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Doing Business in Kenya: Better, But Still Not Great

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I have to thank my father for being the person who first alerted me to the Economist Intelligence Unit, all those years ago when I needed research material as MUN ambassador to Sudan (tough gig). The unit is an offshoot of the Economist magazine, and offers all sorts of useful analysis throughout the year. Yesterday, it provided some good news.

The unit has published a special report, entitled Globalisation stalled: How global economic upheaval will hit the business environment. Nothing like some early afternoon alarmism to pique my interest. The report is available as a free PDF download at the EIU website, and I am still going through it, but what it had to say on Kenya was what interested me most.

If you scroll down the linked page to the “Regional forecasts” section and select Sub-Saharan Africa, you can find Kenya’s previous score, in addition to how it ranks against Angola, Nigeria and South Africa. It appears that Kenya has managed to raise its ranking, while our regional rivals have lost ground. Out of 82 studied countries, between 2004-08 Kenya was ranked 80th, with a business environment score of 4.23 out of 10. Only Angola was worse, bottom at 82nd with a score of 3.65. Today, Kenya has moved up three placed to 77th, with a score of 4.50, two places above Nigeria which has a score of 4.30, down from 4.41 for the previous period, when it was ranked 78th. South Africa leads the region, despite having fallen six places down the rankings to be ranked at 51st compared to 45th previously.

What to make of this? Well, to quote the EIU, “the average quality of the region’s investment environment continues to be poor,” but that does not mean it is impossible. I would rather attempt to set up a business in Kenya than North Korea any day of the week. However, it does seem to indicate that the political wrangling that has been taking place since the post-election violence abated has slowed promised reforms and also discouraged investors from taking the Kenyan economy seriously. To give the EIU’s comment in full:

Kenya remains among the least attractive investment destinations
globally in 2009-13, although its business environment improves
somewhat, lifting the country’s global ranking to 77th in 2009-13 from
80th in 2004-08. Kenya will be less damaged by the global slump than
industrialised economies. The government will gradually push ahead with
some market reforms. Kenya’s two biggest weaknesses remain its
political environment and poor infrastructure. The grand coalition
government, formed in April 2008, may survive (the next election is due
in 2012), although there is a risk of renewed instability.

Not very flattering, is it? Essentially, because the Kenyan economy is not as developed as other countries, it will not be as affected by the current global slump. While some may take this as a good point, it is important to remember that Kenyan society desperately needs development. With a growth rate of just 1.7 percent and earnings from tourism down close to 20 percent, it is very clear that something needs to be done. Faster broadband speeds and increased connectivity might help, but what is really needed is a sea-change in the mindset of foreign investors. They need to be convinced that Kenya is not only a safe bet, but also somewhere they can do business without worrying about a Byzantine regulation system or an eruption of violence that brings the economy grinding to a halt.

What could the government be doing? Well, their jobs for one, as opposed to the numerous summits, committees and roundtables that achieve nothing. The burden of red tape bureaucracy — both for locals and foreigners — needs to be streamlined to make it easier for entrepreneurs to get up and running. And Kenya also needs to promote itself. Forget the tourism department’s whining, that’s not what I’m talking about. Here in the UK, there have been ads running across commercial television channels highlighting a friendly tax regime, a highly-trained workforce and numerous business opportunities. Where? Macedonia. Yes, an eastern European country is advertising itself as the place for UK industrialists to do business. Why can’t Kenya do the same?

Granted, Macedonia has (as the adverts tell me) ease of access to EU markets and quick transport links to other European centres of industry, but Kenya also has some things going for it. We have a young population, many of whom are educated but currently unemployed. The majority of those seeking employment speak English, albeit with an accent. We are some of the most hardworking people on Earth, and some of the most innovative (jua kali, anyone?). The growth in the mobile sector alone shows that we are quick to adopt new technologies and develop our own solutions where more developed countries lag behind (mobile payments). And we love making money.

So while the EIU report may not all be unicorns and rainbows, there’s no cause for despondency. Yes, things are going to be difficult for a while; yes, there are still far too many people living in poverty; and yes, at the moment, Sebastian, long-dead resident of Nairobi Animal Orphanage, would probably make a better politician than the current crop, but Kenya still has the raw materials needed to move from a frontier to a fully-fledged emerging economy. All that’s needed is the wherewithal and political will to make it happen. It will be a slog. People may bitch and moan that progress is not being made fast enough. But if we continue to push, it is progress that can be made.

[Image by L.N Batides]

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