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Regulatory bodies should boost enterprise

Tuesday January 20 2009

Jaindi Kisero

Managing Editor, Investigations

Jaindi Kisero Managing Editor, Investigations & Economic Affairs 

Jaindi Kisero
By Jaindi Kisero
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I DON’T AGREE WITH THE WAY the Kenya Bureau of Standards (Kebs) raids the premises of manufacturers suspected of making sub-standard products.

Manufacturers who break the law should be punished. But the means to do so must be civilised and fair.

Consider the manner in which the raid on Swaraj Motors was conducted the other day. Accompanied by the Press and the police, the Kebs managing director raided the company premises and issued seizure notices for all the vehicles in the showroom.

Later, he called a press conference and declared that the India-made vehicles were sub-standard and therefore could not be sold in the market.

As it emerged, Kebs took this draconian decision before conducting thorough tests on the vehicles. The upshot is that the Ministry of Industrialisation has now launched investigations into the matter.

Regardless of the outcome of the investigations, it is unlikely that this vehicle will survive in the marketplace. The damage done to the reputation of the brand is almost irreparable.

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Then there was this case when, out of the blues, Kebs announced that it had banned the import of used motor vehicles spare-parts.
Hundreds of millions of shillings invested by hard-working entrepreneurs in this business were put at risk. There was no prior warning. Kebs was not even willing to implement the ban in phases.

This decision was reversed by the Government. The Ministry of Industrialisation has now appointed a stake-holders committee to investigate the whole saga. Included in the committee are representatives of importers of spare-parts, the Association of Kenya Insurers, and operators of auto-bazaars.

From an economic standpoint, the recent mushrooming of the used spare-parts business is nothing to celebrate. It just shows how much of a mitumba (second hand clothes) economy we have become and how we have failed to industrialise.

There was a time when we had a thriving textiles industry that supported cotton farming. Our engineering industries had the capacity to manufacture motor vehicle components and industrial equipment.

In its heyday, the Kenya Railways workshop used to make its own water pumps and several other motor vehicle components. This was during the era when we practised the import substitution industrialisation strategy.

We abandoned this strategy in the 1970s and 1980s as we embraced import liberalisation. In hindsight, we have paid a heavy price for uncritically embracing these policies.

PERHAPS WHAT WE NEEDED TO DO was to implement a policy of deepening import substitution in some key sectors of the manufacturing sector. Today, we wear mitumba shirts, drive mitumba cars and rely on imported mitumba spare-parts.

Yet this is hardly justification for banning imports of used spare-parts in the manner Kebs tried to do. The growth of second-hand spare-parts is but a symptom of a deep-rooted problem.

The situation I describe is but an illustration of the paralysing effect of over-regulation — growth-stifling controls.

The top management of Kebs display an anti-enterprise culture that is totally out of tune with the policies of a Government that professes commitment to reducing the role of the State in private sector-led growth.

That raid on Swaraj Motors was conducted in a barbaric manner. While it is true that no entrepreneur or business is above the law, it is equally true that so long as there is still a Constitution in this country, every manufacturer or business is above state terrorism.

Changing such mind-sets will require a total revolution in the mentality of individuals running regulatory bodies. We need to drum into their heads that the purpose of business regulation is to facilitate, not stifle, entrepreneurship.

A few years ago, industry welcomed the establishment of the National Environmental Management Authority (Nema). Today, all that most manufacturers who have dealt with this regulatory body will narrate is a catalogue of woes.

Part of the problem is in the governance regime for regulatory institutions. We treat these critical institutions as if they were mere parastatals and allow politicians to appoint their cronies to run them.

In turn, these political appointees approach their work as if loyalty to their patrons is the most important. Values such as hierarchical authority, neutrality and predictability are honoured more in breach than in practice. We need to start insulating critical regulatory bodies from politics.

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