Why good governance is critical for Kenya’s prosperity 

By Phyllis Wakiaga 

Any nation’s development is reliant on the leaders elected by the citizenry. Therefore, elections are a fundamental part of a country’s prosperity. 

We are approaching the general elections slated for later this year. Campaigns are in top gear, and political aspirants, both at the national and county government levels, have embarked on an aggressive push to sell their agenda to citizens. 

Unfortunately, it is disconcerting that political contenders are more focused on grand theoretical economic plans, as opposed to a focus on practical solutions to issues that can be actualized through predictability and political goodwill – and have a much larger impact on all citizens beyond the elections. Political goodwill is particularly essential in ensuring that we uphold good governance at both levels of government. 

Former United Nations Secretary-General Kofi Annan said, “Good governance is perhaps the single most important factor in eradicating poverty and promoting development.” According to the African Development Bank, good governance should be built on a foundation of effective states, mobilized civil societies, and an efficient private sector. Today I’ll focus on good governance for an effective private sector. 

Government plays two key roles in an economy – regulatory and promotional/development roles. The regulatory role entails formulating and implementing various direct and indirect measures to monitor and regulate the economic activities of the private sector. On the other hand, promotion involves increasing the social and economic overhead capital for the growth of an economy. These roles are key pillars for the business community. If well implemented, they drive private sector growth. However, if not properly done, they stifle growth, leading to stagnation or slow economic growth and expansion. 

Let us take a look at the prevailing economic situation in Kenya. In these economic times, it is becoming extremely difficult for many Kenyans to make ends meet. This is attributed to the impact of COVID-19 and the ever-increasing cost of commodities,  because of numerous taxes and overbearing regulations, against dwindling purchasing power. 

Studies by the World Bank have revealed that over-taxation leads to the informality of the economy, consequently diminishing prospects for expanding the tax base. When this happens, the ever-increasing tax burden will continue to be borne by a few formal enterprises such as manufacturers. Increased taxation disincentivizes investments, thus reducing capital formation which is scarce in Kenya. 

On promotion and development, Government can drive private sector growth through regulations that drive growth. Numerous regulations and arduous regulatory regimes make it difficult to invest in Kenya. This means that regulations can benefit society or be considered a burden. Regulatory burdens can be defined as the increase in complexity of rules and regulations that require firms to comply without adding value to the companies, households or the long-term objective of government policymakers. 

From the KAM Regulatory Audit, 2020, numerous requirements, manual renewal of licenses and cumbersome procedures of starting a business make the regulatory burden heavy for manufacturers. This is coupled with the duplication of roles and mandate of various regulatory agencies and the high tax regime that disincentivize investors. 

KAM’s Manufacturing Manifesto gives solutions to the issues bedevilling the country right presently, which political aspirants need to focus on even beyond the elections. What we need now is a focus on issue-based politics that works for all citizens. This means centring on practical and easily achievable steps to reduce the difficulties facing business and citizens. 

Going forward, it is critical that political aspirants strive to address the cost of living, high rates of unemployment, economic development, macroeconomic issues, reducing the regulatory burden, providing public goods, driving competitiveness in the counties, effective and pro-industry national taxation structure and fully implementing existing manufacturing-centric policies. 

As a country, we must reflect on our governance challenges and engage in robust national dialogue to enable an effective and inclusive governance system. This is because without good and inclusive governance, Kenya will not achieve its social and economic aspirations. 

The writer is the outgoing CEO of Kenya Association of Manufacturers and the Global Compact Network Kenya Board Chair. She can be reached at ceo@kam.co.ke. 

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