President Uhuru Kenyatta's second term has been characterized by high cases of insolvency as companies shut down over what has been termed as the ever skyrocketing cost of doing business.
The Jubilee administration, in an effort to cater for the ballooning wage bill and capital intensive projects, has introduced new levies that have seen businesses, especially start up, struggle to remain afloat.
Kenyans.co.ke has now learnt that since 2017 when the Jubilee administration secured a second term in office, more than 6,000 companies have since been dissolved.
In the 2017/18 Financial Year, a total of 453 companies dissolved. The highest number of dissolution was registered in March 2018 when 61 companies shut down, followed by May with 67 and June with 73 companies dissolving.
The 2017/2018 Financial Year saw a monthly average of 36 companies being dissolved across different sectors.
According to data in our possession, this was the lowest number of shut downs, as the scenario worsened in the following years.
In 2019/2020 Financial Year, the total number of companies that dissolved increased by 128 per cent, to 992, with February 2019 being the worst month after seeing 111 companies close their doors completely.
Other months that saw significant dissolutions included March 2019 where 106 companies folded, followed by January 2019 and November 2018, which saw 102 and 94 companies fold respectively.
The situation worsened in the 2019/2020 Financial Year where the numbers jumped significantly surpassing the 1,000 mark with 1,255 companies folding by the end of that year. The highest number was in August 2019 where 122 companies folded.
The 2020/2021 Financial Year as not any different with the downward trend continuing where the numbers more than doubled to increase by 102 per cent. This saw a total of 2,540 companies dissolve by the end of that year. This coming in the backdrop of the Covid-19 pandemic that saw the government order a dawn to dusk curfew which worsened an already bad situation for companies struggling with productivity.
According to Francis Kamau, a partner at Ernst & Young, graft, cost of power, shifting policy, policy implementation and security are among the main reasons that forced companies to shut down.
He further notes that in countries like Egypt, the cost of power is capped at Ksh5 per kilowatt-hour, while in Kenya the same goes for Ksh15. This amount is also more than double the cost of power in neighboring countries like Ethiopia where it cost Ksh7 per kilowatt-hour.
“When you look at manufacturing companies, they are forced to produce their own power to reduce the overall cost of production. Just recently, KenGen said it will be selling directly to bulk consumers," noted Kamau.
“For you to invest in Kenya, you have to go through so many hands to basically allow you get the right piece of land, get the right approvals, etc,” he added.
These revelations contradict the government's claim that the country has improved in raking on the ease of doing business index globally, making the improvement inconsequential to the economy.A closed sign placed on a pharmacy shut down by the Pharmacy and Poisons Board on February 26, 2021, in the Lower Eastern Region
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