COMPARING REGULATION IN 11 LOCALITIES AND 183 ECONOMIES in Kenya 2010 51233 COMPARING REGULATION IN 11 LOCALITIES AND 183 ECONOMIES A copublication of the World Bank and the International Finance Corporation © 2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail feedback@worldbank.org All rights reserved. A publication of the World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. 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Doing Business in Kenya 2010 and other subnational and regional Doing Business studies can be downloaded at no charge at http://subnational.doingbusiness.org Additional copies of the Doing Business global reports: Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth and Doing Business in 2004: Understanding Regulations, may be pur- chased at www.doingbusiness.org About the Investment Climate Advisory Services of the World Bank Group The Investment Climate Advisory Services of the World Bank Group helps governments implement reforms to improve their business environment, and encourage and retain investment, thus fostering competitive markets, growth and job creation. Funding is provided by the World Bank Group (IFC, MIGA, and the World Bank) and over fifteen donor partners working through the multi-donor FIAS platform. Contents Doing Business in Kenya 2010 is a new The indicators are used to analyze subnational report of the Doing Business economic outcomes and identify what About Doing Business and series on the sub-Saharan African region, reforms have worked, where, and why. Doing Business in Kenya v following the subnational Doing Business Other areas important to business--such Overview 1 report on Nigeria. It measures business as a country's proximity to large mar- Starting a business 6 regulations and their enforcement in 11 kets, the quality of infrastructure services Dealing with construction permits 10 Kenyan localities: Eldoret, Garissa, Isiolo, (other than services related to trading Registering property 14 Kilifi, Kisumu, Malaba, Mombasa, Nai- across borders), the security of property Enforcing contracts 17 robi, Narok, Nyeri, and Thika. The locali- from theft and looting, the transparency ties can be compared against each other, of government procurement, macro- Data notes 22 and with 183 economies worldwide. economic conditions, or the underlying Comparisons with other economies strength of institutions--are not directly Doing Business indicators 28 are based on the indicators in Doing studied by Doing Business. To make Locality tables 30 Business 2010: Reforming Through Dif- the data comparable across localities, List of procedures ficult Times, the seventh in a series of the indicators refer to a specific type of Starting a business 35 annual reports published by the World business--generally a small- or medium- Dealing with construction permits 48 Bank and the International Finance Cor- sized limited-liability company. Registering property 58 poration. The indicators in Doing Busi- This project is the result of a request ness in Kenya 2010 are also comparable from the Government of Kenya to the Acknowledgments 64 with the data in other subnational Doing Investment Climate Advisory Services of Business reports. All Doing Business data the World Bank Group. It was produced and reports are available at http://sub- with the support of the Office of the national.doingbusiness.org and at www. Prime Minister, the Office of the Deputy doingbusiness.org. Prime Minister and the Ministry of Local Doing Business investigates the regu- Government, and with the financial sup- lations that enhance business activity and port of the Embassy of the Kingdom of those that constrain it. Regulations af- the Netherlands in Nairobi and the IFC fecting four stages of the life of a business Funding Mechanisms for Technical As- are measured at the subnational level in sistance and Advisory Services. Kenya: starting a business, dealing with construction permits, registering prop- erty, and enforcing contracts. These in- dicators have been selected because they cover areas of local jurisdiction in prac- tice. The data in Doing Business in Kenya 2010 are current as of June 2009. About Doing Business and Doing Business in Kenya 2010 In 1664 William Petty, an adviser to to stop doing things for which demand and reviewers. The initial goal remains: England's Charles II, compiled the first has weakened and to start doing new to provide an objective basis for under- known national accounts. He made 4 things. Clarification of property rights standing and improving the regulatory entries. On the expense side, "food, hous- and strengthening of market infrastruc- environment for business. ing, clothes and all other necessaries" ture (such as credit information and were estimated at £40 million. National collateral systems) can contribute to con- What Doing Business in Kenya 2010 covers income was split among 3 sources: £8 fidence as investors and entrepreneurs million from land, £7 million from other look to rebuild. Doing Business in Kenya 2010 provides personal estates and £25 million from Until very recently, however, there a quantitative measure of the national labor income. were no globally available indicator sets and local regulations for starting a busi- In later centuries estimates of coun- for monitoring such microeconomic fac- ness, dealing with construction permits, try income, expenditure and material tors and analyzing their relevance. The registering property and enforcing con- inputs and outputs became more abun- first efforts, in the 1980s, drew on per- tracts--as they apply to domestic small dant. But it was not until the 1940s that ceptions data from expert or business and medium-size enterprises. a systematic framework was developed surveys. Such surveys are useful gauges A fundamental premise of Doing for measuring national income and ex- of economic and policy conditions. But Business is that economic activity re- penditure, under the direction of British their reliance on perceptions and their quires good rules. These include rules economist John Maynard Keynes. As the incomplete coverage of poor countries that establish and clarify property rights methodology became an international constrain their usefulness for analysis. and reduce the costs of resolving disputes, standard, comparisons of countries' fi- The Doing Business project, launched rules that increase the predictability of nancial positions became possible. Today 8 years ago, goes one step further. It looks economic interactions and rules that the macroeconomic indicators in national at domestic small and medium-size com- provide contractual partners with core accounts are standard in every country. panies and measures the regulations ap- protections against abuse. The objective Governments committed to the eco- plying to them through their life cycle. is: regulations designed to be efficient, to nomic health of their country and op- Doing Business and the standard cost be accessible to all who need to use them portunities for its citizens now focus on model initially developed and applied in and to be simple in their implementa- more than macroeconomic conditions. the Netherlands are, for the present, the tion. Accordingly, some Doing Business They also pay attention to the laws, regu- only standard tools used across a broad indicators give a higher score for more lations and institutional arrangements range of jurisdictions to measure the regulation, such as stricter disclosure re- that shape daily economic activity. impact of government rule-making on quirements in related-party transactions. The global financial crisis has re- business activity. Some give a higher score for a simplified newed interest in good rules and regu- The first Doing Business report, pub- way of implementing existing regulation, lation. In times of recession, effective lished in 2003, covered 5 indicator sets in such as completing business start-up business regulation and institutions can 133 economies. This year's report covers formalities in a one-stop shop. support economic adjustment. Easy 10 indicator sets in 183 economies. The Doing Business in Kenya 2010 en- entry and exit of firms, and flexibility project has benefited from feedback from compasses 2 types of data. The first in redeploying resources, make it easier governments, academics, practitioners come from readings of laws and regula- vi Doing Business in kenya 2010 tions. The second are time and motion important factors in understanding Focused on the FormaL sector indicators that measure the efficiency some of the underlying causes of the In defining the indicators, Doing Business in achieving a regulatory goal (such as global financial crisis. in Kenya 2010 assumes that entrepre- granting the legal identity of a business). · Doing Business does not cover all neurs are knowledgeable about all regu- Within the time and motion indicators, regulations, or all regulatory goals, lations in place and comply with them. cost estimates are recorded from official in any locality. As economies and In