The recent protests led by Gen Z have significantly impacted the country’s economy, placing investors in a cautious stance.
In an interview, CEO of the Kenya National Chamber of Commerce and Industry (KNCCI), Patrick Nyangweso, discussed the business landscape, investment climate, and future strategies.
What have been the repercussions of the Gen Z protests on businesses?
Over the past month, the business environment has been volatile, leaving enterprises uncertain about operations. The foremost impact has been on the supply chain, disrupting the transport of raw materials, particularly affecting manufacturing. This disruption has hindered production and local as well as export deliveries, posing challenges in meeting market demands and sectoral contributions to the economy. Considering the manufacturing sector’s substantial Sh1 trillion contribution last year, as per the Economic Survey, disruptions potentially result in daily losses of Sh2.86 billion in value addition. If sustained, this could perpetuate Kenya’s dependency on imports, impeding efforts to achieve the sector’s targeted 20% GDP contribution by 2030. Ensuring a conducive operational environment and smooth supply chains is crucial.
Which other sectors have been adversely affected?
Tourism has also suffered, with up to 27% of bookings canceled during the peak season, including the wildebeest migration. This setback impacts foreign exchange earnings and risks losing ground to competing markets like Tanzania. Furthermore, the shilling’s depreciation against the US dollar has begun anew, raising the cost of imports. The protests have also impacted monetary and capital markets, necessitating corrective measures.
How can we address the substantial trade deficit?
Empowering local manufacturers is paramount. From cottage industries to large-scale enterprises, enhancing competitiveness is key. This strategy fosters value addition, boosts local production, and augments export growth, thereby curbing the current Sh1.6 trillion trade deficit. Affordable energy, robust infrastructure, credit access, and predictable tax frameworks are essential for sustaining competitiveness and countering cheaper imports from neighboring markets.
What is the current investor sentiment?
Investor confidence hinges on political stability and the business climate. Many investors are withholding investments, leading to reduced Foreign Direct Investments (FDIs). A collaborative government dialogue is imperative to stabilize conditions, retaining current investors and attracting new ones.
What are your views on governmental bureaucracies?
Excessive regulations stymie businesses. Establishing a restaurant, for instance, demands over 14 licenses, consuming a significant portion of initial capital. Addressing these regulatory burdens at both national and county levels is essential. Counties should streamline fees and levies to enhance business viability.
How accessible is credit for businesses?
High bank interest rates are a barrier, particularly for MSMEs struggling with loan repayments during economic downturns. Lowering interest rates and providing tax incentives for startups can bolster business stability and compliance.
What is your take on industrial parks?
Decentralizing industries from urban centers to county aggregation parks is a commendable initiative. These parks can drive industrialization, foster MSME growth, generate employment, and bolster export opportunities if adequately supported.
Why do investors prefer importing human resources despite Kenya’s educated workforce?
Skill mismatch is the primary hurdle. Although well-educated, our youth lack job-market competitiveness due to this disparity. Aligning educational curricula with industry needs and enhancing Technical and Vocational Education and Training (TVET) can bridge this gap. Dual TVET programs integrating classroom learning with practical experience are pivotal in equipping graduates with industry-relevant skills.
What steps should Kenya take moving forward?
Dialogue is paramount for mitigating economic disruptions. Addressing pertinent issues, tax concerns, and fostering a favorable business environment are crucial for sustainable economic growth.
