How Regulatory Overreach is Impeding Kenya’s Economic Growth  

Last year, a Twitter user who sells water in her neighbourhood sought to venture into packaging the product and selling it – basically, the manufacture of bottled water. She, however, discovered that to do so, she will need to meet numerous requirements in form of licenses, permits and fees. 

This is frustrating for business owners, especially small and medium enterprises (SMEs). It discourages start-ups, and for those up and running, gobbles up a large share of operating fees, thus driving up the cost of doing business. 

Naturally, regulations are a prerequisite for any nation or institution. When effectively implemented, they create an enabling environment for competitiveness by enforcing fair business practices, driving equal opportunity and inclusive participation of all in the economy.

However, when they are cumbersome and arduous, the ripple effect is a constrained business environment. It deters investments and leads to the duplication of roles and mandates of various regulatory agencies. The high costs and taxes disincentivize investors. This is because an environment that constantly makes it difficult for businesses to operate results in investors seeking alternative, more suitable, predictable and secure markets to establish or relocate their businesses. 

Whereas Kenya has made tremendous efforts to address regulatory concerns in the country, as demonstrated in the Ease of Doing Business reports since 2014, a lot still needs to be done to promote the industry’s competitiveness and productivity. 

The 2020 Competitive Industrial Performance (CIP) Index ranks Kenya’s industrial competitiveness at a position of 115 out of 152 countries. On the other hand, the World Bank Ease of Doing Business Report 2020 ranks Kenya at position 56. On starting a business, Kenya is ranked number 129. From the report, business registration takes an astounding 7 steps! These time-consuming steps involve various agencies, including the country government, with some having a cost implication. 

A regulatory audit conducted by the Kenya Association of Manufacturers (KAM) found that business permits, licenses and environmental audits account for a majority of fees and levies charged to manufacturers across all sectors. Other major fees and levies include standards, distribution licenses and safety audits. 

Further analysis of regulatory requirements uncovered that various enforcing bodies’ roles overlap. For instance, business registration and licensing are sought from the Business Registration Service, respective county government(s) and specific agencies. Standards and measures as well as calibration are done by the Kenya Bureau of Standards (KEBS) and the Department of Weights and Measures.  

Water and sewerage regulations are overseen by water and sewerage companies, the National Environmental Management Authority (NEMA), Kenya Bureau of Standards (KEBS), Water Services Regulatory Board (WASREB), Water Resources Authority (WRA) and Department of Occupational Safety and Health (DOSH). 

These overlapping roles are cumbersome to adhere to, consume a lot of time and increase the cost of doing business in the country. The report makes recommendations on how we can make it efficient to support competitive industrial development. Consequently, this will translate to increased employment, inclusivity and efficient use of resources by industry and all citizens. 

This includes streamlining regulatory bodies that have almost similar or duplicative roles and fast-tracking the enactment of the Government Owned Entities Bill, implementing a one-stop-shop approach to obtain permits from national and county government agencies and fast-tracking the completion of the County Licensing (Uniform Procedures) Bill, 2019 to harmonize county licensing processes. 

County governments also need to formulate tariffs and pricing policy to guide the imposition of fees and charges. 

It is important that both national and county governments prioritize the involvement of manufacturers, and the business community in its entirety while formulating laws, regulations and policies to ensure realistic charges, levies and user fees. By doing so, the laws, regulations and policies will be industry-centred, and in turn, support competitive industrial development. 

Our sustainability and self-reliance as a nation is only guaranteed through our capacity to be a competitive economy on a global scale.  

The writer is the CEO of the Kenya Association of Manufacturers and Global Compact Network Kenya Board Chair. She can be reached at ceo@kam.co.ke.