Kenya ranks fifth among East African Community (EAC) countries in terms of ease of doing business, according to a new regional survey by the East African Business Council.
The survey of 252 companies found Rwanda has the easiest business environment in the region, followed by Democratic Republic of Congo and Uganda. Kenya was placed fifth out of seven countries surveyed, ahead of only Burundi and South Sudan.
Overall, companies ranked Kenya at 3.43 on a scale of 1 to 5, with 1 being “very easy” and 5 being “very hard,” meaning the business environment is moderately difficult.
| Country | Ranking | Score |
|---|---|---|
| Rwanda | 1 | 2.08 |
| Democratic Republic of Congo | 2 | 2.75 |
| Uganda | 3 | 3.05 |
| Tanzania | 4 | 3.32 |
| Kenya | 5 | 3.43 |
| Burundi | 6 | 3.18 |
| South Sudan | 7 | 3.50 |
The report found paying taxes was ranked at 3.67 and obtaining financing was 3.62 in Kenya, indicating major obstacles for companies. By comparison, Rwanda scored 2.08 on the ease of doing business overall.
Across the EAC, access to trade finance was identified as one of the biggest challenges, with a score of 3.62. Companies said obtaining funding and credit is difficult.
Regulations and bureaucracy associated with trading across borders were also scored as moderate difficulty, at 3.32. Delays and complexity of customs processes were cited as issues for companies in Kenya and the region.
“Lengthy customs approval processes leading to delays in the release of cargo, arbitrary decisions by customs officials, delays in approval of tax payments, corruption, lengthy refund process and reconciliation of ledgers, denial of self-assessment by traders, and revenue motive by revenue authorities which contravenes with trade facilitation role,” were cited as challenges companies face in paying taxes, the report said.
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Acquiring work permits was also ranked as more difficult in Kenya, scoring 3.09 compared to an overall score of 2.28 for ease of starting a business.
“Companies reported the environment for starting and operating is challenged by stringent business registration regulations requiring estimates of earnings/turnover before the start of business operations, corruption, acquiring work permits, complex regulations for starting and operating a business especially for MSMEs, and licensing is not automated,” the report stated.
Corruption was repeatedly cited across indicators as an obstacle to easier business operations, especially regarding customs, licensing, and tax issues.
The EAC is one of the fastest growing economic blocs in Africa, with a combined GDP of more than $200 billion. The bloc is aiming to complete a common market by 2023, which could position Kenya as a major hub serving the region’s over 260 million consumers.
The report indicates that with a population of over 50 million and relatively advanced infrastructure, Kenya has the potential to be the EAC’s business and logistics hub if it can match the regulatory efficiency of its neighbors.