practice, entrepreneurs may spend fee schedules where applicable. Here, technology advance, more areas of considerable time finding out where to Doing Business builds on Hernando de economic activity are being regulated. go and what documents to submit. Or Soto's pioneering work in applying the For example, the European Union's they may avoid legally required proce- time and motion approach first used body of laws (acquis) has now dures altogether--by not registering for by Frederick Taylor to revolutionize the grown to no fewer than 14,500 rule social security, for example. production of the Model T Ford. De Soto sets. Doing Business in Kenya 2010 Where regulation is particularly used the approach in the 1980s to show measures just 4 phases of a company's onerous, levels of informality are higher. the obstacles to setting up a garment fac- life cycle, through 4 specific sets of Informality comes at a cost: firms in tory on the outskirts of Lima, Peru. indicators. The indicator sets also do the informal sector typically grow more not cover all aspects of regulation in slowly, have poorer access to credit and What Doing Business in Kenya the particular area. For example, the employ fewer workers--and their work- 2010 Does not cover indicators on starting a business do ers remain outside the protections of not cover all aspects of commercial labor law. Doing Business in Kenya 2010 It is important to know the scope and legislation. measures one set of factors that help limitations of Doing Business in Kenya explain the occurrence of informality 2010 in order to interpret the results of Based on standardized case and give policy makers insights into po- scenarios this report. tential areas of reform. Gaining a fuller The indicators analyzed in Doing Business understanding of the broader business Limited in scope in Kenya 2010 are based on standardized environment, and a broader perspective Doing Business in Kenya 2010 focuses case scenarios with specific assumptions, on policy challenges, requires combining on four topics, with the specific aim of such as that the business is located in one insights from Doing Business in Kenya measuring the regulation and red tape of the 11 localities benchmarked in the 2010 with data from other sources, such relevant to the life cycle of a domestic report. Economic indicators commonly as the World Bank Enterprise Surveys. small to medium-size firm. Accordingly: make limiting assumptions of this kind. · Doing Business in Kenya 2010 does Inflation statistics, for example, are often Why this focus not measure all ten indicators based on prices of consumer goods in a covered in the global Doing Business few urban areas. Such assumptions allow Doing Business in Kenya 2010 functions report. The report covers only those global coverage and enhance compara- as a kind of cholesterol test for the regu- 4 areas of business regulation that bility, but they inevitably come at the latory environment for domestic busi- are the provenance of municipal or expense of generality. nesses. A cholesterol test does not tell us national governments and where local In areas where regulation is com- everything about the state of our health. differences exist. plex and highly differentiated, the stan- But it does measure something impor- · Doing Business in Kenya 2010 does dardized case used to construct each tant for our health. And it puts us on not measure all aspects of the Doing Business in Kenya 2010 indicator watch to change behaviors in ways that business environment that matter needs to be carefully defined. Where will improve not only our cholesterol rat- to firms or investors--or all factors relevant, the standardized case assumes ing but also our overall health. that affect competitiveness. It does a limited liability company. This choice One way to test whether Doing Busi- not, for example, measure security, is in part empirical: private, limited li- ness serves as a proxy for the broader macroeconomic stability, corruption, ability companies are the most prevalent business environment and for competi- the labor skills of the population, the business form in most economies around tiveness is to look at correlations be- underlying strength of institutions the world. The choice also reflects one tween the Doing Business rankings and or the quality of infrastructure. Nor focus of Doing Business: expanding op- other major economic benchmarks. The does it focus on regulations specific to portunities for entrepreneurship. Inves- indicator set closest to Doing Business foreign investment. tors are encouraged to venture into busi- in what it measures is the Organisation · Doing Business in Kenya 2010 does ness when potential losses are limited to for Economic Co-operation and Devel- not assess the strength of the financial their capital participation. opment's indicators of product market system or market regulations, both regulation; the correlation here is 0.75. aBout Doing Business anD Doing Business in kenya 2010 vii The World Economic Forum's Global ated with perceptions of greater judicial results. Some localities may rank un- Competitiveness Index and IMD's World fairness--suggesting that justice delayed expectedly high on some indicators. Competitiveness Yearbook are broader in is justice denied. And some localities that have had rapid scope, but these too are strongly corre- In the current global crisis policy- growth or attracted a great deal of invest- lated with Doing Business (0.79 and 0.72, makers face particular challenges. Both ment may rank lower than others that respectively). These correlations suggest developed and developing economies are appear to be less dynamic. that where peace and macroeconomic seeing the impact of the financial crisis But for reform-minded governments, stability are present, domestic business flowing through to the real economy, how much their indicators improve mat- regulation makes an important differ- with rising unemployment and income ters more than their absolute ranking. As ence in economic competitiveness. loss. The foremost challenge for many localities develop, they strengthen and A bigger question is whether the governments is to create new jobs and add to regulations to protect investor and issues on which Doing Business focuses economic opportunities. But many have property rights. Meanwhile, they find matter for development and poverty re- limited fiscal space for publicly funded more efficient ways to implement exist- duction. The World Bank study Voices activities such as infrastructure invest- ing regulations and cut outdated ones. of the Poor asked 60,000 poor people ment or for the provision of publicly One finding of Doing Business: dynamic around the world how they thought they funded safety nets and social services. and growing economies around the world might escape poverty. The answers were Reforms aimed at creating a better in- continually reform and update their regu- unequivocal: women and men alike pin vestment climate, including reforms of lations and their way of implementing their hopes above all on income from business regulation, can be beneficial for them, while many poor economies still their own business or wages earned in several reasons. Flexible regulation and work with regulatory systems dating to employment. Enabling growth--and en- effective institutions, including efficient the late 1800s. suring that poor people can participate processes for starting a business and effi- in its benefits--requires an environment cient insolvency or bankruptcy systems, doing Business--a user's guide where new entrants with drive and good can facilitate reallocation of labor and Quantitative data and benchmarking can ideas, regardless of their gender or ethnic capital. And regulatory institutions and be useful in stimulating debate about origin, can get started in business and processes that are streamlined and acces- policy, both by exposing potential chal- where good firms can invest and grow, sible can help ensure that, as businesses lenges and by identifying where pol- generating more jobs. rebuild, barriers between the informal icy makers might look for lessons and Small and medium-size enterprises and formal sectors are lowered, creating good practices. These data also provide are key drivers of competition, growth more opportunities for the poor. a basis for analyzing how different policy and job creation, particularly in develop- approaches--and different policy re- ing countries. But in these economies up doing Business in Kenya 2010 forms--contribute to desired outcomes as a BenchmarKing exercise to 80% of economic activity takes place such as competitiveness, growth and in the informal sector. Firms may be pre- Doing Business in Kenya 2010, in captur- greater employment and incomes. vented from entering the formal sector ing some key dimensions of regulatory Seven years of Doing Business data by excessive bureaucracy and regulation. regimes, can be useful for benchmark- have enabled a growing body of research Where regulation is burdensome ing. Any benchmarking--for individu- on how performance on Doing Busi- and competition limited, success tends als, firms or economies--is necessarily ness indicators--and reforms relevant to depend more on whom you know partial: it is valid and useful if it helps to those indicators--relate to desired than on what you can do. But where sharpen judgment, less so if it substitutes social and economic outcomes. Some regulation is transparent, efficient and for judgment. 