Rankings seldom reveal true health of systems

Surveys often serve hidden agenda as CBK, World Bank reports show

0
154

By David Onjili

The 2018 Doing Business Report by the World Bank was released on October 31, 2018 by Felipe Jaramillo, the World Bank country director. Present were several business leaders including the Cabinet Secretary for Trade, Industry and Cooperatives Peter Munya. In the report Kenya “made great progress”, improving 19 positions from 80th to 61st.

The country made significant progress by carrying out key reforms in several areas, according to the report, including in registering property, accessing credit, protecting minority investors, paying taxes and resolving insolvency. The World Bank highlighted these strides which it noted as being fundamental in improving the business climate for small and medium sized businesses.

Importantly, the country has made tremendous progress in increasing stakeholders’ rights and roles in major business decisions. This is besides the fact that the nation has also established a unified and notice-based collateral registry. Rwanda made extremely significant progress in this regard, and was ranked second on the continent behind Madagascar.

Yet, a keen interrogation of the report provides a damning indictment on the parameters relied upon as they are not reflective of the health of the country and realities of small and medium sized enterprises.

A report by Wyled International stated that around 68 percent of SMEs in the country did not have access to capital owing to a law capping interest rates. The remaining 32 percent who were able to get financing only did so through third-party financial institutions like SACCOs. The prolonged electioneering period of 2017 also had its effects as 55 percent of SMEs reduced their earnings. In this time only 14 percent of SMEs increased revenue by around 25 percent.

In the same week of the report being released, the Central Bank too released a report in which they had highlighted the significant decline in access to credit by SMEs by financial institutions. This report showed there was tremendous increase in access to credit from fintech institutions. The loans accessed by Kenyans from such platforms as Tala, Branch and Ganji, among others, were used primarily for daily needs like food and purchase of airtime.

The CBK report contrasts sharply to the findings by the World Bank, which begs more questions than answers. What was the purpose of the World Bank report, and what was the intended audience.

In a scathing attack of the World Bank report, economist and public intellectual David Ndii noted, “Doing Business is based on things the World Bank promotes, not that work. It should be called Washington Consensus Compliance Index, or simply Darlings of Washington Index.”

Ndii, in an online engagement, also noted that where in some countries, for example it may take longer to register businesses due to stringent environmental concerns, such processes are penalised when such World Bank rankings are carried out, which makes it all the more pressing to interrogate thoroughly the candidness of the institution’s reports, viz a viz established and hidden agenda by Western powers.

The reality today is that the stock market continues to falter, majority of listed companies have issued profit warnings and are laying off staff. Data from the Capital Markets Authority shows no new companies are listing, and once profitable companies are under scrutiny for falsifying financial statements to show profitability and deceive investors; the economic state of affairs is worrying.

As at October 2018, close to 12 companies risked being delisted due to poor performance and corporate governance issues. Further, the National Treasury has marked companies, including Mumias, Kenya Power, National Bank and TransCentury, with negative working capital – those whose short term assets are less than their short term liabilities, which means they cannot meet their short term debts and operating financial obligations.

Publicising glossy reports cannot change the prevailing economic depression.

Advertisement

LEAVE A REPLY

Please enter your comment!
Please enter your name here