Help businesses to thrive

The recent revelation that 9,441 companies have folded over the past five years should serve as a wake-up call for the government to review some of its policies that have made it harder for businesses to operate.

While it is easy to applaud the sharp rise in businesses registering in Kenya to a record 144,000 in the year to June 2023, it underlines the high level of unemployment and job cuts at larger firms.

As more businesses set up, more are also folding after failing to navigate the tough terrain littered with multiple and expensive licences, heavy taxation, huge input costs and a deteriorating purchasing power of consumers.

Further, interest rates on loans are increasing rapidly, making it more expensive to borrow and also service existing loans. More banks are set to follow Equity Bank, NCBA and Access Bank Kenya recently announced higher interest rates following the raising of the base lending rate by the Central Bank.

The importance of small- and medium-sized enterprises (SMEs) to the economy cannot be overstated. The country’s seven million SMEs employ 14.9 million Kenyans and contribute to about 30 per cent of gross domestic product (GDP).

It is, therefore, imperative for the government to make urgent reviews to its policies to not only attract, especially, foreign direct investment but also enable existing businesses to thrive.

Most importantly, the government must put in place a policy to make the taxation regime predictable, which will bring stability to investors. It must also review taxes on critical goods and services with a great impact across the economy, such as fuel and electricity, to reduce the cost of doing business.