Kenya slipped three positions in this year’s global ranking of countries in terms of friendliness to business even as it outshone East African Community partners in access to credit, construction licensing and bankruptcy procedures.
Kenya beat her neighbours with efficiency in setting off new construction — from land acquisition to approval of building plans —and having the best collateral and bankruptcy laws, the report shows.
While on average an entrepreneur in EAC goes through 15 procedures — 22 in Burundi — to complete all formalities required to build a simple warehouse, the report showed it took only eight days in Kenya.
The Doing Business Report 2012 released by the World Bank on Wednesday shows Kenya fell to position 109 globally, down from last year’s 106, and was placed second in East Africa after Rwanda which moved up five places from position 50 in 2011 to 45 in the latest global ranking.
Uganda and Tanzania fell to positions 123 and 127 respectively, down from 119 and 125 in 2011 out of 183 economies ranked this year.
“If we adopted the best practices in our Partner States for each Doing Business indicator, we would be ranked 19th globally, equal to Germany.
There are powerful lessons to be drawn from this”, Richard Sezibera, EAC’s secretary-general said at the launch of the report.
The report indicates that the cost of starting a business in Kenya is generally high, averaging 55 per cent of income per capita.
In Rwanda, the cost is less than five per cent of income per capita while in Burundi, it is almost 117 per cent of income per capita.
Kenya also lags behind her neighbours in providing protection to investments and slow procedures for tax compliance.
The number of procedures and the time required to start a business also vary considerably within the EAC, the report shows.
While an entrepreneur in Rwanda needs only three days to start a business, the same takes 34 days in Uganda.
But in the region, the process of dealing with construction permits takes 170 days, on average, compared to 185 days in the Common Market for Eastern and Southern Africa (Comesa), 238 days in the Southern African Development Community (SADC) and 211 days in Sub-Saharan Africa.
In credit access, EAC economies score an average of four points (out of a possible six) on the depth of credit information index.
While Rwanda’s credit information system scores highest within the group, Kenya not only boasts a unified collateral registry for movable property but also the best legal framework to protect investors.
This focus on the rights of borrowers and lenders with respect to secured transactions lifts the global ranking of the EAC economies to seven out of 10 points on this indicator.
The World Bank’s Doing Business series has been tracking reforms in business registration since 2003.
It shows that EAC investors take on average four procedures, 116 days and $24,450 to get a new electricity connection for a warehouse.
Expressed as percentage of income per capita – 9,353 per cent – the EAC’s electricity costs are among the highest in the world and even higher than in other parts of Sub-Saharan Africa.
In SADC, electricity connections cost an average of 4,343 per cent income per capita, less than half the relative cost of the EAC’s connections.
“The EAC’s high costs and long waits are often due to the fact that dedicated distribution transformers have to be purchased and installed for the 140-kVA connection surveyed for this set of indicators,” the report says.
In Burundi — the worst rated on this indicator — entrepreneurs wait four to five months, on average, to import a transformer from Europe.
Kenya’s businesses wait an average of 45 days for an external inspection after submitting their applications.
Rwanda, the easiest economy in which to connect to electricity in East Africa, takes four procedures and about two weeks to get electricity connection.