Why we must reduce the regulatory burden 

Regulations are necessary requirements in any nation. When effectively implemented, they create an enabling environment for competitiveness by enforcing fair business practices, driving equal opportunity and inclusive participation of all in the economy. But what happens when they are cumbersome and arduous?  

For an investor, policy and regulatory predictability and stability are key, as they lead to investor trust, which is essential for making sound decisions on scaling up their businesses and investing in new markets. 

For instance, where do they want to see their businesses in a decade, a century or two? What impact will the firm have on society? 

Governments across the world have put in place mechanisms, to spearhead the growth of small businesses and cushion them from shocks. Unfortunately, there remains a gap between governments’ good intentions, to support Small and medium-sized enterprises (SMEs) to contribute more to a country’s economy, and understanding small business’ needs and the challenges facing them.

Unfortunately, here in Kenya, the amount of taxes businesses are required to pay, and the regulations that need to be adhered to, is ever increasing.  A KAM Regulatory Audit conducted in 2020 found that there are various overlapping charges and levies by various quasi-institutions. Some of these include water and sewerage services, movement of goods taxes, noise survey and air receiver and occupational and health certifications. A review and alignment of overlapping roles will reduce the cost of doing business for the manufacturing sector by 28.9 per cent. 

These overlapping regulatory roles affect the operations of Kenya’s manufacturing sector, since they do not only increase the cost of doing business but are also time- due to their multiplicity. Sometimes, they create loopholes for abuse by those mandated to administer them. 

For SMEs, the requirements from numerous agencies and the national and county governments, take up a large portion of their operational costs. At a time when businesses are still reeling from the impact of the pandemic, this is a dire situation that calls for urgent intervention.  Although regulations seek to create a level-playing field for businesses, regulatory overreach hinders the competitiveness of local industry. The national and county governments need to ease the regulatory burden for businesses. 

One way of doing this, is involving the business community, when formulating laws, regulations and policies. By doing so, the laws, regulations and policies will be business-centered, and in turn, support competitive industrial development. In addition, involving businesses shall also enable them to understand the laws, policies, regulations and standards that they need to adhere to, when developing products and accessing various markets. 

Experience from other countries has shown that a properly anchored regulatory framework is key in not only protecting minority investors, but also creating an enabling environment for all players. Streamlining and harmonising licenses in countries such as Egypt and Rwanda has proven to be time and cost-saving.  

Our Manufacturing Manifesto, launched earlier this year, gives proposals to ease the regulatory burden. Some of these include streamlining approval procedures between national and county government agencies, merging regulatory bodies that have almost similar roles and implementing a one-stop shop approach to obtain permits. 

The main aim of economic regulation should be to induce competition, increase efficiency in resource allocation and allow firms to expand the product space. Economies grow by upgrading the products they produce and export. The technology, capital, institutions and skills needed to make newer products are more easily adapted from some products than from others. 

Our regulatory regime needs to be reviewed, to make it efficient to support competitive industrial development, which shall then translate to inclusive socio-economic development. 

—The writer is the outgoing CEO of Kenya Association of Manufacturers—[email protected]