Stable, legal environment key for business

Wednesday February 14 2018

JUDICIARY

Chief Justice David Maraga (right) confers with President Uhuru Kenyatta during the official presentation of the State of the Judiciary and Administration of Justice Report 2016/2017 at the Supreme Court on December 15, 2017. Countries with stable legal environments tend to attract more investments. PHOTO | FRANCIS NDERITU | NATION MEDIA GROUP 

The business community started the year with a renewed sense of optimism, hoping that the politicking that stifled business last year would subside.

This has not happened. The elections did not settle the supremacy battle between Jubilee and Nasa, but instead, set the stage for a bitter and more protracted contest.

The politicians on both sides have demonstrated a flagrant disregard for the rule of law.

The defiance of court orders and lambasting of the Judiciary at political rallies are pointers to this, as were the shutdown of TV stations and the "swearing-in" of Nasa leader Raila Odinga as the “People’s President”.

LEGAL INDUSTRY
These developments are deeply troubling. Besides good infrastructure, availability of human capital and access to capital, adherence to the rule of law is crucial.

Former General Electric CEO Jeffrey Immelt, during a recent visit to Kenya, was categorical about the key role a stable legal environment plays in driving economic development.

Countries with stable legal environments tend to attract more investments.

A case in point is Singapore, which got independence in 1963 like Kenya, but is way ahead in socioeconomic development.

Singapore operates one of the most efficient court systems in the world, according to Cambridge University.

This explains why many multinational firms have chosen to use Singapore as their entry point into Asia.

The presence of multinationals in Singapore has accelerated the transfer of skills, knowledge and technology, making it one of the most globally competitive and innovative economies.

It is ranked first in Asia and seventh worldwide in the Global Innovation Index 2017.

CONSULTATION
If Kenya wants to replicate and surpass this enviable level of success, the political class must change tack and accord the Constitution the respect it deserves.

Politicians, who should uphold the supreme law, treat it as nothing more than a bothersome document.

There is a need for the political class to engage the business community before passing laws that affect them.

The gaming industry has been a victim of this oversight.

Firms were caught flatfooted after the abrupt introduction of a 35 per cent tax on all gambling revenue.

This is the highest in the region, according to PwC.

It has put a Sh200 billion industry at risk of collapse and will have a ripple effect on the telecoms and the media, which benefit from it.

INVESTORS
Predictable government regulation allows the businesses to make long-term investment plans.

Regulatory uncertainty will lock out investors who can roll out long-term projects in manufacturing and agribusiness, limiting economic activity to street trading and importation.

This could stifle President Uhuru Kenyatta’s Big Four agenda, which focuses on health, agriculture, housing and manufacturing, and depends to a great extent on long-term partnerships with the private sector for success.

There is a correlation between a stable legal environment and economic development.

As the government of the day, Jubilee stands to lose or gain the most, depending on how it responds to this.

RULE OF LAW

It has, so far, been successful in positioning Kenya as a regional business hub.

Since 2014, the country has moved from position 136 to 80 in the World Bank’s Ease of Doing Business Index.

As the Baganda say, there is no need to wash a dress and later dry it in the dust.

The progress Jubilee has made in improving the business environment could all be undone if politicians continue disregarding the law.

The government must assure investors that laws, rather than politicians, have the final word in this country.

Mr Kittony is the national chairman, Kenya National Chamber of Commerce and Industry. [email protected]