(THE EAST AFRICAN) Billion-dollar plan to spur business growth in Kenya

Billion-dollar plan to spur business growth in Kenya

Finance minister Uhuru Kenyatta (centre) Planning minister Wycliffe Oparanya (right) and assistant Finance minister Oburu Odinga (left) pose for a photo before leaving Treasury for Parliament where Mr Kenyatta presented the 2010/2011 Budget June 10, 2010. Photo/STEPHEN MUDIARI
By Mark Kapchanga (email the author)
Posted Monday, June 14 2010 at 00:00

Kenya will spend over Ksh406.5 billion ($5.42 billion) in projects that have over the past years inhibited business growth.

Kenya presents a 'job creation budget'

Latest statistics from the just concluded 2010/2011 budget presentation show that the government will spend the money for the enhancement of investment climate.

To usher in more inflows, Treasury said that it was determined to bring down production costs. Leading the pack is the radical proposal to cut power overheads incurred by firms, as Finance Minister Uhuru Kenyatta said in his budget speech that that the country will be shifting its reliance on hydropower to alternative but cheaper energy sources.

The new development will see businesses use more of geothermal, wind as well as solar power it its operations. The shift is also likely to reduce pressure on hydropower, especially with the ballooning demand for energy.

Analysts say the diversification of power sources is likely to spur company margins as energy costs have eaten deeply into their revenues. Reports show that alternative energy sources account for only 6.4 per cent of Kenya’s total energy use.

“The government is aware that there are many private investors who are keen to invest in the energy sector and especially in alternative and cheaper sources. However, there are concerns that the procedures take too long. In this regard, Treasury commits to support the Ministry of Energy by removing all procedural and licensing impediments so that private investment in the energy sector can be fast-tracked,” Mr Kenyatta said.

Currently, the Energy Regulatory Commission is formulating a system that will see the electricity tariffs reviewed to ensure predictability of power costs.

In the 2010/2011 fiscal year budget, more than Ksh34.1 billion ($455 million) will be pumped into the sector with more than Ksh15.6 billion ($208 million) invested in expansion of the national grid system and Ksh11.6 billion ($154.7 million) for geothermal development and coal exploitation.

Geothermal power generation is likely to be expanded substantially this fiscal year as public-private sector partnerships help the country exploit an additional 500MW in the next four years. This will bring installed power capacity to a total of 800MW by 2014.

In an effort to open borders to foreign businesses and increase the county’s competitiveness, the minister proposed that radical reforms be introduced especially in the regulatory institutions “whose mindset appear to be aimed at preventing not facilitating business.”

This apparently referred to local authorities that have in the recent years come under sharp criticism over their archaic regulations, which have substantially affected business operations.

Nairobi City Council is a conspicuous example for its bureaucratic, corrupt and overlapping licensing procedures.

“This budget proposes measures to improve our regulatory framework supportive of private sector-led growth. One key action in this direction will be the enactment of the proposed Business Regulation Bill which is now ready for submission,” the Finance Minister said.

Once enacted, The Bill will bar regulatory bodies from introducing punitive charges and fees at will.