Unrealistic regulations stifling industry growth

The essence of regulations is to create the right environment for people and businesses to be productive and thrive.

There are, arguably, three major ways in which business regulation is supposed to be beneficial—to protect consumers; create and grow markets and  enable competition.

These things will only be upheld if the regulations developed are progressive, transparent and fit-for-purpose.

Regulations, ideally, should give breathing room for businesses to innovate and prosper.

But when the result of regulation suffocates businesses and is punitive to citizens, it ceases to serve its meaningful purpose and becomes a burden to the economy with far-reaching consequences. 

At a time when we are facing stiff competition in terms of trade, from our  neighbours  and further, when the continent is opening up to create the largest market in the world through the Africa Continental Free Trade Area, it seems retrogressive for us to be effecting a myriad of regulations that clip the wings of local businesses, rendering them uncompetitive for present and future markets.

We are setting ourselves up to start at a disadvantage when we should be doing everything possible to ensure Kenya stays ahead of the curve.

Despite being a key pillar in the government’s Big Four agenda, the manufacturing sector continues to be plagued with numerous regulations and over-taxation.

For a sector that should grow at double digit every year to provide productive employment, its contribution to the GDP is dropping and growth decreasing.

From an average share contribution of 10 per cent  annually for several years, right now it is balancing at 7.7 per cent GDP share.

This turn of events can be attributed to, among other things, lack of well-structured regulatory frameworks and tax policies to nurture and propel businesses and innovation.

This has resulted in punitive corrective measures such as closures or suspensions being executed without the knowledge of the leadership of the regulatory agencies or with little supervision; lack of review of regulators processes to ensure their adherence to the fair administration principles; lack of transparency and use of unnecessary force over what is cited as “compliance issues” by the same compliance agencies that have issued up-to-date licenses and permits to manufacturers.

There is indeed a dilemma in executing regulation: The balance between its contribution to fairness and equality.

The benefits of any regulations—the protection of people and businesses—are negated when the implementation of said regulation falls short. Then public trust dissipates and everything that comes afterward is treated with suspicion. 

In the short and medium term, part of the remedy can be that a review of the roles and mandate of regulatory agencies is conducted in order to identify and address overlaps and support effective coordination of functions and actions.

Additionally, we need to look into establishing a uniform government communication process for regulatory agencies to the public touching on businesses regulatory operations. 

Poorly designed regulation and ineffective implementation of regulation can stifle innovation, growth, job creation and investments.

Our economy has been in dire need of a massive boost and this can come through an enabling business environment which increases productivity, jobs and wages, and equal distribution of resources through growth and investments.

Our number one priority in formulating sustainable development policies should be to do away with policies and taxes that are tantamount to over-regulation and let businesses breathe. —The Writer is the CEO, Kenya Association of Manufacturers and the UN Global Compact Representative for Kenya. ceo@kam.co.ke.

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