Kenya and Burundi are the only East African countries that have registered improvements in their business environment, according to the World Bank’s 2015 Ease of Doing Business Report.
Kenya improved by a single position in the global competitiveness ranking, to stand at position 136 this year, up from 137 in 2013, while Burundi moved up four positions from 156 in 2013 to 152 this year.
Tanzania’s ranking dropped from position 130 to 131, while Uganda was ranked 150.
Within the EAC, Rwanda and Burundi were singled out as the countries that have registered improvements in the business environment even though Rwanda dropped from position 32 to 46. The World Bank attributed this drop to a change of methodology used in making the rankings.
Even though Kenya has registered a single digit improvement, it has poured cold water on its ranking, saying the methodology and indicators used do not reflect the reality on the ground.
Cabinet Secretary for Industrialisation and Enterprise Development Adan Mohammed said the statistics are skewed since they only use 10 indicators and few respondents per indicator to rank countries.
“In the past year, we have made an overhaul in how we do business but the report still did not recognise this. It doesn’t include any of these reforms. There has been an improved business environment in Kenya as a result of these reforms,” Mr Mohammed said.
The report points out that Kenya’s costly procedures for acquiring construction permits, high permit fees and taxes did not allow the country to move up positions.
To reflect the true picture of the business environment in Kenya, Mr Mohammed said, the government will set up a 40-member panel to look through the report and also come up with another report that highlights the correct position.
The Kenya Private Sector Alliance noted that the report included less than two respondents in some indicators, saying the participants cannot reflect the true picture of the business environments in the country.
“This situation is not a representative of the entire country. If you look keenly, we have become a destination of choice for investors within sub-Saharan Africa and we have major global companies having their African operations headquartered in Kenya,” Kepsa chief executive Carole Kariuki said.
The ranking gauges guidelines touching on domestic firms in 189 markets. The Bank ranks the economies in 11 areas of business regulations from starting a business to resolving bankruptcy, enforcing contracts, electricity connections, registering property and cross-border trade.
Ms Kariuki said the report has glaring anomalies, especially on the number of days it takes to register a business and also to get connected to electricity.
“When you read the report on Kenya, it says that it takes 32 days for a business to be registered in the country yet the process now takes just 24 hours and involves an online platform. The report also indicates that its takes 158 days for a business premises to be connected to electricity but it only takes a month,” said Ms Kariuki.
In a bid to further strengthen its position as a preferred business destination, Kenya in October established a Business Environment Delivery Unit that will address challenges facing investors in the country.
Speaking at its launch, Deputy President William Ruto said the unit will operate through a public-private partnership (PPP) initiative aimed at promoting the ease of doing business in Kenya in order to make it a preferred investment destination.
Trade and development manager at the Kenya National Chamber of Commerce Peter Biwott said the country has always performed dismally in the World Bank index because of some specific sectors that have a lot of bottlenecks.
“If you have tracked the country’s performance at the GCI Index and the World Investment Index, you will notice that we are doing better with very impressive foreign direct investment (FDI) inflows but the government needs to do more in the areas of transport, manufacturing and taxation to fare better in the World Bank index,” said Mr Biwott.
Mr Biwott said the structures in place, especially when it comes to registering a business, getting connection to electricity and its subsequent supply, construction permits from the relevant county governments and the necessary approvals, were sometimes slow and costly.
East Africa Chamber of Commerce chief executive Charles Kahuthu said the teething problems in Kenya are due to outdated policies that slow down the business environment.
“When you have unfavourable policies, the results is cumbersome procedures, delayed implementation of business proposals and slow development. This reflects on us when it comes to the ranking of the country in the Ease of Doing Business Index,” said Mr Kahuthu.
Melissa Johns, advisor, Global Indicators Group, Development Economics at the World Bank said sub-Saharan African economies have come a long way in reducing stringent business regulations.
“Our data show that sub Saharan Africa accounts for the largest number of regulatory reforms, making it easier to do business in the past year. Yet despite broad regulatory reform agendas, challenges persist in the region,” Ms Johns said.