As we are finding out, middle-income status is less forgiving

Just how can entrepreneurs benefit from the rebasing of GDP? Rebasing simply means, according to the Oxford dictionary, to establish a new base level for a tax level, price index or economic parameter to enable economic monitoring.

Once rebasing is done, debt levels as a proportion of GDP, which is a closely watched ratio, may rise or fall. A reduction would give governments the ability to access more capital for investment and development. 

As a result of rebasing, Kenya's gross domestic product (GDP) was estimated to be 25 per cent bigger after the authorities changed the base calculation year to 2009 from 2001, sending the East African nation into the top 10 of sub-Saharan Africa's largest economies.

Economic output was calculated to be 4.76 trillion shillings ($53.3 billion) in 2013 after rebasing, up from 3.8 trillion shillings ($42.6 billion). Growth in 2013 was calculated to have been 5.7 per cent after rebasing, up from the previous estimate of 4.7 per cent.

GLOBAL LAUGHING STOCK

According to Trading Economics, Kenya recorded a government debt to GDP ratio of 51.70 per cent in 2013. From 1998 until 2013, the government debt to GDP in ratio in Kenya averaged 56.63 per cent, reaching an all-time high of 78.30 per cent in 2000 and a record low of 42.80 per cent in 2008.

While media outlets surveyed public sentiments on rebasing, nobody asked how best we as a country can use rebasing to the advantage of our economy, particularly our SME sector.

Inasmuch as the government can access funding more easily, we must live up to the billing of a middle-income state before we become a global laughing stock.

First, we must lower the time in days it takes to register a business in Kenya, down to a single day. It’s time to leverage our ICT expertise, given we keep calling ourselves the region’s’ leading ICT hub.

MANUFACTURERS LEAVING

Registration and licensing processes must be streamlined at both the national and county levels. We cannot talk of being middle-income when we conduct our affairs like a Third World country in the fourteenth century.

We also need to ensure that our diplomatic engagement is in tune with that of a middle-income country so that we do not turn off our partners. We should have handled the trade negotiations with the EU better, and now Kenya stands to pay more than Sh2 billion

Countries like South Africa, Nigeria and Egypt have upped the ante for investment opportunities and we must not be left behind. Currently Kenya is a frontier market, at the cusp of being an emerging market.

When manufacturers close shop in Kenya to relocate to Egypt, that's an indictment of our investment climate.

Most SMEs are likely praying for reform of the tax code to spur growth and not curtail it. For you to milk a cow profitably, you must feed and fatten it well.

Our tax code can be likened to a farmer milking a malnourished cow that has not been fed or watered in months.

MORE FOCUS ON SMES

The tax code is a key determinant of how investment money moves, and Kenya must adopt international best practices. Otherwise, investors may relocate to countries where the tax code is more favourable.

A study by KMPG shows that India, Canada, China, Mexico and Russia have some of the most competitive tax regimes in the world. Perhaps Kenya could look to them for examples of how to reform a tax code.

Focus also needs to shift from multinationals to the SME sector if we are to take advantage of rebasing and tackle unemployment, under-employment and crime.

It is pointless talking about rebasing our GDP if we do not make these improvements. We must live to this middle-income billing or be condemned as jokers.

Twitter : @SokoAnalyst