405 articles have been published in implemented in a simple way, it becomes Doing Business in Kenya 2010 pro- peer-reviewed academic journals, and easier for any aspiring entrepreneurs, vides 2 approaches on the data it collects: about 1,143 working papers are avail- regardless of their connections, to oper- it presents "absolute" indicators for each able through Google Scholar. Among the ate within the rule of law and to benefit locality for each of the 4 regulatory topics findings: from the opportunities and protections it addresses, and it provides rankings of · Lower barriers to start-up are associ- that the law provides. localities, both by indicator and in aggre- ated with a smaller informal sector. In this sense Doing Business values gate. Judgment is required in interpret- · Lower costs of entry encourage good rules as a key to social inclusion. It ing these measures for any locality and entrepreneurship, enhance firm also provides a basis for studying effects in determining a sensible and politically productivity and reduce corruption. of regulations and their application. For feasible path for reform. · Simpler start-up translates into example, Doing Business 2004 found that Reviewing the Doing Business rank- greater employment opportunities. faster contract enforcement was associ- ings in isolation may show unexpected viii Doing Business in kenya 2010 how do governments use doing InformatIon sources for the data tors and calculating rankings. Other ap- Business? Most of the indicators are based on laws proaches were explored, including using A common first reaction is to doubt the and regulations. In addition, most of the principal components and unobserved quality and relevance of the Doing Busi- cost indicators are backed by official fee components. The principal components ness data. Yet the debate typically pro- schedules. Doing Business respondents and unobserved components approaches ceeds to a deeper discussion exploring the both fill out written surveys and provide turn out to yield results nearly identical to relevance of the data to the economy and references to the relevant laws, regu- those of simple averaging. The tests show areas where reform might make sense. lations and fee schedules, aiding data that each set of indicators provides new Most reformers start out by seeking checking and quality assurance. information. The simple averaging ap- examples, and Doing Business helps in For some indicators part of the cost proach is therefore robust to such tests. this. For example, Saudi Arabia used the component (where fee schedules are lack- company law of France as a model for re- ing) and the time component are based Improvements to the methodology and data revIsIons vising its own. Many countries in Africa on actual practice rather than the law on look to Mauritius--the region's stron- the books. This introduces a degree of The methodology has undergone contin- gest performer on Doing Business indi- subjectivity. The Doing Business approach ual improvement over the years. Changes cators--as a source of good practices for has therefore been to work with legal have been made mainly in response to reform. In the words of Luis Guillermo practitioners or professionals who regu- country suggestions. In accordance with Plata, the minister of commerce, indus- larly undertake the transactions involved. the Doing Business methodology, these try and tourism of Colombia, Following the standard methodological changes have been incorporated into the approach for time and motion studies, Doing Business in Kenya 2010. It's not like baking a cake where you follow Doing Business breaks down each pro- For enforcing contracts, for exam- the recipe. No. We are all different. But we cess or transaction, such as starting and ple, the amount of the disputed claim in can take certain things, certain key les- legally operating a business, into separate the case study was increased from 50% sons, and apply those lessons and see how steps to ensure a better estimate of time. to 200% of income per capita after the they work in our environment. The time estimate for each step is given first year of data collection, as it became by practitioners with significant and rou- clear that smaller claims were unlikely to Over the past 7 years there has been tine experience in the transaction. go to court. much activity by governments in re- The Doing Business approach to Another change relates to starting a forming the regulatory environment for data collection contrasts with that of business. The minimum capital require- domestic businesses. Most reforms relat- enterprise or firm surveys, which capture ment can be an obstacle for potential ing to Doing Business topics were nested often one-time perceptions and experi- entrepreneurs. Initially, Doing Business in broader programs of reform aimed at ences of businesses. A corporate lawyer measured the required minimum capital enhancing economic competitiveness. In registering 100­150 businesses a year regardless of whether it had to be paid structuring their reform programs, gov- will be more familiar with the process up front or not. In many economies only ernments use multiple data sources and than an entrepreneur, who will register part of the minimum capital has to be indicators. And reformers respond to a business only once or maybe twice. A paid up front. To reflect the actual po- many stakeholders and interest groups, bankruptcy judge deciding dozens of tential barrier to entry, the paid-in mini- all of whom bring important issues and cases a year will have more insight into mum capital has been used since 2004. concerns into the reform debate. bankruptcy than a company that may All changes in methodology are ex- World Bank support to these reform undergo the process. plained in the Data notes section of this processes is designed to encourage criti- report as well as on the Doing Business cal use of the data, sharpening judgment development of the methodology website. In addition, data time series for and avoiding a narrow focus on improv- The methodology for calculating each each indicator and locality are available ing Doing Business rankings. indicator is transparent, objective and on the website. The website also makes easily replicable. Leading academics col- available all original data sets used for methodoLogy and data laborate in the development of the indi- background papers. Doing Business in Kenya 2010 covers 11 cators, ensuring academic rigor. Seven Information on data corrections is localities, including Nairobi. The data of the background papers underlying provided in the Data notes and on the are based on national and local laws the indicators have been published in website. A transparent complaint proce- and regulations as well as administrative leading economic journals. One is at an dure allows anyone to challenge the data. requirements. (For a detailed explana- advanced stage of publication. If errors are confirmed after a verification tion of the Doing Business in Kenya 2010 Doing Business uses a simple averag- process, they are expeditiously corrected. methodology, see the Data notes). ing approach for weighting subindica- Overview Table 1.1 Some paleontologists believe the first reforms were initiated by the national doing Business in Kenya--where is it easiest? humans may have inhabited Kenya more government and implemented first in AGGREGATE than two million years ago. According to Cairo. Once the reforms proved suc- locality RAnk recent fossil evidence man was "born" cessful, they were adopted all over the narok (easiest) 1 on the eastern shores of Lake Rudolf, country. In the case of business start-up, Malaba 2 now Lake Turkana, which would make the one-stop shop reduced the number Thika 3 Kenya the "Biblical Garden of Eden, of required procedures from ten to seven kisumu 4 from which descendants moved out to and cut start-up costs and time by more Mombasa 5 populate the world."1 Later on, Kenya than half. Following the success of the nyeri 6 stood at the crossroad of important trad- one-stop shop in Cairo, the authority Garissa 7 ing routes. Persian and Arab merchants to process business registrations was Eldoret 8 traveled to the African shores to estab- delegated to regional one-stop shops. kilifi 9 lish commercial ventures. In those days, These replicated the Cairo success story. nairobi 10 Isiolo (most difficult) 11 they took advantage of the monsoon Second, interagency cooperation is cru- winds to reach their destination.2 Nowa- cial to bridge administrative gaps. In the Note: the aggregate ranking index is calculated