6 November 2017

East Africa: Kenya, Rwanda Remain the Most Business-Friendly Economies in the Region

Photo: Phoebe Okall/The Nation
Solomon Kirimi, a businessman at Makutano, Meru County (file photo).

Rwanda and Kenya were the only economies in the region to record improvements in the Ease of Doing Business Index released last week, as new laws, inability to repatriate funds, and business registration saw the other countries fall in their ranking.

Kigali had the biggest jump, improving 15 places from last year's rank 56 to rank 41, followed by Nairobi, whose attractiveness to investors improved 12 places, buoyed by improvements in regulations for starting a business, trading across borders, getting electricity, access to credit and the payments of taxes.

However, slow registration of property and issuance of construction permits remain the biggest hurdles to ease of business. Since the start of Ease of Doing Business Index ranking 15 years ago, Rwanda has implemented the most reforms at 52, followed by Kenya at 32 and Mauritius at 31.

Kenya's Trade and Industry Cabinet Secretary Adan Mohamed said that Kenya was happy with the ranking, adding that the country would strive to involve the private sector.

"This is the country's best performance in 15 years and reflects continuous improvement, which is a good indicator for international investors. It will now help us attract more investments into the country. Last year, we delivered the highest number of business-related reforms on the continent," Mr Mohammed said.

Kenya

According to the report, Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, and memorandum and articles of association. The country also did away with requirements to sign compliance declarations before a commissioner of oaths.

On access to electricity, Kenya streamlined the process by introducing the use of a geographic information system that eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain a connection.

Other notable areas of improvement were in property registration, where Kenya increased the transparency at its land registry. The country also made resolving insolvency easier by introducing a reorganisation procedure, facilitating continuation of the debtor's business during insolvency proceedings and by introducing regulations for insolvency practitioners.

"Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company," the report said.

"We will still collaborate with the government to ensure there is continuation in these reforms," Kenya Private Sector Alliance chief executive Carole Kariuki said.

On the lowdown, Kenya is ranked worse than the average score in seven out of 10 parameters assessed by the World Bank.

The report cites six key reforms needed in starting a business, accessing electricity, dealing with construction permits, paying taxes, accessing credit and trading across the border for the country to improve its standing on the list.

"Kenya made starting a business easier by merging procedures required to start and formally operate a business," the group said in the report.

Rwanda

Rwanda, which implemented five reforms last year, including ease of tax payments and issuance of construction permits, was ranked second on the continent behind Mauritius.

Tighter quality control and risk-based inspections, improved the construction permit process. Resolving insolvency remained the country's only negative point, according to the report.

"We upgraded the existing systems, which allowed us to roll out the building permit management information system. This has since seen the time taken to obtain permits reduce by at least 10 per cent. This system currently allows online tracking -- through e-mail and SMS -- of the application," the City of Kigali said.

Rwanda also adopted an online tax payment platform and the registration of property, which has greatly cut the time spent on filling in forms.

According to the World Bank, the country strengthened minority investor protections by requiring greater corporate transparency and making it easier to sue directors.

"Rwanda made enforcing contracts easier by making judgments rendered at all levels in commercial cases available to the general public through publication on the judiciary's website," the report said.

"We are now more open in our communication channels with investors and stakeholders over any proposed reforms and legislations, carefully taking in their inputs," Rwanda Development Board chief executive Clare Akamanzi said.

Trade and Industry Minister Vincent Munyeshyaka said the report assessment was satisfactory.

"We have found this report a useful barometer on how to measure the success of our business reforms as we seek to attract investments into the country. We have used it to identify the areas of improvement and inform policy," Mr Munyeshyaka said.

Uganda

Uganda, which recorded a drop in position to 122, from 117 last year, recorded only one reform -- trading across borders -- compared with three the previous year.

"Uganda reduced the time for export documentary compliance and border compliance by allowing for electronic document submission and processing of certificates of origin and by further developing the Malaba One-Stop Border Post," the report says.

Tanzania

Tanzania also recorded one reform, implementing a one-stop shop and streamlining the building permit process.

However on registering property, the country made it more expensive by increasing the land and property registration fee.

War-torn South Sudan and Somalia, troubled by the Al Shabaab terrorist group, remain the lowest ranked at 187 and 190 respectively.

The World Bank Doing Business report measures aspects of regulation across 190 economies affecting the life of a business including starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

Kenya

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