Foreign investors want Kenya to address insecurity and corruption

A survey conducted by government in whose respondents were foreign investors on their perception on the investment climate in the country lists insecurity and corruption as their main concerns. It also listed tax administration, cost of electricity and politics as the five main concerns by the business community. These factors were also enumerated as requiring urgent government intervention in order to ensure smooth business operations.

Top business concerns and areas for improvements. Source: KNBS
Top business concerns and areas for improvements. Source: KNBS

The Foreign Investors Survey (FIS) 2015 took cognizance of the fact that, while there are many motivating factors explaining why investors choose certain locations for their businesses, there are some key factors that are generally perceived to have a significant impact on the decision of where to set up a business. This question is especially critical considering that the country really needs investments to spur growth. In addition, many counties have been holding investment forums with a view of enticing investors to pour their money and resources in their counties.

This year, the country also held its the inaugural investors conference. The conference highlighted Kenya’s strategic role as a hub for doing business with the rest of the world.

The question tested the extent to which these factors influence the decision to invest in Kenya. Domestic market growth potential, rule of law and existing regulations; availability of skilled workforce; quality of infrastructure and logistics; and access to other markets were the five major factors, in order of importance as presented. From these issues, largely used to determine the location issue for an investor, not many counties will qualify.

In terms of the time taken to register various document and regulatory requirements, the country had an above average result. The report says

In terms of the “perception of investors on the time taken to acquire the necessary approvals and services when starting a business, more than 58.9 per cent of the respondents indicated that it takes a long time to register property whereas 48.3 per cent indicated that it takes long to acquire work permits. However, 59.2 per cent and 53.3 per cent of the respondents indicated that it takes a short time to register with NSSF/NHIF and to register with the tax authority, respectively. For the rest of the factors, majority of respondents indicated that the time taken is moderate.”

In terms of the cost of running some services, statutory deductions rank high, almost similar to time taken.

“The cost of access to business credit, electricity connection and acquisition of work permits was rated high by 51.3, 45.4, and 44.3 per cent of respondents respectively. On the other hand, the cost of registration with NSSF/NHIF and registration with the tax authority was rated to be low by 63.7 per cent and 58.7 per cent of the respondents, respectively. The cost of other selected factors was considered to be moderate by majority of the respondents,” asserts the report.

There is however favorable rating in general that the country is improving. Respondents were asked to assess whether the quality of selected factors had improved, deteriorated or had remained unchanged over the last two years. More than 50.0 per cent of the respondents indicated that there is a lot of improvement in access to Telecommunication services, Internet reliability, Transport infrastructure and Tax administration over the last two years. Security, counterfeiting, corruption and access to land were rated to have deteriorated over the same period.

They however want some areas improved. The respondents identified exchange rate movement, delays in VAT refunds, need to digitize government services, traffic jams, harmonization of national and county government levies; and involvement of the private sector in policy formulation as areas that required improvement.

The findings of the Foreign Investment Survey (FIS) 2015, is the third in a series of Foreign Investment Surveys jointly conducted by the Kenya National Bureau of Statistics (KNBS), Central Bank of Kenya (CBK) and Kenya Investment Authority (KenInvest).

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