International.
The country scored 31 points out of the possible 100, a decline from a score of 32 points in 2022. It is ranked position 126 out of 180 countries.
Apart from corruption, US companies are concerned with the delay experienced in tax dispute resolutions.
"While judicial reforms are moving forward, bribes, extortion, and political considerations continue to influence court cases. As such, foreign and local investors risk lengthy and costly legal procedures."
It however hailed the Kenya Revenue Authority (KRA) for offering an alternative dispute resolution mechanism to help taxpayers resolve some tax disputes more quickly since 2015.
The companies further raised concern about the length of time required for Kenyan Customs to release shipments, as well as the use of a complex and inefficient process that involves many steps with uncoordinated offices, despite the implementation of a single window system.
US firms have also picked issues with Kenya’s one-stop customs clearance system does not operate as intended and that pre-arrival processing of electronic documents is ineffective.
Other U.S. companies have raised concerns about the inconsistent application of classification and valuation decisions, as well as unnecessary transit inspections.
The US companies have termed Kenya's import permits as complex, non transparent, and costly, especially for the importation of all meat, dairy, and poultry products.
The report says that before issuing a no-objection letter, which requires several attestations, including animal and public health statements, the DVS requires an importer to explain the reason for importation through a “Letter of Application to Import” and to specifically address the market need the import would meet.
The DVS issues the no-objection letter for meat, dairy, and poultry products at its discretion on a case-by-case basis.
"Importers have reported that the DVS has at times provided them with non-sanitary-related grounds for denying permits, such as the local availability of a similar product."
The US government is also not happy with the “Buy Kenya Build Kenya” initiative that has blocked several US firms from getting government tenders.
The policy initiated in 2015 requires Kenyan state ministries, departments, and agencies to procure at least 40 per cent of their supplies locally.
