TRADE-KENYA: Government Takes Steps to Streamline Investment Procedures

By IPS Correspondents Reprint | | Print |

Joyce Mulama

NAIROBI, Mar 26 2004 (IPS) - In its latest bid to make Kenya more attractive to foreign capital, government says it will introduce a law that simplifies investment procedures for entrepreneurs who want to open businesses in the country.

This announcement was made at an international investment conference held in the capital, Nairobi. The three-day event, which ends Friday (Mar. 26), has brought together more than 400 delegates from around the world.

Addressing the meeting earlier this week (Mar. 24), President Mwai Kibaki said “The Investment Bill will be published in the next few days and tabled for debate in parliament, which reopens next week.”

At present, people looking to invest in Kenya face a bureaucratic obstacle course that normally requires them to get several licenses before they can start operating. This process is time consuming – and expensive for some.

In an earlier interview with IPS, the Governor of Kenya’s Central Bank – Andrew Mullei – said, “It takes 68 days on average to start up a business in Kenya, while it takes 32 days to (do the same) in South Africa.”

Christian Skoog, a commercial attaché with the Swedish Embassy in Kenya, agrees. “Licensing conditions are still tough in Kenya. If they are not simplified, it will not be easy for any (investor) to come,” he said at the conference.

“In Tanzania and Uganda, the process is easier and cheap. There is a lot of interest for us to invest here (in Kenya) but the procedure is…cumbersome because one has to go through so much in order to be registered,” Skoog added.

Labyrinthine investment procedures also open the door to corruption, something that has severely dented Kenya’s image in recent years.

“Japanese firms are trying to transfer from Nairobi to South Africa because of corruption,” said Makoto Asami, Japan’s Ambassador to Kenya. “We are tired of doing business here and are looking for new markets elsewhere.”

All of these problems have taken a toll on capital flows to Kenya. A World Investment Report released last September by the United Nations Conference on Trade and Development says that Kenya’s foreign direct investment (FDI) in 2002 stood at 50 million dollars.

This was about four times lower than investments in Kenya’s East African counterparts, Uganda and Tanzania. Uganda’s FDI for the same period amounted to 275 million dollars while Tanzania recorded 240 million dollars.

According to statistics from Kenya’s Ministry of Planning and National Development, 56 percent of the country’s 30-million-strong population currently lives below the poverty line of a dollar a day. It also estimates that 14.6 percent of the labour force is unemployed.

Washington Akumu, a financial journalist at a Kenyan daily, believes that centralising business registration procedures will go a long way towards ironing out these problems.

“There are so many offices an investor has to pass through before being cleared to open up a business. If we can collate these into a one-stop shop, a single unit of government to handle all investors’ needs at once, it will no longer be cumbersome and will help retain our investors,” he said.

Apart from simplifying investment procedures, Kibaki’s government has also stepped up the fight against corruption.

Last year, it established a commission to look into the Goldenberg scandal which led to Kenya losing about 600 million dollars for fictitious gold and diamond exports.

A recent development in the case involved ruling party legislator Koigi wa Wamwere. He asked the courts to have government release video tapes which reportedly show officials asking for bribes in exchange for their silence about the exports. The request was denied.

However, two civil servants have also implicated former President Daniel arap Moi in the Goldenberg scandal, and it remains to be seen whether the commission will fully probe his alleged role in the fraud.

In addition, Kenyan authorities have set up a tribunal to try judges who have been accused of corruption. Twenty-three judges named in a report issued last September by the Integrity and Anti-Corruption Committee were suspended because of accusations of graft.

Certain delegates at the conference felt these measures would restore investor confidence in Kenya.

“This is a country with great opportunities and investors should come here because the government is trying to fight corruption,” said Lynda Chalker, formerly Britain’s Minister for Overseas Development, and now Chairwoman of Africa Matters. This British-based organisation advises businesses and governments on dealing with barriers to investment in Africa.

The hope is that the investment conference – a follow-up to a meeting held in November – will jump start this process.

“This is an opportunity to wake up an economy that has been in deep slumber for nearly two decades,” observed Anyang’ Nyong’o, Kenya’s Minister for Planning and National Development.