ECONOMY-KENYA: Officials Fight Graft and Woo Investors

By IPS Correspondents Reprint | | Print |

Joyce Mulama

NAIROBI, Nov 21 2003 (IPS) - After years of being labeled as highly corrupt, Kenya has put a number of measures in place to curb graft.

The government is hoping that this will attract foreign investors back to the East African country. “Kenya is now open for business,” President Mwai Kibaki said this week.

Kibaki, who came to power in December last year, said reforms in the judiciary, which had for years been linked to high-level corruption, have been implemented.

Kenya has suspended 23 judges implicated in corrupt practices.

Andrew Mullei, Governor of the Central Bank of Kenya, said concern about political instability had contributed to the country losing its competitiveness in attracting investment.

“To stimulate investment in Kenya, we must take actions aimed at changing investors’ perceptions about our political risk. We must improve (the) effectiveness of our governance of institutions, adopt laws to protect foreign investments and restore policy credibility,” said Mullei, addressing the “National Investment Conference” in Nairobi on Nov. 20.

At present, Kenya’s economic policies are distinctly unattractive to investors. “It takes 68 days on average to start up a business in Kenya, while it takes only 32 days to (do the same) in South Africa,” said Mullei.

He called on the government to reduce the number of licenses and permits required before a new business can start operating. These are some of the things believed to be responsible for Kenya’s low rate of investment.

According to the World Investment Report, released on Sep. 4 by the United Nations Conference on Trade and Development, Kenya recorded only 50 million dollars in foreign direct investment (FDI) during 2002, which was lower than the inflows to neighbouring Uganda and Tanzania.

Uganda attracted 275 million dollars in FDI during the same period, while Tanzania followed with 240 million dollars.

“The government cannot ignore the private sector and act alone. The only way to witness the growth of (the) economy is for it to collaborate with the private sector in every way, including policy development,” said Manu Chandaria, Chairperson of the newly formed Kenya Private Sector Alliance.

Privately-owned companies contribute around 66 percent of Kenya’s gross domestic product (GDP). “The country’s GDP is 1200 billion shillings (around 17 billion dollars) per year, of which 800 billion shillings (about 11 billion dollars) come from the private sector,” Chandaria told IPS in an interview.

Economists hope that the Nairobi conference will spur growth. “This shows the government is committed to doing all it can to increase investment to bring the economy back on track,” said Kwame Owino of the Institute of Economic Affairs in Nairobi.

James Wamugo of the Nairobi-based Centre for Governance and Development, a non-governmental organisation, said the conference marked the first step towards achieving a stable economy. “(This) is something the National Rainbow Coalition government…had in its manifesto,” he said.

Economic recovery was one of the promises made by the coalition before it took power 11 months ago.

Kenyans are optimistic that investment will lead to job creation and reduce the high unemployment rate. “This means job opportunities for many Kenyans, including myself, who are unemployed,” said Mbaka Oyondi – a university graduate who is currently searching for a post.

About two million people, mostly school leavers and university graduates, are currently out of work in Kenya, which has a population of 30 million.

To spur growth, the government also launched a five-year economic recovery plan in June this year: the “2003-2007 Economic Recovery Strategy For Wealth and Employment Creation”.

Kenya’s economic growth currently stands at 0.3 percent – down from two percent in the 1990’s.

Economists have blamed rising poverty levels on this economic deterioration. According to David Nalo, Permanent Secretary in the Ministry of Planning and National Development, more than 56 percent of Kenyans live below the poverty line of a dollar a day.