Wasted Opportunity: Apathy Towards Investment in Kenya

At a public forum on inequality in Kenya on November 30, Mr. Julius Kipngetich, the Managing Director of the Investment promotion Center, spoke on inequalities from the investors perspective and implications on investment policy.

Inequalities from investor perspective

1. Poor governance/bureaucracy: Telecommunications is the fastest growing sector of the economy – and yet Minister Tuju has canceled two major licenses in two months
2. Investors are facing unwarranted attacks by NGO’s (such as Tiomin, Del Monte, and Bidco)
3. We are the biggest exporter to the COMESA region and yet have no infrastructure to speak of (crap rail/ road network)
4. Shortsightedness – instead of comparing ourselves to Uganda and Tanzania – we should be compare ourselves to Egypt (COMESA member) and South Africa
5. Blessed continent, yet Kenya is one of only 3 African countries (with Ethiopia and Eritrea) that has not engaged in mining (see Tiomin above - have been in Kenya for 9 years and are yet to begin mining operations)
6. Kenya is a high quality tourism destination with over 50 national diverse national parks but gets barely a million visitors a year. Egypt (desert) and south Africa (not much beyond Mandela) get over 6 million each

Investor concerns about Kenya

1. Government bureaucracy: we still use archaic laws to govern investment such as the land acquisition act (from 1928!) 1948 companies act (year 1948). Corruption oils/ thrives in bureaucratic systems
2. Cost of doing business relative to competing countries is high - compared to Egypt and South Africa.
3. Security: our level of crime/insecurity is not sustainable for investment
4. Corruption; is more difficult now – and therefore the price has gone up
5. Labor productivity is still low. E.g. from next year, China will have a similar textile export agreement to the US like Kenya has under AGOA – can we be as productive as them?

Some Fixes

1. Restructure the public service 84% budget goes to salaries and debt, leaving 16% for development (actually govt. contributes 4% and donors 12%)
2. Computerize government operations – this will increase productivity and reduce corruption
3. Increase access to credit by the poor. The 44 banks in Kenya serve a total of 1 million customers i.e. as many as 5 – 10 million adults don’t have bank accounts
4. Adopt zero-based budgeting: all public expenditure must be justified each year
5. Reduce defense budget (currently 17 billion shillings) – use it for development
6. Executive reform: parliament has passed one bill in 2004 (maybe 2 now but was the consensus bill really a priority or even a bill?)
7. Increase efficiency of judiciary – judge has 42 days to return a judgment which he WRITES IN LONG-HAND