In recent years, Kenya has witnessed a concerning trend of multinational corporations exiting the market.
Prominent companies such as GlaxoSmithKline, Game stores, Betin, and Shoprite have ceased their operations in Kenya, citing a range of issues from regulatory challenges to high operational costs.
These departures have raised significant concerns about the country's economic stability, highlighting the urgent 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. While Kenya has made some progress in this area, more can be done to simplify regulations, reduce bureaucratic hurdles, and improve government services.
A more business-friendly environment would not only encourage existing multinationals to stay but also attract new ones.
For example, 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 particularly 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 also needs to 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 favorable tax policies, the government can help create an environment that supports 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.
In addition to addressing regulatory and fiscal challenges, Kenya must 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 significantly from value-addition initiatives.
By processing raw agricultural products locally, Kenya can increase its export value and create more jobs.
Similarly, in the manufacturing and technology sectors, local content policies that encourage the use of Kenyanmaterials and labor can help strengthen the economy and provide a more sustainablefoundation for growth.
Political stability and sound economic policies are fundamental to maintaining investor confidence.
The unpredictability of the political environment in Kenya has been a significant concern for businesses.
The government must work towards ensuring a stable and predictable political climate, which is essential for long-term business planning and investment.
Addressing corruption, which has long been a challenge in Kenya, is critical to improving the business environment.
Countries like Botswana, which have maintained political stability and low levels of corruption, continue to attract and retain multinational investments, serving as a model for Kenya.
Lastly, investing in education and training to build a skilled workforce is crucial for the economic future. As industries evolve, the demand for skilled labor increases.
Partnerships between the government, educational institutions, and the private sector can create programmes that align with industry needs, ensuring that the Kenyan workforce remains competitive on the global stage.
For example, South Korea’s investment in education and vocational training has transformed it into a global leader in technology and manufacturing, attracting numerous multinational corporations.
By following a similar path, Kenya can develop a workforce capable of supporting a diverse and dynamic economy.