Government red tape inhibits foreign direct investment, report says

A new report singles out red tape in obtaining county permits as a barrier to investors.

This is one of the challenges Foreign Investors There is a designated agency in a country with authorization to facilitate investors to open shops.

However, as noted in the latest World Investment Report 2024, released in June, the Kenya Investment Authority (KenInvest) does not assist investors in obtaining permits and licenses.

The United Nations Conference on Trade and Development (UNCTAD), which authored the report, noted that even though the government has digitized most of its services (currently 17,000), the country’s process for onboarding new investors remains confusing.

“Despite significant progress in digital government services in Kenya, particularly through e-Citizen Platformnew businesses and investors still face multiple, disjointed registration processes and authorizations, including permits and licenses required to operate in regulated industries and counties,” the report reads.

While some applications can be completed online, the lack of integration between systems adds significant barriers for investors and entrepreneurs, the report said.

The report notes that there is an urgent need to strengthen facilitation to increase investment levels to address interrelated economic, health, security and climate challenges.

“KenInvest provides one-stop on-site services such as assistance with foreign taxpayer registration, grid connection and work permits. However, its services do not include important permits and licenses at the county, departmental or environmental levels,” the report said.

The report added that the KenInvest service was unable to fully register investments online, collect data or provide effective investor follow-up services, which are critical to monitoring and supporting successful investment outcomes.

A typical example is Tatu City and Kiambu County Government Involving the approval of a new master plan, the developer accused the county executive of seeking favors to approve the project.

However, Kiambu Governor Kimani Wamatangi said the county had asked Tatu Municipality to hand over some of the land for public use.

“The law requires private developers to allocate land for public facilities such as schools, hospitals, fire stations, recreation areas, police stations, playgrounds and other public facilities,” he said.

“It is important to note that the 54 acres requested is only a drop in the bucket of the 406 acres set aside for public use when the original master plan was approved.”

Tatu City is Special Economic Zones The country is home to several multinational companies involved in different fields such as technology and manufacturing.

The developer believes that the delay in approval could cost the state more than Sh15 billion.

To eliminate this disconnect in FDI, UNCTAD is developing the Kenya Investment Single Window Project.

“It will introduce an online system to streamline the country’s investment process and enhance the government’s ability to attract and effectively monitor investments,” it said.

The system is expected to be connected with existing government databases such as the eCitizen portal, the Kenya Revenue Authority’s iTax system and county government portals.

“Such integration will enhance the capabilities of existing platforms and make it easier for businesses to adapt to the regulatory environment,” the report added.

KenInvest has set an ambitious target in its 2023-27 strategic plan to attract investments worth Sh1 trillion by 2027.

The plan documents budgetary constraints, conflicting mandates with other agencies and looming mergers as part of the government’s fiscal consolidation strategy as some of the obstacles the agency faces in fulfilling its mandate.

The disjointed approach to attracting investment was also documented as a key challenge in KenInvest’s strategic planning.

The strategic plan reads in part: “While KenInvest is committed to promoting and facilitating investment in Kenya, it faces challenges with the lack of a unified approach to investment across other relevant government agencies, resulting in a fragmented and inefficient investor journey.”