
President William Ruto’s administration has established a ten-member task force to address the alarming trend of businesses exiting Kenya due to difficult regulatory conditions. This initiative aims to review and reform regulations cited as significant barriers to business operations.
Business owners interviewed by Nyanza Daily highlighted key issues, including an unpredictable tax regime that can impose sudden and hefty costs. For example, a change in customs duties could add Ksh 400,000 to the clearance of a single shipping container, severely impacting import-dependent companies. Additionally, the complexity of tax classifications can create confusion, as even simple items like toothbrushes may fall under multiple categories, leading to misclassification and penalties.
Over-regulation further complicates the business landscape, with entrepreneurs navigating an overwhelming array of licenses. The burden of compliance often feels akin to a criminal endeavor, as officials may demand bribes for documentation that is deemed incomplete.
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Key permits required for businesses include an annual business permit, fire clearance certificate, health and food hygiene licenses, and an advertising signage license. Recent amendments have also introduced new work permit requirements for international NGO employees, adding to the challenges faced by foreign investors.
According to the Kenya Private Sector Alliance (KEPSA), the high cost of doing business and reduced competitiveness in the East Africa region risk capital flight to neighboring countries like Tanzania, Uganda, and Rwanda. The departure of businesses employing a significant portion of Kenya’s workforce would worsen the employment crisis, following a report from the Federation of Kenya Employers (FKE) revealing the loss of 70,000 jobs since October of the previous year.
FKE attributed these job losses to rising interest rates, increased taxation, global geopolitical developments, and climate change. “The Kenyan private sector is grappling with high capital costs influenced by interest rates, inflation, and government policies,” the organization stated. To mitigate these issues, FKE recommended reviewing key taxes such as VAT on petrol, PAYE, and corporate tax, proposing a reduction in these rates to boost disposable income and attract investment.
Market analyst Rufas Kamau emphasized that high taxation is driving both companies and wealthy individuals to relocate to countries with more stable and favorable tax policies. He noted that the current administration’s rapid changes in tax policy are undermining economic growth.
As the year closes, many Kenyans face uncertainty as major corporations announce layoffs. Procter & Gamble plans to lay off 850 employees by December 2024 and exit Nairobi due to high operational costs. Similarly, Base Titanium will lay off 1,200 employees as it ceases operations in Kwale County. Other companies, including G4S and Tiles and Carpet, have also announced significant job cuts.
By October 2023, over 30 manufacturing companies had ceased operations in Kenya, reflecting the increasingly difficult business environment. Despite President Ruto’s promises to create jobs, the reality for many workers is bleak.
In the insurance sector, Blueshield Insurance faced liquidation, and Resolution Insurance struggled with Sh4.1 billion in gross written premiums, unable to meet its obligations. The Insurance Regulatory Authority has also placed Xplico Insurance under statutory management.
Manufacturers like Savannah Cement and Kansai Coatings are encountering severe financial difficulties, with Savannah Cement inviting expressions of interest in its assets after a year of administration. Kansai Coatings announced voluntary liquidation, signaling ongoing struggles in the paint industry.
The tech and logistics sectors are similarly affected, with companies like Copia and Mobius facing significant operational challenges. Copia and iProcure have struggled to secure funding, while Sendy has found it hard to maintain profitability amidst rising costs.
These challenges highlight the broader economic issues facing Kenyan businesses, raising concerns about the future of employment and investment in the country.