Kenya’s investor-unfriendly climate hurting the economy

Kenya’s investor-unfriendly  climate hurting the economy
By Alfred Mosoti Abuga Kenya is East and Central Africa’s economic powerhouse. Her strong shilling over her neighbours’ currencies, and robust economic sectors bear testimony. The country was recently ranked the third most reformed (economically) state globally according to a World Bank report. Speaking at an investment forum in October in Bungoma, Hon Adan Mohamed, who is CS for Trade and Industrialisation, said some parameters considered during the survey include payment of taxes by business people, the ease with which exporters and importers are able to clear cargo across the nation’s entry and exit termini; the speed of registering a company or business at the State Law Office and; how fast it takes to have one’s premises get connected electricity or water. Kenya hosts many international organisations such as the United Nations Environmental Programme (Unep) and the International Centre of Insect Physiology and Ecology (Icipe), in addition to providing venue of several high-powered conferences. Successive visits of high-profile international figures – the likes of outgoing US president Barrack Obama, Israeli PM Benjamin Netanyahu, and Indian Premier Naredra Modi – to sign bilateral trade treaties and counter-terrorism pacts, among others, also attest to this. Kenya, is also undertaking ambitious multi-billion infrastructural projects to ease movement of people and goods, such as the Standard Gauge Railway (SGR), as well as the Lamu Port South Sudan Ethiopia Transport (Lapsset) corridor, which will also support her plans for the extractive industry. She also boasts impressive roads and the unprecedented opening up of rural towns and regions following devolution. Currently, the country is embarked on various decongestion projects for the capital, Nairobi, and other major towns. Following all these steps, why then is she not a darling of many foreign investors, willing and able to pump huge sums of money into the economy? Statistics show that most of those investors have a preference for Rwanda, Uganda, Tanzania and Ethiopia! C. B. Forbes’ statement, “If you do not drive your business, then you will be driven your of business” rings true of Kenya’s situation. To worsen matters, Uganda’s decision to lay its fuel pipeline through Tanzania to transport its fuel speaks volumes when President Museveni had earlier made a commitment to both SGR and Lapsset speaks volumes about what he thinks of Kenya; he may be apprehensive of the fluid and volatile nature of Kenyan politics as attested to by the 2007/2008 post-election crisis. In the Bungoma International Investment Conference held two months ago, Trans-Nzoia Governor Patrick Khaemba noted that Kenya is losing in the race for foreign investment to its rivals Ethiopia and Rwanda. He blamed this unfortunate trend to unrealistically high land prices coupled with lengthy and complex process of its acquisition compared to her neighbors. In response, government, through the Land ministry, has initiated policies to cap the price of land in various states and in different locations throughout the country. Khaemba also noted that prior to the commencement of devolution, pieces of public land deliberately changed hands to private ownership and the process of reversing that is both complex and lengthy due to legal bumps. Apart from this, there is a growing tendency among individuals and companies to inflating prices to unimaginable levels when doing business with the county, central government or a foreign investor. Recently, Murang’a residents held demonstrations protesting the (outrageous) cost their county government purchased some land for. While the county government claimed to have acquired the 10 acre piece of land at 340 million, locals claim the same parcel of land goes at a market price of between Sh4 and 5 million. Congestion in Nairobi particularly around the CBD is also discouraging investors who would like to choose Kenya as their investment destination. Perennial traffic gridlocks, which cause annual losses in the billions, are another hindrance. Besides the economic loss, they cause environmental degradation, which comes with associated health problems. During the tail end of the Kibaki administration, foreign organisations threatened to relocate their organisations from the country if the traffic problem was not addressed. The government responded by expelling hawkers from the CBD but this seemed to have been a ploy to hoodwink them to stay as the hawkers soon came back full swing. There doesn’t seem to be genuine effort to get them out of the city. Also, government’s plan to start toll stations along five major roads, including on Thika and Mombasa Roads, as well as in the bypasses around the city didn’t go down well with both locals and foreign investors, and the idea was quickly abandoned. This lost revenue was quietly brought back by way of increased petroleum levies – the Kenyan motorist is overwhelmed by high fuel prices. In any event, toll charges are justifiable only in special cases, such as where a road has been constructed and is being maintained by a private company, without state sponsorship. In such a case, the State allows them to collect fixed charges on its users within a specific period, in order to recover their expenditure and of course get some profit. This happens a lot in developed countries – through the now lifeless public private partnership (PPP) model that was introduced in the country four years ago. To regain the faith of investors, national and county governments must provide incentives for investors through, first, removing corruption from the equation of business requirements, and then by doing away with double taxation, and assuring security and social amenities. Further, the zoning of counties and the nation into specific economic sub-regions, favourable for various investment ventures will also go a long way to attracting and retaining foreign investment.

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