Study reveals why it is easier to do business in Nakuru

It is easier to start a business in Nakuru town compared with five other populous urban areas in Kenya because of a reduced tax burden, reveals a survey by the Institute of Economic Affairs.

The analysis measured performance indices in Nairobi, Nakuru, Kisumu, Eldoret, Machakos and Mombasa counties. It also considered areas relevant to the life of a small medium enterprise, which include structure of taxes, fees, good governance and conditions for investment.

The IEA assessment shows that Nakuru had an overall score of 89 in the tax sub-cluster followed by Eldoret (78) and Machakos (67).

The bottom three in this category were Kisumu (64), and Nairobi and Mombasa (56).

BURDEN OF TAX

The study says urban centres that reduce the burden of tax and provide an enabling environment are likely to have more investments.

Its main objective was to assess the performance of urban areas in service delivery, provision of enabling conditions for investment, and governance.

“The result implies that Nakuru has the most friendly tax regime among the urban centres singled out in our report. The county provides sufficient information on local taxes and other levies, like most of the other urban areas.

“The levies for parking (Sh100 for salon cars), and Sh4,000 charged for an annual single business permit for general merchant, according to Finance Act 2015, are the lowest,” said Mr John Mutua, a programme officer at IEA.

Mombasa leads in the investment and trade sub-cluster, which assesses the environment as a critical foundation for enterprise growth and employment creation, with a score of 43. This is because it takes the shortest time, 41 days, to register property. This is credited to automation of services.

INVESTMENT CLUSTER

Cumulatively, Mombasa led the pack in the conditions for investment cluster with a score of 46, followed by Eldoret. The rest were Nairobi and Nakuru (42), Kisumu (31) and Machakos (29).

The study recommends harmonisation of county tax regimes to improve the overall performance, especially in regard to providing an enabling environment for business and potential investors.

Scores in this Urban Areas Performance Index were based on 67 questions (indicators) that were administered to respondents who were county government officials.

Primary data from these officials and secondary data based on the year 2015 was collected from November 2016 to May 2017 from the six largest urban areas in Kenya covered in this research.

WATER AVAILABILITY

Water reliability also saw Nakuru top. The county has water availability 17 hours a day. In Kisumu, Machakos, and Mombasa, water supply was below 70 per cent.

“Generally, all the six urban areas have plans and strategies for improvement of waste collection and management. How they have executed and implemented these plans differs. Nakuru is the best performer on solid waste management,” the Urban Areas Performance Index report says.

On transport, the best performance was unexpectedly registered by Machakos, with a score of 50. The two largest cities tied at a disappointing score of 42.

“Nairobi does not use any economic instruments such as congestion fees for traffic management, although its comparatively high parking fees for private cars is not only for purposes of revenue generation but also as a deterrent of private cars in the central business district,” says the IEA document.

DISASTER MANAGEMENT

Nairobi leads in the safety and disaster management sub-cluster, with an exceptional score of 88. Mombasa, Kisumu and Eldoret follow in that order, but at some varying distance. The least performance was posted by Nakuru and Machakos, with average scores of 51 and 50, respectively.

Eldoret leads its peers with a perfect overall score of 100 on Early Childhood Development Education and Youth Polytechnics. "Not only does Eldoret have a plan on ECDE and polytechnics covered in its education policy but it also has the lowest pupil to ECDE centre ratio among the six urban areas,: says the report.