Constitution: How a Devolved Government Can Help Investors

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One of the biggest draw-backs to investing outside of Nairobi City is the cost. Concentration in Nairobi has meant that for most investors outside the capital city most maintain an office in the Nairobi to improve operations by making it easy for the business to access the many the services of the government.

For example, an investor who wants to incorporate a company or even register a business name must do so at Sheria House in Nairobi, the only place, where such services are available in the country. That increases traveling costs.

In addition, filing deeds and details of your company must be done at the Registrar of Companies at the Attorney General’s Chambers at Sheria House. If you are using the services of a lawyer, the cost can run out of the roof. In deed, many companies find it easier to hire lawyers based in Nairobi to register their companies even when the companies are based outside Nairobi.

I will not mention the loss of income, and therefore prestige, for lawyers based outside the capital city. Their case represents those of other professionals based outside Nairobi. For the investor, the consequence is that, qualified employees become rare and expensive.

Help May Come, Soon

But how will a devolved government help? According to the Harmonized Draft Constitution of Kenya Chap 14(h), one of the objectives of the devolved government is to “facilitate decentralization of state organs, their functions or services from the capital of Kenya.” If that clause is translated as it is stated, it will mean that each regional government will have the capacity to register and authorize a business operation in its own right without recourse to the central government. The effect is not just the lowering investor costs; it will allow local governments to compete effectively for investors.

As it is today, no local authority can design substantially different investment policies, although many are trying. For example, despite these unified investor regulations, Narok has come up with an investment regime which according the World Bank, makes it the best place to invest in Kenya in terms of costs and ease of operating your business.

“Across Kenya,” the World Bank report says,” doing business is easier in Narok, Malaba and Thika. It is more difficult in Kilifi, Nairobi and Isiolo.”

These efforts at differentiation would be more pronounced and better implemented if there was leg-room for local or regional governments to work with.

Harm Done by Jomo Kenyatta’s Crop-centered Agricultural Policies

A local government is, of course, in a better position to use local resources and design its investment programs according. A centralized government, as we have today, runs the risk of developing a tunnel vision as far as investment opportunities are concerned.

President Jomo Kenyatta, the main architect of the country’s current policies, came from an area dependent on crop agriculture. The entire government agricultural investment policy was therefore tilted towards crop agriculture –coffee, tea and pyrethrum — all of which could be found in his backyard of Gatundu. Cattle farming, fish farming, fruit farming, chicken farming were distant and suffered neglect as a result.

Kenya could already be self-sufficient in electricity if there had been concentration in coal mining. Coal is found in large quantities in Kitui – a semi-arid region neglected in Kenyatta’s crop -centered agricultural policy. There may be modern, easier sources of industrial power, but it was coal that provided the power that industrialized European nations.

If these things happened, there will develop more cities with varied investor opportunities and incentives. The level of investing will increase to the benefit of the investor. And more jobs will be created to the benefit of job seekers.

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