Lessons from Kenya Revised

May 1, 2023 [email protected] 1

Cutting Red Tape in Africa

Sharing Approaches to Regulatory ReformDecember 3-5, 2008

Ngurdoto Mountain LodgeArusha, Tanzania

Reforming together – mechanisms to involve the private sector in reform design and

implementation

Ben Musau, Senior Partner, B M Musau & Co., Advocates


Licensing Reform in Kenya

• 165+ government agencies authorized to issue licenses

• Licenses widely used to raise revenue• Original estimates were 300+ business

licenses• Licensing recognized as major regulatory

constraint on the formal economy, business formalization, and investment


Results

A first-ever inventory and review of all of business licenses in Kenya (a total of 1,325)– 315 licenses eliminated – 379 licenses simplified– 294 retained– Approximately 300 licenses deferred, and 25 re-

classified– 23 licenses out of a priority list of 26 business

priorities eliminated or simplified– Kenya a “global top reformer” in Doing Business 2008


Private sector in Kenya• In Kenya Government was very reluctant to involve the

private sector• Reform initiative taken as a “Government only” affair• Subsequently, Government now acknowledges the role

and impact of the private sector in regulatory reforms• Licensing Committee involved the private sector from the

very start• Chair of the Reform Exercise appointed by Government

from the private sector– Licensing Committee, therefore, changed Government’s initial

reluctance to directly involve the private sector– Private sector involved in all main consultative forums, meetings

and other communication with the Government mainstream and other regulatory agencies including local governments


Why involve the private sector?• If private sector is not involved in the reform process, the reforms will not

necessarily address the concerns of the private sector– Such reforms could address licenses that are not critical for private sector

operations• Essence of democracy: Government of the people by the people for the

people• If people are not involved in Government and governing, democratic

principles are not achieved• Reforms without taking into account the wishes of the private sector will lead

to resentment and could lead to civil disobedience, riots and disorder• Public-private partnership – the private sector is a real partner of

Government in development– It is the private sector that creates the jobs for the people– Taxes– Economic growth– Facilitative business environment will lead to a stronger state with increase

growth, more taxes for more social services, etc.


Kenya approach• Regulatory guillotine: what is it?• Committee did not used the dogmatic guillotine approach, which

would include elimination by default of all licenses that did not pass the test– all committee decisions had to go through a process of political approval

by either Government or Parliament– So in Kenya we used “revised guillotine”.

• Strong “ex-ante” government mandate to Licensing Committee with cross-ministerial representation

• 2 years of work has added lots of nuance to the reform leading to a nuanced, thorough and relatively long review process

• Specialized consultants to review sector licenses (environment, agriculture, traceability issues, municipal governments and tourism)

• Decision memo for each of the 1,325 licenses


Exactly how did we involve the Kenya private sector

• All the main private sector organisations involved

– Kenya Private Sector Alliance– Kenya Association of Manufacturers– Kenya National Chamber of Commerce & Industry– United Business Association– Horticulture, tourism and other private sector organisations

• Use of Chair’s contacts with the private sector to involve them

• Specific review sheets for the private sector– assessment of the business-friendliness or otherwise of each of 1,325 licenses


Exactly how …

• Extensive business consultation– Specific public-private sector forums for dialogue– Forums were sector based (environment, agriculture, tourism, local government and

others)– Specialized consultants reviewed sector licenses where the private sector was

consulted and involved– Breakfast meetings with private sector to confirm the list of licenses in each sector– Specific one to one forums with the Licensing Committee

• Committee discussed with the private sector comments of the public sector especially where there were claims of business friendliness


Exactly how …

• Decision memo for each of the 1,325 licenses– Comments and arguments of the private sector

influenced the Committee’s decisions– These comments and arguments are reflected in

the 1,325 decision memos– Decision memos are the basis of the

Committee’s work


Private sector “hit” list of 26• Business sector concerns sometimes rather surprising The critical

contribution of private sector was its certification of a “hit” list of 26 licenses considered to be most burdensome

– Committee had never imagined the type of licenses that most affected business operations

• This list assisted the Committee– Holding more consultative forums with the private and public sectors to discuss

all the pros and cons of the licenses on the list with special attention– Highlighting and advising Government to concentrate the highest efforts in

addressing the elimination or simplification of the licenses on the list– Critically reviewing the decision memos on the 26– Government adopted the Committee’s recommendations on the 26 wholesale– The actions taken by Government to address the 26 have led to a lot of public

attention and debate, thereby sustaining the moment for regulatory reform in Kenya

• Long live the public-private partnership in Kenya


“Hit” list of 26• Businesses particularly critical of the Single Business

Permit: deep concerns about many of the activities regulated and its implementation and enforcement

• Recommendations of Committee– Out of the 26, eliminate 16 and simplify 10– Rationalize and reduce number of SBP schedules from 16 to 10 – SBP replaces all other LA business licenses– Immigration work permits: introduce an interim work permit valid

for 6 months– All Government advertising licenses to be replaced by standards


Challenges from Kenya• Capacity of the private sector to engage Government is seriously limited

– Committee has included capacity building within the scope of the draft regulatory reform strategy for the country included in the final report

• Reluctance of Government agencies to accommodate private sector representation in policy discussions

– Capacity building of public sector to value private sector contribution is within the strategy

• Since delivery of Committee’s final report March 5, 2007 there has been no published private sector consultation

– Continued and systematic involvement of the private sector through a revitalized business licensing committee (with a broader mandate)

– While BRRU concentrates on filtering new regulations• Continuity of the reform initiative

– No legislative reform measures have been effected since Budget 2007/8– Parallel reform initiatives of the regulatory agencies e.g. tourism,

communications, etc. do not take priority in Parliament as budget-related packages

– No institutional successor to the Working Committee to drive the private and public sectors and to keep them on the reform track


Way forward in Kenya• Finalization and submission of the Business Regulation Bill to

Parliament• Track and promote full implementation of the licensing reform

– continued and systematic involvement of the private sector through a revitalized business licensing committee (with a broader mandate)

– Mandate of revitalised committee to finalise the strategy, the Business Regulation Bill, and to take the reform process back to track in consultation with the private and public sectors

– DB reforms to be within the mandate of the revitalised committee• Establish temporary measure to vet new business licenses

– BRRU should concentrate in its core mandate• Strengthen and formalize key institutional drivers of reform• Assess and quantify the effects of the licensing reform (in progress)• Publish Regulatory Reform Strategy• Improvement of Doing Business Indicators (probably in progress)• Fail to consult the private sector, prepare to fail in the regulatory

reforms


Conclusion• Private sector contribution critical for the success of any

regulatory reform efforts• Vital to involve the private sector from the very beginning• If private sector is not involved, reforms will not target the

concerns of the businesses, and the impact of reforms will be constrained

• It is possible for a country to drop if there are no concerted efforts to sustain private sector involvement

• Revitalised licensing committee with broader mandate– Sustained business licensing reforms– BRRU concentrates on the core business of vetting new

regulations to avoid “re-creeping” of unwanted regulation– BRRU should closely consult the private sector

• Fail to consult the private sector, prepare to fail in the regulatory reform process


End

Long live the World of peace and understanding!

Long live Africa while reforming!God Bless Africa!God Bless Kenya!

Many thanks for listening

Documents

Lessons from Kenya Revised