Power supply challenges top list of barriers to businesses
Kenyan businesses have identified power supply as a significant impediment to their operations, despite improvements in overall infrastructure quality, according to a recent survey by the Standard Bank Africa Trade Barometer (SB ATB).
The survey indicates that the perception might have been driven by the fact that most of the businesses’ exports are sold within the East African Community (EAC).
The existence of the EAC Common Market Protocol and EAC Customs Union has eliminated, or significantly reduced tariffs and trade barriers, and harmonised customs procedures amongst member states, making Kenyan goods and services less competitive.
“The main barrier for businesses in terms of infrastructure is power, particularly for rural areas where it may be accessible but is unreliable,” notes the SB ATB report.
Even when businesses have access to a generator, the cost of operations is much higher, further affecting production costs and productivity.
Two nationwide outages that occurred in November last year and March 2023 highlight the significant financial losses to businesses, underlying the need for additional investment into the country’s ageing transmission infrastructure.
The survey notes that high electricity bills have also been a concern for years, with new higher tariffs burdening consumers, households and businesses and past subsidies by the Government unable to fully address the issue.
However, in the long term, some relief in the form of a $72 million (Sh10 billion) revamp of the transmission network and amendments to regulation that will permit private electricity producers to sell power directly to all consumer groups.
Transport infrastrcture improves
Despite the power troubles, Kenyan businesses said the quality of transport infrastructure improved from 48 in September 2022 to 53 this year, relative to the average of SB ATB markets of 46. The measurements use 50 as the base, with perceptions above 50 being an improvement.
The research was conducted in Kenya, Tanzania, Uganda, Angola, South Africa, Namibia, Mozambique, Nigeria, Ghana and Zambia.
“This improvement was driven by increases in the perception of quality across all infrastructural aspects. Notably, there was a significant increase in the perceived quality of Kenya’s road, port and water supply infrastructure,” the study notes.
Kenya’s infrastructure is ranked 53rd in the world, according to the Global Quality Infrastructure Index and is considered one of the best in sub-Saharan Africa, following the Government’s heavy investment in the country’s road networks.
The Port of Mombasa has also been undergoing major expansion and rehabilitation, including the upgrading of four berths to increase port capacity from 32 million tons to 47 million tons and the construction of a second container terminal all designed to increase capacity. Once the second terminal is ready, the port will have the capacity for 20 million twenty-foot equivalent units (TEUs) annually.
The Government is also hoping to yield improved trade facilitation from the development of the Mombasa Special Economic Zone (SEZ), set to be completed in 2026. The SEZ is planned to comprise an approximately 3,000-acre, customs-controlled area in which the Government will facilitate industrial activity through fiscal and regulatory incentives and infrastructure support.