Kenya improves in World Bank's investment destination list

Kenya’s ranking as an investment destination has improved, largely due to the introduction of Huduma Centres and a campaign to increase electricity connections.

Huduma Centres are one-stop shops where a wide array of government services are offered.

The World Bank’s 2016 Ease of Doing Business Index released Wednesday ranked Kenya as the third most improved nation in business regulatory reforms among 189 economies.

The report placed Kenya at position 108, an improvement by 21 places from last year’s position.

However, the country still lags behind Rwanda, South Africa, Swaziland, Botswana and Mauritius on the continent.

The economy is struggling with rising interest rates and a government weighed down by debt brought about by too many large projects, corruption and a tendency to waste public resources.

Rwanda, which has perennially beaten Kenya in the ranking, did it again this year, outshining Kenya on competitiveness despite climbing down seven positions to 62 from 55 last year.

It takes six days to register and start a business in Rwanda, 26 in Kenya and 46 in South Africa, which also outpaced Kenya at position 73, although it slid four places from last year's position.

REGULATORY REFORMS

Kenya attained a better rating this year due to four regulatory reforms: improving access to loans, ease of electricity connection, starting a business and registering property.

However, difficulties in acquiring construction permits affected the country’s overall ranking.

According to the report, credit rating improved as a result of the introduction of credit reference bureaus that allow financial institutions to assess the creditworthiness of companies and individuals.

A reduction in electricity connection procedures, which cut the number of days it takes to connect a business to power from 158 to 110 days, also gave Kenya a boost.

In the starting-a-business indicator, reforms have reduced the number of days it takes to register a business from 30 to 26.

In the registering-property category, automation of records at the Land ministry registries was noted for reducing customer interaction points and spurring efficient services.

Kenya also introduced a number of reforms involving stamp duty, property transfers and access to credit, says the report.

However, the country still scores poorly in the assessment of whether regulations facilitate or impede start-ups and daily operations.

CUMBERSOME REGULATION

Despite this, Kenya was ranked the eighth-best performer in sub-Saharan Africa.

The other countries that beat Kenya are Zambia and Namibia.

Singapore was ranked the most favourable place for doing business, while Eritrea was the most unfavourable.

The United Kingdom and United States are ranked sixth and seventh respectively.

“A modern economy cannot function without regulation and, at the same time, it can be brought to a standstill through poor and cumbersome regulation,” said World Bank Chief Economist Kaushik Basu.

“The challenge of development is to tread this narrow path by identifying regulations that are good and necessary, and shunning ones that thwart creativity and hamper the functioning of small and medium enterprises.”

Kenya took several positive initiatives in the past year, the report notes.

REDUCED DELAYS
The government made starting a business easier by reducing the time taken to assess and pay stamp duty.

The electricity supplier “reduced delays for new connections by enforcing service delivery timelines and hiring contractors for metre installation,” says the report.

Property transfers took place more quickly due to better electronic management at the land registry and the introduction of a unified registration form.

On the down side, the report says: “Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the building permit and by increasing the costs for both water and sewerage connections.”