Doing Business in Africa: Kenya

Doing Business in Africa: Kenya

When information on borrowers is significantly lacking – as is the case in most of Africa – legal protections for creditors must in turn be very strong. Kenya does admirably well here as it has very strong legal rights for creditors and a wide range of information available on many of the country’s potential borrowers.

Figure 2:

How the World Banks Conceptualizes Credit Acquisition

Fig 2 Ease of Business Graphic WB

When it comes to protecting investors and minority shareholders, Kenya does less well, though still ranks much better than many countries in Africa. Here, the country ranks 93rd out of 183 countries. It has received this score because Kenya requires only very modest amounts of levels of conflict-of-interest disclosure by firm directors, has few strong laws that hold directors liable, but is a relatively easy place to bring a shareholder lawsuit.

Kenya unfortunately does much less well in the area of taxation. The World Bank estimates that pleasing the tax man in Kenya requires a total of 41 payments over the course of a year which, in turn, takes up to 393 hours to complete and can consume up to 49.7-percent of a company’s profits. Accordingly, Kenya’s tax burden is ranked 162nd out of 183 nations, making it one of the worst in the world in this area.

When it comes to engaging in cross-border trade, Kenya also does poorly. In Kenya, to import goods into the country one is required to have seven documents for customs officials to inspect. On average, it takes a total of 24 days to import goods into Kenya with the cost amounting to $2,190 (excluding tariffs) per container shipped into the country.

The cost to export goods is roughly similar as Kenya requires eight documents to be inspected by customs’ officials, while the total cost (excluding taxes) is $2,050 per container, with delivery taking up to 26 days from point of origin. Compared to global averages this nets Kenya a ranking of 144th out of 183 on ease of engaging in cross-border trade.

Kenya does somewhat better when it comes to contract enforcement, where it ranks 125th out of 183 countries ranked on this issue by the Bank. On average, reports World Bank analysts, it takes a total of 40 legal procedures to take a contract from dispute to resolution, at the cost of 365 days spent in court or otherwise attending to legal issues. The financial cost of pursing a contract claim, says the Bank, typically accounts for 47.2-percent of the value of the claim.

Finally, in terms of closing or liquidating a business Kenya ranks 85th out of 183 countries. Here it takes 4.5 years to close an estate or enterprise at a total cost of 22-percent of its value with an average recovery rate of 29.8 cents on the dollar.

Table 1 presents a summary of these rankings as well as Kenya’s overall ease-of-doing business rating. All things considered, doing business in Kenya is much easier than in many places in Africa and in the world ranks in the middle of the pack. It does best in the area of credit were it ranks amongst the best the world, but is also notable for the speed at which it expedites construction permits. On the other hand, lackluster scores on ease of starting a business and registering property hints at an inefficient and corrupt legal system and bureaucracy that hurts in-country business formation. Finally, trading across borders is difficult largely due to dilapidated infrastructure and the threat posed to ocean-going commerce by Somali pirates.

Table 1:

World Bank Ease of Doing Business

Assessment and Rankings: Kenya

Table 1 Kenya Ease of Business


Accounting for 40-percent of East Africa’s GDP, Kenya is the dynamo which keeps the rest of the region running. For years Kenya’s slow, steady growth kept the region going even as socialist-induced lunacy in Tanzania and genocide and civil war in Rwanda and Burundi deeply impacted growth for the worse in those countries. Now with politics seemingly less important a factor in its neighbors it is ironic that politics has arisen as a potential threat to growth in Kenya.

While democratization has inflicted some pain, it has not been without benefits as it was accompanied by a forcing through of liberalizing reforms necessary to spur economic growth. As one can see from the accompanying chart below, this has resulted in steady GDP growth that has averaged 4.66 percent per year over the last decade. Not as spectacular as some on the continent, true, but respectable to be sure.

Figure 3:

Kenya Economic Growth,

Percent Increase, 2003 – 2013

 Kenya GDP Growth