Since gaining independence in 1963, Kenya has evolved to become a major economic force in East and Central Africa, so much so that it has been compared to Singapore’s extraordinary rise in Asia.
Like Kenya, in the 1960s, Singapore was a nascent state grappling with its newfound independence and the various challenges that it presented. But fast forward to today, and Singapore is a beacon of economic prosperity – its transition from a humble port city to a universally acclaimed financial nucleus is a compelling tale of transformation.
Singapore’s success story, underpinned by strategic positioning, stalwart legislation and a pro-business environment, offers a replicable model for burgeoning economies. It is in this proven blueprint that Kenya – with its robust policies; booming fintech, ICT and renewables sectors; young and capable workforce; and strategic geographic location – can find inspiration, and how it could well become Africa’s own version of Singapore.
FROM GOOD TO GREAT
Kenya’s thriving economic climate is testament to the strength of its 2010 Constitution, effective legislative frameworks and forward-looking regulatory policies – all contributing to a competitive business landscape that propels economic development.
According to the World Bank, Kenya’s economy achieved broad-based growth averaging 4.8% per year between 2015 and 2019, significantly reducing poverty from 36.5% in 2005 to 27.2% in 2019.
Real GDP is anticipated to rise to 5% in 2023 and 5.2% on average in 2024 and 2025. Moreover, the World Bank’s Ease of Doing Business index placed Kenya 56th out of 190 economies in 2020, a substantial climb from its 113th rank in 2013.
That said, there is room for improvement.
98% of all Kenyan businesses are small and medium enterprises (SMEs). Given that these SMEs provide livelihoods for the majority of Kenya’s working populace, any policy modification bolstering this sector’s growth promises profound economic dividends. For example, adjusting antitrust and competition regulations by tweaking the thresholds for compulsory reporting or approvals could reduce investment barriers and benefit smaller ventures.
The pursuit of inclusive growth is also key. While the country’s constitution advocates fairness and inclusivity, corruption is an issue. Transparency International’s 2022 Corruption Perceptions Index ranks Kenya at 123 out of 180 countries, which highlights the need to rein in corruption.
Kenya must also scrutinise its constitutional expenses. A rationalised approach to expenditure would contribute to fiscal prudence and further solidify the country’s economic health.
An evaluation of Kenya’s existing legal framework reveals the need to revise and update certain laws. By doing so, inconsistencies that pose potential hurdles to investors can be mitigated. This would involve investing in capacity building for legal and regulatory bodies. Strengthening these institutions is a key step towards ensuring the uniform resolution of complex legal issues and fostering consistency in decision-making. In addition, there is a real opportunity for Kenya to further the development of an independent and competent judiciary.
Although already on the path to digitise government services and registries, a sharp focus on completing the digitisation of lands and business related registries will increase efficiencies.
The role of public-private partnerships (PPPs) in infrastructure development is also pivotal. To reap the full benefits of PPPs, however, Kenya should revisit the current legal framework governing these partnerships. Simplifying processes and enabling swift project implementation would make PPPs more attractive, fuelling infrastructure growth.
On the human side, investment in education and vocational training is key. Kenya’s public universities need to offer modern and fit-for-purpose curricula. Vocational training in sectors such as healthcare, tourism and manufacturing will make the human capital in Kenya even more competitive, and attract more investment into the country.
Finally, a significant aspect of Kenya’s path forward involves reforming its complex and aggressive tax laws. A clear and equitable tax structure would expand the tax net, foster a conducive business environment, and amplify Kenya’s appeal to local and foreign investors.
LOOKING FORWARD
Kenya has positioned itself at the forefront of green growth in Africa. 93% of the country’s electricity generation capacity in 2020 hinged on renewable energy. However, like other developing nations, the financing of green initiatives presents a challenge that needs to be confronted.
Kenya’s blossoming technology industry also requires a supportive legislative environment. An astute ‘light-touch’ regulatory approach would enable industry growth while ensuring regulatory compliance.
The African Continental Free Trade Area (AfCFTA) offers the prospect of pan-African economic integration. To capitalise on this opportunity, Kenya needs to harmonise its national legislation with AfCFTA provisions. With approximately 40% of the East African Community’s GDP credited to it, as well as its experience fostering regional integration within the East African Community, Kenya is well positioned to shepherd the AfCFTA agenda.
Kenya’s quest for success hinges on steadfast action and unwavering commitment to economic competitiveness, inclusive growth, sustainability and regional integration. The challenges are daunting, but not insurmountable. The Government has demonstrated a readiness to confront these hurdles head-on, laying a robust foundation for the country’s future.
The road ahead for Kenya is illuminated with promise. With sustained efforts and strategic interventions, Kenya’s vision of replicating Singapore’s success story on African soil is within reach.
Paras Shah is the Managing Partner | Bowmans Kenya
This article first appeared in DealMakers AFRICA, the continent’s quarterly M&A publication.
DealMakers AFRICA is a quarterly M&A publication.
www.dealmakersafrica.com