as the ranking on the simple average of locality percentile rankings on each of the 4 days, if they planned to open a business Arab Republic of Egypt, business start- topics covered in Doing Business in Kenya 2010. Source: Doing Business database. in Garissa, for example, they would end up reforms proved successful, because up catching a bus to Nairobi to submit the different agencies involved assigned Narok, Nyeri, and Thika. The study cov- the paperwork needed. In addition to employees to the one-stop shops and ers four Doing Business topics--starting the travel expenses, the trip would be gave them the necessary approval au- a business, dealing with construction time-consuming, maybe requiring an thority.3 As a result, entrepreneurs in permits, registering property, and en- overnight stay at a hotel or with rela- Assiut no longer have to travel all the forcing contracts. These indicators were tives. Why not take care of it in Garissa way from Upper Egypt to Cairo to start selected because they reveal differences itself? Because many of the necessary their business. in national and local regulatory policies permits, documents, and authorizations Doing Business studies business and practices. The results are presented have to be approved in Nairobi. regulations from the perspective of a here (table 1.1). Until three years ago, an aspiring small- to medium-size domestic firm. Across Kenya, doing business is entrepreneur in Assiut, Arab Republic Nairobi, the most populous city in easier in Narok, Malaba, and Thika. It of Egypt, would have faced a similar Kenya, represents the country in the is more difficult in Kilifi, Nairobi, and situation. Today, she can save time and global Doing Business series. However, Isiolo. While Nairobi has the fastest time money: opening a business at the new while Kenya is a centralized country, to start a business, it lags behind other one-stop shop in Assiut is as easy and local business regulations and their en- localities in the time needed to register almost as fast as it is in Cairo. This ex- forcement differ across localities. This is property or enforce a contract before ample illustrates two lessons that may why Doing Business in Kenya 2010 goes a court. However, large cities can also also apply to Kenya. First, as the expe- beyond Nairobi and benchmarks ten perform well. The other major business rience in the Arab Republic of Egypt additional localities: Eldoret, Garissa, center, Mombasa, ranks fifth overall; it is shows, decentralization can work. There, Isiolo, Kilifi, Kisumu, Malaba, Mombasa, the best performing locality in register- 2 Doing Business in kenya 2010 Table 1.2 the top 10 reformers in 2008/09 Dealing with Trading Starting a construction Employing Registering Getting Protecting Paying across Enforcing Closing a Economy business permits workers property credit investors taxes borders contracts business Rwanda 4 4 4 4 4 4 4 kyrgyz Republic 4 4 4 4 4 4 4 Macedonia, FYR 4 4 4 4 4 4 4 Belarus 4 4 4 4 4 4 United Arab Emirates 4 4 4 Moldova 4 4 4 Colombia 4 4 4 4 4 4 4 4 Tajikistan 4 4 4 4 4 Egypt, Arab Rep. 4 4 4 4 Liberia 4 4 4 Note: economies are ranked on the number and impact of reforms. First, Doing Business selects the economies that implemented reforms making it easier to do business in 3 or more of the Doing Business topics. second, it ranks these economies on the increase in rank on the ease of doing business from the previous year. the larger the improvement, the higher the ranking as a reformer. Source: Doing Business database. ing property and ranks third in starting a trend that started 3 years ago. Indeed, these in only 8 weeks. As of November a business. three-quarters of such economies cov- 2008, 315 licenses have been eliminated, Doing Business rankings do not tell ered by Doing Business reformed. In 379 simplified, 294 retained, and 26 pri- the whole story. The indicators do not sub-Saharan Africa 29 of 46 economies oritized for reform. account for all factors important for reformed in 2008/09, implementing 67 In order to facilitate business entry, doing business--for example, macro- reforms. As in the previous year, nearly the national government enacted the economic conditions, infrastructure, half the reforms in the region focused Licensing Laws (Repeals and Amend- workforce skills, or security. Nor do they on making it easier to start a business ments) Act in 2006, reducing the num- assess the strength of the financial infra- or trade across borders. And for the first ber of mandatory business permits. In structure or market regulation, both im- time a sub-Saharan African economy, 2007, the Commercial Registry managed portant factors in understanding some Rwanda, led the world in Doing Business to improve the quality of its services, of the underlying causes of the global reforms (table 1.2). thanks to better coordination between financial crisis. But improvements in Rwanda has steadily reformed its the Ministry of Lands and Housing and an economy's ranking do indicate that commercial laws and institutions since the Kenya Revenue Authority. As a result the government is creating a regulatory 2001. In the past year it introduced a of these reforms, the time to start a busi- environment that is more conducive to new company law that simplified busi- ness dropped from 54 to 44 days in 2007 business. At the same time, good perfor- ness start-up and strengthened minority and to 34 days in 2009. mance should not lead to government shareholder protections. Entrepreneurs Property registration also under- complacency. Both Singapore and New can now start a business in 2 proce- went reforms. Well aware that an afford- Zealand--ranked 1 and 2 on the ease of dures and 3 days. Reforms also included able and efficient immovable property doing business--know this well. Despite measures to speed up trade and prop- registration system reduces informality, being top performers for a number of erty registration. Delays at the borders the Registry Superintendent of the Min- years, both have introduced several re- were reduced thanks to longer operat- istry of Lands and Housing decided to forms to ease business entry and opera- ing hours and simpler requirements for allow the private sector to provide prop- tion in the past two years. documents. Reforms removed bottle- erty valuations in addition to valuations necks at the property registry and at the available from the public sector; today, Kenya is reforming-- Rwanda Revenue Authority, reducing the time needed for an entrepreneur to What gets measureD the time required to register property by get a valuation is only 7 days. gets Done 255 days (figure 1.1). Another area of reform is construc- Since 2004, Doing Business has re- Kenya has been implementing regu- tion permits. In November 2006, the corded more than 1,000 reforms world- latory reforms across several Doing Busi- Minister of Housing and Lands launched wide--287 of those took effect between ness topics over various years. In 2005, the Rapid Response Initiative (RRI). As June 2008 and June 2009 alone. Low- Kenya launched a "guillotine initiative"4 part of the initiative, the Physical Plan- and lower-middle-income economies to review 1,325 business licenses that ning Department of the City of Nairobi accounted for two-thirds of reforms re- were crippling business performance. started to look into why the issuance corded during the last year, continuing In 2006, the first phase eliminated 26 of of building approval and occupancy over vie w 3 FIGURE 1.1 similar to France. A commercial dispute Consistent reformers continued reform e orts in 2008/09 Improvement in the ranking on the ease of doing business, DB2009­DB2010 in Nairobi will take 1 year and three 1 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 183 months to resolve. Kenya has a signifi- cant backlog of cases. Most lawyers and Georgia 16 TO 11 Colombia 49 TO 37 litigants cite this as a primary source 2 REFORMS 8 REFORMS of delays. This is not a problem that is unique to courts in Kenya alone. It is Mauritius Rwanda mainly a consequence of inefficiency 24 TO 17 143 TO 67 6 REFORMS 7 REFORMS and the high number of inactive cases that accumulate due to lack of action Macedonia, FYR 69 TO 32 from the litigants. Because courts do not 7 REFORMS have the power to revive an inactive case Egypt, Arab Rep. 116 TO 106 4 REFORMS (this is the prerogative of the parties), they clog the system and interfere with 139 the court diary, impeding the efficient Source: Doing Business database. SUB SAHARAN AFRICA DB2010 AVERAGE allocation of resources. These examples show some signifi- FIGURE 2.2 permits took so long. One reason was utilities would take only about 69 days cant variations in the way local govern- Time and cost to start a business in Kenya and selected economies and regions that the fire, water and0.4public health in Narok, placing Narok in fifteenth ment regulations enhance or restrain clearances required from1 the various New Zealand position worldwide just behind Hong business activity across Kenya. While Cost the Physical 6 agencies withinDenmark 0.0 Planning Kong, China and in the same position (% share the capita) local governments of income per same basic 8 to be Department hadSenegal reviewed by an as Denmark. It would take almost one 63.7 legal framework, they also interpret and 7.5 24 Time Middle Eastcommittee. Because the com- 21 internal and North Africa 34.0 longer in Malaba (111 month and a half implement national regulations differ- (days) South Africa 6.0 22 mittee only convened sporadically, this days) and two more months in Isiolo ently. Some localities have made pro- Nairobi 36.5 34 review significantly delayed the building (127 days). Getting the construction 46 cesses more efficient with the help of Sub-Saharan Africa 100.0 approval process. The RRI removed the Thika permit is cheapest in Nyeri (132% of47 39.1 technology. Global competition is be- need for the committee review, shorten- Isiolo income per capita), but if you 55.5 to want coming increasingly local. It is not only 62 ing the time to obtain a building permit Kili construct a warehouse in Kilifi, 57.0will it countries that compete with each other, 68 from 80 to 50 days. In 2009, the time was Malaba cost more than twice as much (284% of 58.9 but increasingly, specific locations-- 70 Mombasa shortened further to 40 days. Under the income per capita). 