How technology is readying Kenya for business

What you need to know:

  • This year, Kenya was ranked number 61 on the ease of doing business, out of 193 countries in the world. In just two years, the country has moved 31 spots to join the list of most improved countries.
  • he results are the consequence of deliberate government effort to create an enabling environment.
  • The objective of improving on efficiencies is not just to attract foreign investment. It is simply what governments must do to improve their country’s competitiveness - it makes good business sense.
  • In as much as Kenya has made improvements on the ease of doing business, it should be an indicator that the country needs to exploit technology more in order to comprehensively deal with the remaining challenges of doing business in the country.

This year, Kenya was ranked number 61 on the ease of doing business, out of 193 countries in the world.

In just two years, the country has moved 31 spots to join the list of the most improved countries.

This monumental achievement did not come on a silver platter. By simply collaborating with giant technology company IBM, Kenya deliberately worked towards this ranking.

The country has to keep improving on this position.

GOOD NEWS

Why is this important? The survey is an important guide for everyone – economists, entrepreneurs and large enterprises who wish to expand into new markets.

Research by the World Bank in 2012 demonstrated that a one percentage increase in the ease of doing business score translates into between $250 million and $500 million of foreign direct investment.

Even without the World Bank research, many Kenyans are happy with the speed of service delivery through Huduma Centres.

United Nations trade development arm UNCTAD is also upbeat about Kenya’s improved state of doing business. The organisation notes in its 2017 report that ''FDI (foreign direct investment) inflow into Kenya increased to $672 million, up by 71 per cent, due to buoyant domestic demand and inflows into ICT industries. Investment opportunities expanded despite the political uncertainties last year.''

The government is happy that the change, since 2014 when the country was ranked 136, has been phenomenal.

The results are the consequence of deliberate government efforts to create an enabling environment, as has been noted by the former Cabinet Secretary for Industry, Adan Mohamed: ''The key to sustainable growth and job creation lies in the growth of the domestic companies and the attraction of local and foreign investors to invest capital and expertise into the economy. A key enabler for this to occur is the establishment of a suitable business environment for businesses to thrive and we as a government have made this a top priority.''

The government is a key enabler of trade and investment, since virtually all of the 10 indicators of ease of doing business can only be improved through policy and use of technology to improve efficiency. Some of these indicators include the time it takes to obtain a business permit, getting electricity connection, resolving a commercial dispute and optimally getting right the logistics of importing and exporting.

TECHNOLOGY

To assess all these requirements, it requires modelling multiple variables. It is at this juncture where technology becomes important. In recognition of this, a team of IBM scientists in Nairobi has been working with various government agencies since 2015 on aiding this transformation.

The IBM scientists have been applying several computer-modelling technologies to find inefficiencies in certain processes, such as interacting with government. For example, the team reduced the number of interactions with government for starting a business from 11 to just three simplified steps. This required legal amendments, collapsing of some procedures into simplified ones, as well as cost reductions.

The objective of improving efficiencies is not just to attract foreign investment. It is simply what governments must do to improve their country’s competitiveness - it makes good business sense.

Issues such as rent seeking occur when systems encourage inefficiency. The cost of doing business become expensive and ultimately the consumer pays for inefficiencies.

LONG WAY

Although Kenya has made great progress, it is still far from creating a perfect enabling business environment.

Commercial disputes still take years to resolve and some utility companies are hardly efficient. For example, one can be connected to electricity in a matter of days but frequent blackouts lead to cost increase and water in many cities is so scarce that it cannot support many businesses that require plenty of it.

In order to deal with such challenges, we need studies on consumption patterns, potential sources and how such resource can be managed sustainably to support growing cities and their industrial expansion programmes.

Despite having the capacity to gather data and analyse it to predict the future requirements of any resource, we are always lagging behind the demand and persistently in a catch-up mode. This behaviour pattern is what stifles economic expansion and limits job creation.

In as much as Kenya has made improvements on the ease of doing business, it should be an indicator that the country needs to exploit technology more in order to comprehensively deal with the remaining challenges of doing business in the country.

The writer is an associate professor at the University of Nairobi’s School of Business. Twitter: @bantigito