The 2020 AMCHAM economic outlook forum

We are all aware and have seen the figures regarding how the economy performed last year and projections on how it will perform this year. These figures notwithstanding, we know that there has been a slowdown in economic activity, many of the companies represented here are feeling the impact of these hard-economic times and are faced with great uncertainty about the future.

We know that the people who are most impacted by a slowdown in economic activities, are the most vulnerable members of society, young people who are looking and ready to participate in the economy yet can’t find jobs, women who are the corner stone of our societal fabric. Women / Young people are asking leaders to step up and lead, government to deliver on its promise, stop corruption,

As Amcham Kenya, we know this well, as our businesses who have been part of Kenya for more than 70 years, operate across the country.

Interestingly, we also know that such times of uncertainty are often the one’s that hold the most opportunity. So despite the challenges, we are also faced with the responsibility to find innovative ways to spur and accelerate growth in the economy.

Kenya’s immense potential is undisputed the world over, with the country referred to as one of Africa’s frontier economies to watch. This is the reason why we all choose to invest here.

There has been much progress, however in improving the business environment over time. The consistent improvements in Kenya’s ranking on the ease of doing business index attests to this as well as the growing number of new investors coming in and the expansion of existing operations.

More recently, the launch of the Kenya Investment Policy was a step in the right direction towards attracting further and more varied investment. Other efforts such as President Kenyatta’s directive to clear pending payments to businesses by the government and process VAT refunds were also welcomed.

However, the slowdown that we are experiencing is an indication that something is still amiss. Which brings us to four key areas which we, as AmCham believe would, if addressed, significantly improve the economy and the business environment giving us the space we need to innovate and grow.

The first point is:

Cap the growing burden and unpredictability of taxation

We understand and appreciate the continued investment by the government in infrastructure development, which is necessary for economic development. We therefore appreciate the significant funding required to meet the development goals, driven by the Big 4 agenda set out for Kenya.

However, our view is that the spiralling taxation is not the answer. Unpredictable, excessive taxation inhibits businesses on accelerating reinvestment needed for growth in output and job creation.

Regulation that is solely for the purpose of increasing tax collection is short sighted and detrimental to long term business growth.

What we advocate for is regulations and taxation that focuses on increasing the tax base. We must grow the economic pie so that we have more to distribute towards long term investment for both public sector infrastructure and private sector capabilities and capacities. This we believe, will have a long-term positive outcome towards the economic empowerment of the broader Kenya communities.

2. Regulatory Reform

Government’s focus should be to continue to drive progressive regulation and facilitating an enabling environment.

We advocate for the development of clear and transparent laws through meaningful public-private sector engagement in policy formulation and predictability. This will enhance investment and improve the business environment.

3. Promotion of Free Trade

Access to markets still remains a hurdle. We support efforts to find a long-term engagement including the possibility of a Free Trade Agreement (FTA), in trade relationship between Kenya and the U.S. beyond AGOA’s expiration in 2025 and are pleased that negotiations through the Trade and Investment Technical Working Group are ongoing.

We reiterate the need for open, comprehensive and reciprocal trade agreements, that will not only contribute to a more enabling business environment but also give more opportunity to benefit from export trade.

We are seeking, Kenya to lead the way and follow the rules agreed between countries within East Africa and the seamless consolidation of economic regulations between counties. Doublespeak is hurting businesses. Particularly on policies on cross border trade. Supporting it on one hand and on the other maintaining non-tariff barriers and protectionist policies is detrimental.

4. Increase Kenya’s Competitiveness

One of the biggest stumbling blocks to economic growth is competitiveness. Driven by main factors, some include, energy costs, investment in newer technology in manufacturing, taxation, know-how, Scale, which Kenya needs to drive this agenda through East Africa, to name a few.

Given this, what role will Kenya play in Africa Free Trade Area (AfCFTA). The question is, will Kenya be the one leading that charge, with goods exported?

Already, the declining share of manufacturing’s contribution to the national GDP reflects the impact of high cost and lack of availability of quality inputs, high costs of production, unpredictability of regulation and stronger competition from imported goods. The reality is that Kenyan goods, we need to address these factors, in order to compete regionally and globally markets.

In Conclusion: Our message as AmCham

As AmCham we are saying, let this be the year to:

Take the long view– Focus on growing the pie for the benefit of all. Put in measures to grow the economy so that there is consistent increase in business opportunities, growth and number and quality of jobs created.
Collaborate– Real collaboration between the public and private sector to find innovative solutions to the challenges of meeting Kenya’s development agenda. We are ready and willing to do the hard work with you, lend our expertise, develop frameworks and give our input to models that work.
Implement– Act. Ensure that pronouncements and declarations filter into action for tangible benefits.

o Stopping Corruption is Fundamental,

o Make progress on the World Trade Organization (WTO) Trade Facilitation Agreement which Kenya ratified on December 10, 2015.

Phillipine Mtikitiki is the President, American Chamber of Commerce in Kenya.