Corruption scandals are bad for Kenya’s bid to attract investors
What you need to know:
- While the country has been successful at making technical tweaks to make it easier to operate a business, it has not been as successful in fighting corruption and institutionalising the rule of law.
- It is ironical that while senior government officials have been globe-trotting under the pretext of the “economic diplomacy” foreign policy, touting Kenya as a new business destination, news of scandal upon scandal keep hitting our front pages.
Kenya rose 21 places in the World Bank’s Doing Business Report 2017. In the same week news of a Sh5 billion scandal at the Ministry of Health broke.
Also during that week, the Public Accounts Committee’s questioning of players unveiled to the public the intricacies of the grand corruption scam at the National Youth Service.
This typifies Kenya’s quest to improve its business environment — reasonable success on one hand and corruption on the other, threatening to erode the gains of reform.
While the country has been successful at making technical tweaks to make it easier to operate a business, thanks in part to initiatives such as the Huduma Centres, it has not been as successful in fighting corruption and institutionalising the rule of law.
Whereas changes to make it easier to operate a business are necessary, they are by no means the end goal of the reform process. Rule of law and practical regulatory reform complement and supplement each other.
A clear, impersonal rule of law system clears off doubts for investors. In a globally competitive world, investors are more likely to move resources into risk-free economies than corrupt and politically restive environments, like the one Kenya has become.
It is, thus, not surprising that most of the countries in the top 10 of the ease of doing business index, such as New Zealand, Hong Kong, Singapore, and the United Kingdom, have a legacy of solid governance and rule of law systems.
It is ironical that while senior government officials have been globe-trotting under the pretext of the “economic diplomacy” foreign policy, touting Kenya as a new business destination, news of scandal upon scandal keep hitting our front pages.
In a related index that measures the ease of economic activity in the world, the Fraser Institute’s The Economic Freedom of the World report ranks Kenya’s legal system a lowly 96.
Whereas reducing the regulatory burden associated with starting and operating a business certainly helps, it does not constitute the entire business environment.
GRAND CORRUPTION
Investors and entrepreneurs, new or old, listen to other subtle factors such as perceived corruption when making decisions about investment. It matters not how many international investment forums the country organises; if grand corruption keeps hogging the headlines, investors will not be interested.
Corruption stems from two possible sources, the first being a burdensome regulatory environment and the second being of an ethical and moral nature.
The first one should be easy to deal with. For example, it takes 160 days, 17 procedures, and a multiplicity of regulatory agencies to build a warehouse in Nairobi. Without doubt, these procedures create an opportunity for graft. The second type of corruption is more insidious and complex to deal with.
It requires not only the political will, but also a decline in the public’s tolerance for corruption.
The government has to be unequivocal in its quest to engender good governance. The public can also help by expressly communicating its displeasure with bad governance and public officials’ misconduct.
Quite often, what is and what is not corruption is open to political interpretation. This should not be the case; the question of waste, particularly in relation to public finances, is not one that should be open to interpretation.
Whereas, it must be acknowledged that fighting a phenomenon that is culturally entrenched is not easy, steps such as congregations rejecting questionable cash by politicians in harambees could help.
See, for the government to achieve its goals in business environment reform, it must pay as much attention to the rule of law as it is paying to other reforms. This is an aspect of reform that needs political will rather than clever thinking.
The need to fight corruption and have good governance is much more urgent, now given the devolved system of governance. Both, the national and county governments should make active efforts to reduce graft in their respective domains. Only then can entrepreneurs have the freedom to create value for the country.
Mr Njeru is programmes director, Eastern Africa Policy Centre. [email protected]. @AlexNdungu
