Kenya Should Be on the Watch out on her Position Within the Region.

Kenya Should Be on the Watch out on her Position Within the Region.

If you want to set up a business in Rwanda, you are required to go to the Rwanda Development Board and in an hour or two you finish up registration of your enterprise. It is a consolidated service where at the end of the one hour or so you could have accomplished three other tasks.

Besides the registration of the business, you finish your tax registration with the Rwanda Revenue Authority, employer registration with the Social Security Fund of Rwanda and finally you could have also lodged a notification of business activities with the National Institute of Statistics of Rwanda.

Just like Kenya, the registration services can be done online as well. It takes one or two days and someone has a registration certificate and can begin business. As you could have noticed, Kenya has also been talking of a one stop shop for setting up a business or company but loopholes continue to ensure that the status quo is maintained.

There are a lot of bureaucracies still when it comes to doing things in Kenya which offer room for corruption to thrive. The ecosystem looks somewhat good on the surface yet when you decide to maneuver it you discover a lot of issues underneath.

According to KNBS (Kenya National Bureau of Statistics) latest figures, Kenya is slowly losing her position as the economic kingpin in the East African Region. This is begged on governance decisions and undertakings that seem to raise alarm but one which seems to be ignored.

One of the key issues is with Kenya’s borrowing. It is in the public domain that our borrowing is clicking or has clicked unsustainable levels and still going. In the last decade, the government has borrowed massively and heavily in order to meet budgetary requirements.

Borrowing in itself is not wrong. Actually, every other government borrows. Whether the borrowing is done in order to meet our development needs or recurrent expenditure (the later being an issue of contention with most people, one they regard as immoral fiscally) isn’t the issue. The actual use and modalities for repayment is the real issue.

The auditor general’s office has always raised red flags over the borrowing especially the one that is done in order to service another loan and has been ignored somehow. And because it has been happening recurrently, it means our borrowing doesn’t receive due diligence before being exercised.

If it were a business, the cash flow could dictate the borrowing. When the cashflow is positive, then a business can go ahead and borrow to meet its operational costs or even meet short-term recurrent expenditures with an assurance of meeting the debt requirements being tagged on the positive cash flows. Otherwise no borrowing should be exercised

In our case as a country, the cash flow is tied to a clause whereby for example the lender agrees to take administrative rights of a project such as the SGR once completed. The lender is then required to run the project until they recoup their principal and interests before they can relinquish such administrative rights to the borrower which is the government in this case.

And this is where the catch is. Some of these massive projects are doing badly. They are losing money which means that cash flows are negative. To meet the loan agreement provisions, it then pushes the borrower to do another borrowing in order to service this loan.

It is like the case of rat that bites someone and blows cold air at the wound. Because the whole exercise is unsustainable, at some point the rat goes away and the one bit gets a real feeling of the bite. The suppression is false and makes the person bitten to think all is fine for some longer.

That is the same case with the model of borrowing one loan to service another. The problem, however, has been the aspect of borrowing in the first place to fund projects in instances where even feasibility studies have indicated otherwise. In the case of the SGR, the world bank raised alarm and we behaved as though we didn’t hear it. Even the auditor general tables his concerns which were never taken into account.

Now we are feeling the pain. The Kenyan shilling is losing value in relation to the dollar. The cost of living is going up; you can’t believe the costs of a kilo of sugar or a liter of cooking oil today. The underlying cause is the rising cost of production for businesses.

Such a highs costs hamper SME growth and becomes a barrier of entry for new businesses. It means that if a new business is to be set up in Kenya and visibility studies turn negative, then the entrepreneur goes shopping in other economies and certainly finds a favorable environment there, and just like that we lose such an opportunity.

Over the long run, we end up becoming a void country built on survival techniques and nothing of real principles and foundations. Somehow, we don’t seem to care. So, what remains of us? We simply watch as we lose our position as the economic giant in the region or we do something. Otherwise, we will be stamping the writing on the wall.

The choice is ours.

Geoffrey Ndege

Geoffrey Ndege

Geoffrey Ndege is the Editor and topical contributor for the Daily Focus. He writes in the areas of Science, Manufacturing, Technology, Innovation, Governance, Management and International Emerging Issues. For featuring, promotions or support, reach out to us at info@dailyfocus.co.ke
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