50.3 Mombasa versus Lagos (Nigeria) or Cas- 72 Eldoret Physical Planning Act, the Department 50.8 If you decided to purchase property 74 ablanca (Morocco), rather than Kenya Kisumu 51.8 74 further administratively consolidated in Mombasa, your new real estate would versus Nigeria or Morocco. Kenyan local Garissa 52.4 78 the procedure for obtaining a certificate Nyeri be registered in 23 days, almost as fast authorities must expedite their pace of 42.2 80 of compliance with the occupancy per- Narok as in Colombia, but 10 times longer than 44.3 reform to convince investors that it 81 is mit. Thanks to this consolidation, the in Thailand or Saudi Arabia, the global more profitable to invest scarce capital average Business database. Source: Doing time to obtain an occupancy leaders. If in Garissa, transferring the in such places as Kilifi or Thika rather permit dropped from 17 to 14 days. The property title would take four times lon- than Lagos or Kampala; without forget- total time to get a construction permit FIGURE 2.3 ger, similar to Nigeria and Sri Lanka. The ting that the National Government has Starting a business to 120 days. decreased from 133in Garissa--the most di cult locality in Kenya cost of transferring property is similar a key role--especially given the high Time (days) across the 11 benchmarked localities at Cumulative cost (% of income per capita) degree of centralization in Kenya. comparing Business reguLations 80 4.2% of property value. However, if you Cost 52.4% 48 in Kenya--wide variations want to transfer property in Isiolo, it will Learning From each other-- across LocaLities adopting good LocaL practices cost 24.2%. This is due to a transfer taxTime 60 78 days 36 If you were returning to Kenya from in the amount of 20% of property value 8 Publishing comparable data on the ease studying abroad, with a great days for levied daysthe Isiolo for a business permit The 29 idea by Apply County Council. of doing business inspires governments a40new business, starting your company transfer tax makes Isiolo one of the most 24 to act. Comparisons among localities would be fastest and least expensive in expensive places in the world; among within the same country are even stron- the Registrar Nairobi, where it takes 34 days and costsFile deed and details withChambers of Companies Doing 20 the 183 economies measured in at the Attorney General's 12 ger drivers of reform. Local officials have Business, Isiolo is the nominal capital 36% of income per capita. If you tried to and articles and a statement ofcheaper only than the 23 Stamp the memorandum a difficult time explaining why it takes days do the same in Nyeri, it would take 80 Syrian Arab Republic (28%). 0 longer or costs more to comply with ad- 0 days and cost 6% more (42% of income Resolving a dispute in the courts is ministrative procedures in their town or 1 2 5 8 12 per capita). Obtaining all permits Procedures Source: Doing Business database. to generally time-consuming across locali- state than in their neighbors'--despite build a new warehouse and hook it up to ties, but is faster in Malaba at 11 months, sharing a similar legal and regulatory FIGURE 2.1 Many procedures to start a business in Kenya Kenya Kenya 4 Doing Business in kenya 2010 Table 1.3 Best practices in Kenya compared internationally global rank Kenya's performance Best (183 economies) in dB2010 performing How kenyan localities Indicator (represented by nairobi) city Best local practice would compare globally number of procedures to build a warehouse 11 procedures kisumu 10 procedures 9 Days to build a warehouse 120 days narok 69 days 15 Days to enforce a contract 465 days Malaba 330 days 23 Days to register property 64 days Mombasa 23 days 51 Cost to register property 4.2% of the property value Thika 4.1% of the property value 78 Cost to build a warehouse 161.7% of income per capita nyeri 132.4% of income per capita 88 Days to start a business 34 days nairobi 34 days 124 Cost to start a business 36.5% of income per capita nairobi 36.5% of income per capita 130 number of procedures to register property 8 procedures All localities 8 procedures 136 Cost to enforce a contract 47.2% of the claim value Isiolo 38.4% of the claim value 140 number of procedures to start a business 12 procedures All localities 12 procedures 154 hypothetical city of "Kenyana" 78 Source: Doing Business database framework. That was the case in India, eliminate the requirement for a separate What began in 2007/2008 as a finan- where 10 cities were measured by Doing business permit all together, the ease cial crisis has deteriorated into a global Business in South Asia 2007 and again in of starting a business could move up 6 economic and employment crisis, posing 2009. The studies created competition places globally, placing the country next major challenges for governments. Early to reform and the second benchmark- to Vietnam and Poland and ahead of attention has rightly focused on stabili- ing showed that 9 of the 10 states had Austria and Tanzania. zation of the financial sector, and fiscal reformed in at least one of the areas The effectiveness of the Munici- stimulus to check recessionary pressures. measured by Doing Business in India. As pal Council in issuing building permits But as governments look to support re- a result of the reforms, the average time and the local presence of utility com- covery, the regulatory environment for to start up a company dropped from panies, make Narok the fastest locality businesses will also be critical. It affects 54 to 35 days and the time to obtain a in dealing with construction permits. how well firms can cope with the reces- building permit was reduced by 25 days Cutting the time to that of Narok--69 sion, capitalize on new opportunities and on average. The conclusion: what gets days--would put Kenya into position create jobs as recovery begins. As un- measured, gets reformed. 15 worldwide on the time to deal with employment and public debt rise, it has Localities in Kenya can learn from construction permits, ahead of Canada become even more important to create each other and adopt local best practices and Iceland. Adopting the time to regis- the conditions that encourage businesses to compete globally. If a hypothetical city ter property from Mombasa, by creating to grow, create productive jobs in the called "Kenyana" were to adopt the good opportunities for entrepreneurs to take formal sector and stimulate incomes and practices found in the benchmarked lo- care of their paperwork locally rather potential tax revenues. While the crisis calities, it would move up 17 positions on than traveling to Nairobi, would cut the originated in the financial sector, it has the global ranking, placing the country time to 23 days and put the hypothetical brought renewed attention to the need ahead of Panama or Italy. Implement- city "Kenyana" into position 51 world- for sound and effective regulation in all ing Kenya's best practices would allow wide, ahead of South Africa or Lebanon. areas of the economy. the country to rank 78 out of the 183 Finally, the courts in Bungoma, where economies measured by Doing Business commercial disputes relating to Malaba 2010. For example, business permits are are heard, tend to be strict on adjourn- issued by local authorities. If Garissa ments, which contributes to the speed of 1. Muhoho, R. (2006). Kenyan Culture, History, Food, People, Lifestyle, Tribes followed the example of Nairobi, it could enforcement in Malaba. As a result, the and Language. Retrieved from http:// speed up the business permit issuance 11 months needed in Malaba to solve a www.buzzle.com/articles/kenya-safaris- by 3 days and cut the cost by half. If the commercial dispute are faster than the kenyan-culture-history-food-people- local authorities across Kenya decided to OECD average of 462 days (table 1.3). lifestyle-tribes-language.html over vie w 5 2. Parkinson, T., Phillips, M. & Gourlay, W. (2006). Lonely Planet Kenya. History 25- 33. Retrieved from http://books.google. com 3. World Bank. 2007. Doing Business in Egypt 2008. Washington D.C.: The World Bank Group. 