Jubilee owes business community stable legal environment

President Uhuru Kenyatta accompanied by his Deputy William Ruto and other Jubilee leaders, during a campaign rally at Nandi Bears Club in Nandi County. [Photo by Peter Ochieng/Standard]

The business community kicked off the year with a renewed sense of optimism, confident that the intense politicking that stifled business activity in 2017 would subside. Unfortunately, the opposite has come to pass. The elections did not settle the supremacy battle between Nasa and Jubilee, but instead, set the stage for a more protracted and bitter contest.

Amidst this struggle for power, politicians on both sides of the political divide have demonstrated a flagrant disregard for the rule of law. The defiance of court orders and the public lambasting of the Chief Justice in political rallies are pointers to this, as are the arbitrary shut down of broadcasters and the swearing in of the opposition chief as President of the People.

Troubling developments

These developments are deeply troubling for us in the business community, who rely on the stability of our legal environment to conduct business. Besides good infrastructure, availability of human capital and access to affordable capital, adherence to the rule of law is one of the key determinants of an economy’s global competitiveness.

Jeffrey Immelt, the former CEO of General Electric, in one of his recent visits to Kenya, was very categorical about the instrumental role a stable legal environment plays in driving economic development. This underlines the deep consensus on this issue among business leaders around the world.

Countries with a stable legal environment tend to attract more investments in the long run. A case in point is Singapore, which got independence in the same year as Kenya, but is significantly ahead of Kenya in terms of socioeconomic development.

Singapore operates one of the most efficient court systems in the world, according to Cambridge University. This explains why many multinational companies have chosen to use Singapore as their entry point into Asia. The presence of multinationals in Singapore has accelerated the transfer of skills, knowledge and technology to the local population, making the country one of the most globally competitive and innovative economies. The country is ranked first in Asia and seventh worldwide in the Global Innovation Index 2017.

If Kenya wants to replicate and surpass Singapore’s enviable level of success, the political class needs to change course and accord the Constitution the respect it deserves. It is lamentable that the very politicians who bear the greatest responsibility to uphold the Constitution are the same ones who treat it as nothing more than a bothersome document.

Equally important is the need for the political class to engage stakeholders in the business community more robustly before passing laws that affect them. The gaming industry has been a victim of this serious oversight.

The risks

Gaming firms were caught flatfooted after the abrupt introduction of a 35 per cent tax on all gambling revenue. This is the highest in the region, according to PwC. Moreover, it has put a Sh200 billion industry at risk of collapse and will have a ripple effect on the telecoms and media industries, which benefit from daily advertisements from gaming firms.

Businesses need predictable government regulation, as this allows them to make long-term investment plans. Continued regulatory uncertainty will lock out deep pocketed investors who have the expertise to roll out long-term projects in strategic sectors such as manufacturing and agribusiness, limiting economic activity in Kenya to street trading and importation.

This could stifle the implementation of President Uhuru Kenyatta’s Big Four agenda, which focuses on health, agriculture, housing and manufacturing, and depends to a great extent on long-term partnerships with the private sector for success.

Evidently, the political class needs to be more respectful of the rule of law, cognizant of the correlation between a stable legal environment and economic development. However, for this to happen, Jubilee must take charge of the situation. As the government of the day, it stands to lose and gain the most, depending on how it responds to the issue.

Our undoing

So far, Jubilee has been successful in positioning Kenya as a regional business hub. Since 2014, the country has moved from position 136 to the current position 80 in the World Bank’s Ease of Doing Business Index.

As the people of Buganda say, there is no need to diligently wash a dress to later dry it in the dust. The commendable progress Jubilee has made in improving Kenya’s business environment could all be undone if politicians continue disregarding the rule of law. The government needs to urgently address this issue and reassure investors that laws, rather than politicians, have the final word in this country.