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| An illustration of a corporate lady |
In recent years, multinational corporations have exited the Kenyan market. Companies such as GlaxoSmithKline, Spire Bank, Betin and Shoprite have ceased operations in Kenya, citing a range of issues from regulatory challenges to high operational costs. These departures have raised concerns about the country’s economic stability, highlighting the need for strategic action to make Kenya a more attractive destination for foreign investment and to prevent further exits.
One of the most critical steps Kenya must take is to enhance the ease of doing business. More can be done to simplify regulations, reduce bureaucratic hurdles, and improve government services. A more business-friendly environment will encourage existing multinationals to stay and attract new ones. Rwanda’s consistent improvement in the World Bank’s Ease of Doing Business rankings is a testament to the positive impact that regulatory reforms can have on attracting and retaining foreign investments. By adopting similar reforms, Kenya can create a more conducive environment for business growth.
Public-Private Partnerships (PPPs) are another crucial component in addressing the challenges that multinationals face in Kenya. These partnerships can be effective in bridging infrastructure gaps, which are often cited as a significant barrier to business operations. The Lake Turkana Wind Power project is a prime example of how successful collaboration between the government and private sector can lead to the development of critical infrastructure, enhancing the attractiveness of Kenya as a destination for investment. Expanding PPPs across various sectors, including transport, energy, and technology, could provide the necessary infrastructure support that multinationals need to operate efficiently in Kenya.
Kenya must address its tax and fiscal policies to create a more predictable and stable environment for businesses. Multinationals often express concerns over unpredictable tax regimes and the high cost of compliance. By engaging with the business community and providing clear, consistent, and favourable tax policies, the government can help create an environment that supports a long-term investment. Offering targeted tax incentives for companies that invest in strategic sectors or underdeveloped regions could further encourage multinationals to maintain and expand their operations in Kenya.
Kenya must also focus on building robust local supply chains and promoting value addition. Developing strong local industries can reduce the country’s dependence on imports and make the economy more resilient to external shocks. For instance, the agriculture sector, which remains a cornerstone of Kenya’s economy, could benefit greatly from value-addition initiatives. By processing raw agricultural products locally, Kenya can increase its export value and create more jobs.
Political stability and sound economic policies are fundamental to maintaining investor confidence. The government must work towards ensuring a stable and predictable political climate. Addressing corruption is critical to improving the business environment. Lastly, investing in education and training to build a skilled workforce is crucial for Kenya’s economic future. As industries evolve, the demand for skilled labor increases. Partnerships between the government, educational institutions, and the private sector can create programs that align with industry needs.