Kenya seems to be slowly sinking into the abyss of corruption, denting the country’s business environment and position as an attractive investment destination for investors.
Such sentiments are expressed no better than a majority shareholder in the Sh250 billion Tatu City project, Mr Stephen Jenkings’.
In an interview, Mr Jenkings said he has faced a series of frustrations on his mission to invest in Kenya, partly due to emergence of parties keen to defraud and frustrate him. Although he exudes a lot of positivity on his investment in the country and about the business climate in Kenya over the medium term, he says that he has faced more problems on his mission to invest in the country than anywhere else on the African continent combined.
“If we look at the corruption surveys, Kenya is ranked 145 in the world now and has fallen nine places from last year. If we look at the ease of doing business, the country is at 136, a decline from a year earlier, whereas the rest of Africa has been improving. Foreign Direct Investment here is much lower than anywhere in East Africa,” Mr Jenkings said in reference to his investment in the multibillion-shilling Tatu City project being set up in Kiambu County. He blamed his woes on a number of local partners who were keen to frustrate him through fraudulent means in an attempt to push him out of the sweet deal that promises to offer East Africa one of its private-investment driven city that would be a model for a number of other such cities in the rest of Africa.
Mr Jenkings indicated that of all other projects being developed in a number of sub-Sahara Africa countries, the Tatu city project would the leading urban UN Development in Africa. It would also be “the biggest, the best and the most impressive”.
Despite such optimism, the investors in the project “were well aware that just like any other land projects, legal issues would come up. The issues are also about the business environment itself. Kenya is slowly slipping behind most of her African peers because of corruption and weak institutions”.
“For Kenya to attain high levels of growth, corruption has to be tackled. The business community and the civil society must realise that if we want Kenya to be a high growth and middle income country, this trend has to stop,” he said.
His story paints a bleak picture on the investment prospects in the country, which has for many years ranked poorly compared to many of her peers in Africa in terms of the attractiveness to doing business. One of the major issues being cited for the difficult business environment is high level of corruption that now cuts across the public, private and non-state agencies.
Last year, a report released by audit firm, Ernst & Young (EY) listed Kenya’s private firms among the world’s most corrupt, presenting a nightmare on the huge task the government faces in its bid to position Kenya as an attractive investment destination. The EY reported that one in every three Kenyan private firms surveyed paid bribes to win tenders. The survey conducted in 59 countries ranked Kenya behind Egypt, Nigeria and Namibia as markets where private sector corruption is most prevalent especially with bribery claims emerging in the bidding and tender award processes.
According to analysts at Nairobi based Cytonn Investment, widespread corruption within public and private sectors make it hard for ambitious entrepreneurs to pursue their business ideas as they have to pay bribes to attain the necessary legal approvals or win contracts.
“The government’s war on graft is a step to curb the challenge of corruption in turn inspiring the public to innovation. We hope that the recent bold actions by the President to arrest rampant corruption will be sustained. In the long-term, war on corruption can only help the investment environment,” the analysts said.
During his visit to Kenya in July, US President Barack Obama indicated that Kenya was still faced with high levels of corruption, a fact that President Uhuru Kenyatta acknowledged.
“As I stated to him (President Kenyatta) during our meeting, this may be the biggest impediment to Kenya even growing faster and to more people having even more opportunities,” President Obama said.
Besides corruption, other impediments to the business environment in Kenya include insecurity, high taxes, an uninspiring regulatory environment and poor governance permeating both the national and county governments.
Earlier this year, the World Bank raised a red flag on the poor spending of public funds by county governments. The report recommended that the county governments should urgently institute corrective measures to check the wastage of taxpayers’ money by focusing on priority areas that have the potential to lead to economic growth and improving the livelihoods of the people. This is also not lost on the fact that Kenya loses hundreds of billions of shillings annually to corruption and tax evasion. Last year alone, Kenya lost Sh137 billion to
tax evaders, mostly constituting businesspeople and multinationals.
“Like most emerging markets, Kenya will continue to face its fair share of challenges. Corruption, threats to physical security and poor infrastructure are among those often cited as constraints to investment and doing business,” EY Africa chief executive officer, Ajen Sita, said recently during the release of the 2015 EY Attractiveness Survey.
“In our view, the change in the governance and regulatory environment will go a long way in improving changes in the business environment as well,” Cytonn analysts said.