4. The "guillotine" or "staged-repeal" is a process of identifying and then review- ing a large number of regulations or licenses against set criteria. Through the guillotine process the government elimi- nates those regulations or licenses that are obsolete or no longer needed, and streamlines others, without the need for lengthy and costly legal action on each regulation. days Stamp the memorandum and articles and a statement of the nominal capital 0 0 1 2 5 8 12 Procedures 6 Doing Business in kenya 2010 Source: Doing Business database. Starting a FIGURE 2.1 Many procedures to start a business in Kenya business Kenya average 12 Kenya average 67 SUB SAHARAN AFRICA 100 SUB SAHARAN SUB SAHARAN AFRICA 9 AFRICA 46 SENEGAL 64 SOUTH AFRICA Kenya 6 average 49 SENEGAL 4 SOUTH AFRICA 22 SOUTH AFRICA SENEGAL 6 8 Cost Procedures Time (days) (% of income Source: Doing Business database. per capita) Benedict wants to set up a company to operate. Starting a business in Kenya re- the declaration of compliance with the sell souvenirs in Mombasa City. Before he quires 12 procedures in the 11 measured Commissioner for Oaths, and separate can open his doors to potential clients, he localities, takes on average 67 days, and registrations with four different agencies: will have to wait 72 days and pay 50% of costs 49% of income per capita. The aver- the Tax Department, the National So- income per capita to complete the 12 pro- age benchmarked city would rank 135th cial-Security Fund (NSSF), the National cedures required to start his company. In- when compared with the 183 economies Hospital Insurance Fund (NHIF) and stead of waiting for more than two months measured worldwide, roughly the same the Kenya Revenue Authority (KRA). In and spending more than KES 30,000 as Accra, Ghana. contrast, Senegal's one-stop shop merged (about US$ 385), Benedict decides to sell Doing Business records all proce- seven start-up procedures into one. Time his merchandise informally on the beach. dures that are officially required to start dropped from 58 days to 8 days. Liberia His business pays no taxes or social- up and formally operate an industrial also streamlined its business-registration security contributions. It will also have or commercial small or medium sized process, cutting it by 3 months. Busi- difficulties accessing credit and growing. business. These include obtaining neces- nesses there can now start operating in Kenyan entrepreneurs may find that sary licenses and permits and complet- less than 1 month. Liberia also made the establishing a business in their home- ing required notifications, verifications process more affordable, making the use town is a lengthy and cumbersome pro- and registrations for the company and its of lawyers optional.2 cess. Not only do they have to worry employees with the relevant authorities.1 Despite a similar regulatory frame- about location, capital and markets, they New Zealand is the world's top per- work for business registration, there are also have to deal with a maze of adminis- former in this area--with only 1 proce- significant differences in time and cost. trative procedures before they can legally dure, 1 day and a cost of 0.4% of income Nairobi is the easiest city to set up Table 2.1 per capita. Entrepreneurs in New Zea- a business, Garissa the most difficult Where is it easy to start a business--and land must file all necessary information (table 2.1). where not? only once, because receiving agencies are The Registrar of Companies has only municipality RAnk linked through a unified database. Other one office in the entire country, located nairobi (easiest) 1 economies in Eastern Europe and North in Nairobi. Entrepreneurs across Kenya Thika 2 Africa are not far behind: in Georgia, it must travel to Nairobi in order to incor- Mombasa 3 takes 3 procedures and 3 days to start a porate their companies. The Registrar of Isiolo 4 business, while in the Arab Republic of Companies approves the company name Eldoret 5 Egypt the same can be done in 7 days. (procedure 1) and files the incorpora- nyeri 5 kilifi 7 In Kenya, one of the reasons it takes tion deed, the stamped memorandum kisumu 7 so long to start a business is the many and articles of association, as well as the narok 9 steps required--three more than the re- statement of nominal capital (procedure Malaba 10 gional average and three times as many 5). Even though the steps that follow Garissa (most difficult) 11 as in Senegal (figure 2.1). Additional obtaining the approval of the company Note: the ease of starting a business is a simple average of the locality rankings on the number of procedures, and the associ- procedures not required elsewhere in- name--i.e. stamping the memorandum ated time and cost required to start a business. see the Data clude the stamping of the memorandum and articles of association and a state- notes for details. Source: Doing Business database. and articles of association, the filing of ment of the nominal capital, paying stamp starting a Business 7 duty at an authorized bank and signing from out-of-town companies--filing the calities. It takes 8 days in Garissa, 3 days the declaration of compliance before a deed takes 29 days for a company operat- longer than in Nairobi. Ideally, a company Commissioner for Oaths--could be done ing in Garissa, as compared to 10 days for registration certificate should suffice as a locally, the entrepreneur would still have a company operating in Nairobi. license to start any business not subject to return to Nairobi to file the docu- Stamping the memorandum, ar- to separate licensing requirements for ments with the Registrar of Companies. ticles of association and a statement of reasons of public safety or environmental It is hence common practice to get all the nominal capital (procedure 2) is the concerns. Other countries, like Burkina five procedures done in Nairobi directly source of long delays in Garissa and Faso or Cameroon, do not require busi- rather than traveling back and forth. This all across Kenya, despite several reform ness licenses at the municipal level. Ke- significantly increases costs--including efforts to make this process more effi- nyan localities could follow suit. transportation costs. For instance, an cient. In the past, it was the Stamp Duty The business permit also accounts entrepreneur from Isiolo has to travel for Office within the Ministry of Housing for the largest component of the business 9 hours by bus in order to get to Nairobi and Lands that collected the stamp duty start up costs--30% on average. The cost and must pay KES 2,000 (US$ 25) for and processed the stamped documents. is calculated by each municipal govern- a roundtrip bus fare.3 The rest of the In 2005, the Kenya Revenue Authority ment according to the "Single Business- incorporation procedures will have to be (KRA) took over stamp-duty collection. Permit Fee Schedule". This schedule solved in Meru Town, which requires an- However, the memorandum, articles of establishes the fee ranges municipal gov- other 1-hour bus trip and KES 400 (US$ association and statement of nominal FIGURE 1.1 ernments can charge an entrepreneur Consistent reformers continued 5) for the roundtrip bus fare. reform e orts in 2008/09 still first be submitted to capital must looking to do business in a certain lo- Improvement in the ranking on the ease of doing business, DB2009­DB2010 Opening a business takes 34 days in the Stamp Duty Office of the Ministry cality. There are several categories. On 1 10 20 30 40 50 60 70 80 90 Nairobi compared with 2½ times longer 100 110 120 130 140 before 170 183 of Lands and Housing, 150 160 payment one hand, companies are categorized by in Narok (81 days). The cost also varies can be processed by a KRA-designated Georgia Colombia type of activity: general trade, personal 16 TO 11 49 TO 37 8 In Nairobi and greatly across localities. REFORMS 2 REFORMS bank. The entire process takes 23 days in services, retail, transport, storage, and Thika, entrepreneurs spend less than the case of Garissa and 30 days in Narok, communications. On the other hand, 40% of income per capita to open a busi- Mauritius because the Stamp Duty Office has to re- Rwanda companies dedicated to general com- ness; for those in Malaba, Kilifi, or Isiolo 24 TO 17 6 REFORMS 143 bank ceive confirmation of theTO 67 payment 7 REFORMS merce are also classified by the number the cost is above 55% (figure 2.2). after the funds have cleared. On average, of employees:4 megastore or hypermar- Macedonia, the The biggest bottleneck for a business FYR process takes 20 days across Kenya, 69 TO 32 ket, large trader, medium trader, or small 7 REFORMS from Garissa is filing the deed with the down from 54 days in 2005. trader. Given that municipal fees vary Registrar of Companies in Nairobi (fig- Egypt, Arab The third 106 Rep.procedure is get- 116 TO longest from KES 2,500 (US$ 31) to KES 12,000 4 REFORMS ure 2.3). Incorporation documents from ting a business permit which is issued (US$ 149) depending upon the locality, companies based in Nairobi are given pri- locally by the municipal council. The time local governments have ample room for 139 to 8 days across ority and are processed faster than those needed varies from 5SUB SAHARAN AFRICA lo- interpretation in determining the exact Source: Doing Business database. DB2010 AVERAGE FIGURE 2.2 Time and cost to start a business in Kenya and selected economies and regions 0.4 New Zealand 1 Cost Denmark 0.0 6 (% of income per capita) 8 Senegal 63.7 21 7.5 24 Time Middle East and North Africa 34.0 (days) South Africa 6.0 22 Nairobi 36.5 34 46 Sub-Saharan Africa 100.0 Thika 39.1 47 Isiolo 55.5 62 Kili 57.0 68 Malaba 58.9 70 Mombasa 50.3 72 Eldoret 50.8 74 Kisumu 51.8 74 Garissa 52.4 78 Nyeri 42.2 80 Narok 44.3 81 Source: Doing Business database. FIGURE 2.3 Starting a business in Garissa--the most di cult locality in Kenya 42.2 80 Narok 44.3 81 Source: Doing Business database. 