Increasing charges in counties will stifle trade
By Phyllis Wakiaga
Devolution heralded a new era for the country, as some government functions were decentralized. As a result, many parts of the country opened up, leading to increased trade, job creation and wealth. These benefits have, however, come at a cost to many businesses.
Understandably, since counties could not entirely depend on budgetary allocation from the national government, they had to create their own channels through which they could raise their own revenue. Enter county fees, levies and charges. Each county government set its own charges, some of which hindered the ease of doing business, through increased costs and overall unpredictability.
Recently, Nairobi County made proposals that are set to increase the cost of living as well as the cost of doing business. The Nairobi City County Finance Bill, 2020 proposes a raft of charges, to enable the county government to reach its revenue targets, for the financial year ending June 2021.
Some of the proposals include charging offloading fee for various agricultural produce, including tomatoes, flowers, macadamia nuts, French beans and avocado. Properties have not been left behind, with proposals to impose charges on transporting construction materials. The costs vary, for various materials, depending on their weight. Additional charges have also been put forward for the storage and sale of liquified petroleum gas (LPG), business premises including cafes, bars, chemists and shops based on size; and hazardous and non-hazardous waste management, for both homes and businesses which varies according to the amount.
Before the coronavirus broke out, businesses were struggling under the weight of increased cost of operation brought on by various permits and licenses. The new proposals are set to cause additional strain to an already grim situation in the aftermath of the pandemic.
Let us take an example of the tomato, from farm to factory. The major tomato-growing areas in Kenya are Kirinyaga, Kajiado, Taita Taveta, Laikipia and Bungoma accounting for 51% of the total tomatoes production in terms of value (KES 7,031 billion) and 41% of production in terms of volumes (KAM Tomato Value Chain Report, 2018).
With majority of factories located in Nairobi, this means that a farmer from, say, Kirinyaga, shall pay county fees from the source, right up to when it reaches the factory. This, coupled with the high cost of production – that is, high cost of inputs, traditional growing techniques, broker fees, high transport costs – makes our products more expensive.
Eventually, farmers are forced to increase the price of their produce, without necessarily adding value to it, hence making our products less competitive in the local and regional markets. This is the same case for manufacturers involved in value addition, to produce goods such as tomato sauce and paste. This is just one example among many.
We recognize both national and county governments’ need to raise revenue to provide us with services. However, the country is facing a pandemic, which has severely affected the economy. Businesses have been hit hard, they faced severe cashflow problems and struggled to meet their day-to-day financial obligations. Imposing additional costs on them shall only rub salt on an open wound. This might even force them to completely shut down and go out of business, leading to loss of jobs, and sources of revenue for government.
In his state of the nation address earlier this month, His Excellency the President announced that government is considering a country-wide waiver of single business permits for all new businesses as it seeks to ease the cost of doing business in Kenya. If properly implemented, this shall, albeit a little, improve the ease doing business in the country.
County governments should work towards implementing the Unified Single Business Permit, to streamline their revenue collection streams and make it less cumbersome for businesses to pay the fees. Additionally, they should have a one-stop online platform which shall encompass all regulatory permits required to operate a business, by both levels of Government.
Currently, businesses are struggling under the weight of paying for the different business permits and the cumbersome processes involved. The cost of obtaining each and every one of them remains high and the processes are painfully bureaucratic, which hinders them from expanding.
We should recognize that this is a year of survival, it is business unusual. Our focus as a country now should be building back our economy, to ensure competitiveness and resilience such that if we are faced with shocks such as a pandemic in future, we do not see as much damage as we have due to coronavirus.
The writer is the CEO of Kenya Association of Manufacturers and the UN Global Compact Network Kenya Board Chair. She can be reached at ceo@kam.co.ke.
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