8 Doing Business in kenya 2010 FIGURE 2.3 reduce the time to register a company. It Starting a business in Garissa--the most di cult locality in Kenya is also currently working on reducing the Time (days) Cumulative cost (% of income per capita) time to stamp the memorandum and ar- Cost 52.4% 80 48 ticles of association by improving the IT systems between the Stamp Duty Offices, Time 60 78 days 36 the Kenya Revenue Authority (KRA) and 8 designated banks. 29 days Apply for a business permit days A fast-track company registration 40 24 option, at an extra charge, is also being File deed and details with the Registrar of Companies introduced. For example, it is now pos- 20 at the Attorney General's Chambers 12 sible to have the name search done in 1 23 days Stamp the memorandum and articles and a statement of the nominal capital day, for KES 500 (US$ 6); in 2 days, for 0 0 KES 200 (US$ 3); as opposed to the usual 1 2 5 8 12 3 days at KES 100 (about US$ 1.5). In Procedures Source: Doing Business database. addition, according to the information provided by the Registrar, the clerks will FIGURE 2.1 fee to charge. For instance, the Nairobi grow larger and contribute to govern- complete the entire company registration Many procedures to start a business in Kenya City Council will charge an entrepreneur ment revenues by paying taxes.7 process on behalf of the entrepreneur KES 5,000 (US$ 62) to incorporate a me- Kenya Kenya The National Government of Kenya in a maximum of 7 days, instead of the average average SUB SAHARAN dium-trader shop that conducts general 12 67 recognizes the need to develop its formal AFRICA 100 average of 67 days, for a flat fee of KES trade activities, whereas the municipal sector, especially its small- and medium- 30,000 (US$ 374). However, this fast- governments of Garissa, Isiolo and Kilifi SUB SAHARAN AFRICA 9 SUB SAHARAN sized enterprises, so as to create the basis track option is not widely known. Efforts AFRICA 46 will charge KES 12,000 (US$ 149) for the for sustainable economic growth. In 2006, SENEGAL 64 to publicize these alternatives will pro- SOUTH same type of company. the Licensing Law (Repeals and Amend- vide entrepreneurs with a choice. AFRICA Kenya 6 average Another expensive item is the com- ments) Act 49 eliminated the requirement The Attorney General's IT depart- seal, which is still a standard com- pany SENEGAL 4 SOUTH to obtain a trading license in addition ment is finalizing the merger of three mercial practice in Kenya, even though AFRICA 22 to the business permit. In addition, the separate databases which would make it it is no longer mandatory by law. The company SOUTHregistry underwent computer- faster to do name searches, from 3 days on AFRICA cost ranges between KES 3,000 (US$ SENEGAL ization. Moreover, as the authority to col- 6 average to same-day searches. In addition, 37) in Nairobi to KES 5,000 (US$ 8 Time Procedures 62) in lect stamp duty was transmitted from Cost the Registrar is finalizing the procurement Kilifi and the database. Source: Doing Businesstime needed for production (days) of income the Ministry(% ofLand and Housing to the per capita) of heavy-duty scanners to speed up the ranges between 2-10 days. Kenya Revenue Authority (KRA), stamp- scanning of documents, and this, too, is One reason why governments ing the memorandum, articles of associa- expected to reduce the time to register a should make business entry easier and tion and Statement of the Nominal Capital business. The target for completing both more affordable is to encourage the cre- became faster. Since early 2009, the Office activities is late October 2009. ation of new companies. In the Arab Re- of the Prime Minister is spearheading var- public of Egypt in 2006, limited liability ious reform initiatives: the Rapid Results What to reform? companies accounted for only 19% of Initiative (RRI) is a short-term reform registered firms. In 2008, after reforms, pilot program that focuses on process re- open LocaL Branches oF the registrar oF companies this share rose to 30%.5 And payoffs engineering to reduce the time and proce- can be large. In Mexico, reforms cut the dures to undertake any activity. So far it Entrepreneurs from across Kenya have time to start a business from 58 to 28 has been implemented in 67 government to go to Nairobi to start their company. days in 2008 and from 28 to 13 days in institutions. The RRI is especially focused These trips involve delays and increase 2009. A recent study reports a boom in on decreasing both the time and proce- costs. Furthermore, the demand from new businesses: the number of regis- dures required to incorporate a company other localities creates additional back- tered Mexican businesses rose by nearly across the different provinces. logs in the already congested Companies 6%, employment increased by 2.6%, and In addition, the Registrar of Com- Registrar, as well as other agencies in- prices fell by 1% because of the competi- panies introduced a new management volved in business start-ups in Nairobi. tion from new entrants.6 Finally, if it is system on March 16th, 2009, which is A possible solution would be to create re- easy to set up a business, companies that targeted at accelerating administrative gional branches in towns such as Mom- would otherwise operate in the informal processes and simplifying registration-- basa or Kisumu to where entrepreneurs sector are more likely to legalize their op- eliminating outdated requirements, such of nearby localities could travel instead. erations. Formally registered businesses as the typing of certificates, in order to starting a Business 9 puBLicize and communicate public safety or posing environmental the BeneFits oF reForms to entrepreneurs and the puBLic concerns--the government of Kenya is imposing a significant burden on entre- 1. See the detailed description of the stan- dard case in the Data notes. Some reformers are bad marketers. El preneurs without an overriding public 2. World Bank. 2008. Doing Business 2009. Salvador first established a one-stop shop benefit. In the medium term, the single Washington, D.C. World Bank Group. in 1999, but local entrepreneurs thought business permit should be phased out. 3. On average, a lawyer from Isiolo will it was only for foreigners. A lesson was charge KES 49,000 (US$ 610) in order to learned. The second time around, the create a one-stop shop For undertake all the incorporation proce- Business registration dures both in Nairobi and in Meru Town. president himself inaugurated the im- proved one-stop shop and widespread The Kenyan government should consider For purposes of the present report, law- yer fees are not being considered. media coverage made sure that everyone creating one-stop shops across the coun- 4. "General Commerce" is the type of com- knew about the new system. try, as it has been the most common and pany we use as a reference. In the case of Kenya, entrepreneurs relatively straightforward reform in busi- 5. World Bank. 2009. Doing Business 2010: are often not aware of the ongoing efforts ness start-up around the world. Thirty- Reforming Through Difficult Times. Wash- of the national government to improve nine countries have created or improved ington, D.C. World Bank Group. business-incorporation. The fast-track one-stop shops in the past 5 years with 6. Bruhn, Miriam. 2008. "License to Sell: company registration option, for example, promising results. For example, in Azer- The Effect of Business Registration Reform on Entrepreneurial Activity in should be widely promoted. It is also baijan registrations grew by 40% after Mexico." Policy Research Working Paper important to communicate when a re- the creation of a one-stop shop between 4538. Washington, D.C.: The World Bank quirement is no longer necessary. A good January and May 2008, as compared to Group. The results were obtained after example is the use of the company seal. the same period in the previous year.8 controlling for GDP per capita, number of economic establishments per capita, A government communication campaign Often these reforms do not require major fixed assets per capita, and investments could raise awareness and inform the legislative changes, but require instead per capita in the benchmarked munici- public that the seal is not legally required. willingness and a capacity to share data- palities. bases, processes, and often staff. 7. Djankov, Simeon, Rafael La Porta, Flor- maKe Business permits aFFord- encio Lopez-de-Silanes, and Andrei aBLe and transparent promote onLine start-ups Shleifer. 2002. "The Regulation of Entry." Quarterly Journal of Economics 117 (1): Although the fees obtained from the Making registration electronic is one of 1­37. business permits are a source of revenue the most effective ways to make starting 8. World Bank. 2008. Doing Business 2009. for local governments, high fees and un- up faster. In the past 4 years, 13 coun- Washington, D.C. World Bank Group. certainty about the amount that will be tries introduced electronic registration, 9. Ibid. charged may hinder formal economic ac- including Belgium, Ireland, Mauritius, tivity. It would be beneficial for entrepre- and Norway, which lowered the average neurs to have clear expectations of how time to start a business from 40 to 17 much the incorporation process will cost days.9 Kenya is taking steps in that direc- depending on the location across Kenya. tion. An online portal will soon allow Efforts should continue to reduce the for online company name search. The number of different fee categories that a Business Regulatory Reform Unit of the company can be placed in and lower the Ministry of Finance is posting all neces- licensing fees across the board. sary operational licenses on the website While the Licensing Laws (Repeals of the e-Registry. A next step would be to and Amendments) Act of 2006 elimi- ensure transactions and online approvals nated the requirement to obtain a trading as well. By allowing digital signatures license, all new companies must still ob- and standardized articles of incorpora- tain a business permit. Ideally, a company tion, the entrepreneur would be able to registration certificate is the license to register online. If all data were validated start any business activities which are not electronically, as in Denmark, the inter- subject to separate licensing regulations. actions with public officials would be By requiring the business permit from all greatly reduced in the process. businesses--not just those dealing with 10 Doing Business in kenya 2010 Dealing with construction permits Jane and Musa own a bookstore chain in backfire; rather than resulting in fewer average locality, Jane and Musa would Kenya. Their business has grown rapidly accidents, they may push construction go through 12 procedures that take 104 in recent years and they need extra stor- into the informal economy. On the other days and cost 174.5% of income per cap- age. Friends advised them to be careful in hand, objectively balanced regulations ita in order to deal with permits related choosing where to build their warehouses, ensure both public safety and revenue for to the construction of a warehouse. In since in some localities it can take months the government, while making the entire contrast, in OECD countries, the same to get a building permit, clearances and construction process easier. process takes 15 procedures, 157 days, utility connections, and in some instances Doing Business looks at construc- and 56.1% of income per capita on aver- they may have to pay facilitation fees. tion permits as an example of licens- age--3 additional procedures, 53 days This is why they search for the cheapest ing regulations that businesses face. It longer, but 118.4% of income per capita and fastest location in Kenya. measures the procedures, time, and cost cheaper. The good news for Jane and Finding the right balance between to build a commercial warehouse, hook Musa is that Kenya is the second-best regulations aimed at protecting the pub- it up to basic utilities, and register it. It performer in the sub-Saharan African lic and regulations that are accessible, assumes that the new warehouse will be region where a company, on average, efficient and affordable is challenging. used for storage of nonhazardous goods would spend 259 days and pay 1,925.6% In Kenya, almost 30% of firms identify and is located in the peri-urban area of of income per capita and go through 17 construction-related permits as a major the benchmarked locality.2 procedures to conclude its construction constraint when doing business.1 Overly In Kenya, obtaining a construction process (figure 3.1). rigid building rules and regulations may permit is quite fast, but expensive. In an It is easier to deal with construc- FIGURE 3.1 tion permits and utility connections in Best, average and worse practices in dealing with construction permits Narok, Nyeri, and Malaba than in Isiolo, Thika, and Mombasa (table 3.1). Topping INDIA SUB SAHARAN INDIA 2,395 the list is Narok, whose performance is AFRICA SUB SAHARAN AFRICA 1,926 comparable to Estonia. Globally, Narok would rank 21st among 183 economies KILIFI INDIA 284 HIGHEST on the ease of dealing with construction SOUTH AFRICA permits, ahead of the United States or ISIOLO OECD Range South Africa, but behind Thailand or 127 in Kenya Singapore. 175 11 LOCALITY SOUTH AVERAGE AFRICA 104 In Kisumu, Jane and Musa must go GARISSA, SUB SAHARAN 132 LOWEST MOMBASA AFRICA NYERI through 10 procedures to obtain con- 14 69 OECD NAROK OECD struction-related approvals and utility 12 SINGAPORE SINGAPORE SOUTH connections, the same as in Jamaica. The 10 AFRICA KISUMU SINGAPORE same process requires 14 procedures in Procedures Time Cost Mombasa. The variation in the number (days) (% of income of procedures among Kenyan localities per capita) Source: Doing Business database. is mostly due to requirements to obtain FIGURE 3.2 Building permit approvals and utility connections--the biggest bottlenecks DeaLing witH ConstruC tion PerMits 11 Table 3.1 ing national agencies. In contrast, in to get utility connections would rank Where is dealing with construction permits easy--and where not? Mombasa the same entrepreneur must 15th out of 183 economies on the time to personally visit several departments to deal with construction permits, ahead of Cost (% of Time income per get approving signatures, before she can South Africa, India and China. rank Locality Procedures (days) capita) get the final approval from the Municipal The main bottlenecks are building 1 narok 11 69 136.5 Council. permits and utility connections (fig- 2 nyeri 11 100 132.4 In most localities, even though ure 3.2). In most instances, differences 3 Malaba 11 111 137.0 many inspections are mandated by the across localities are administrative rather 4 kisumu 10 99 237.1 municipal bylaws, they are not strictly than regulatory. The time needed to get a 5 Garissa 14 80 156.9 implemented. The nature of the inspec- building permit depends on the backlog 5 nairobi 11 120 161.7 tions is rather random. A municipal in municipal offices. Nairobi and Mom- 7 Eldoret 11 117 168.7 inspector stops by the construction site basa, being the cities with the highest 8 kilifi 11 103 283.6 and checks whether the construction demand, are among the localities where 9 Mombasa 14 96 162.9 is progressing in accordance with the it takes longest. Another factor that in- 10 Thika 11 123 208.4 submitted plans. In Nairobi, a construc- fluences the time involved is the En- 11 Isiolo 13 127 134.8 tion company can fulfill the inspections vironmental Impact Assessment (EIA). Note: rankings are the average of the locality rankings on the requirements in-house, provided it has Although regulated nationally, the EIA is number of procedures, the associated time and cost (% of gni per capita) required to deal with construction permits. see the Data a licensed structural engineer and a pro- not implemented correspondingly on the notes for details. FIGURE 3.1 fessional plumber on staff. The engineer ground--6 out of 11 localities apply it, Source: average database Best,Doing Businessand worse practices in dealing with construction permits every phase of and the plumber check the rest do not. The time required to get construction and provide approving sig- utility connections depends on whether INDIA INDIA 2,395 the building-plan approval during the SAHARAN SUB AFRICA natures in the so-called "Physical1,926 Plan- the utility providers have a local branch. SUB SAHARAN AFRICA preconstruction stage. In most Kenyan ning Act 1 Form (PPA1)". After conclud- For example, in Isiolo it takes around 3 localities, besides getting approval from ing construction, entrepreneurs must KILIFI weeks to get an inspection from the elec- INDIA the local council, Jane and Musa must notify the building and planning author- 284 HIGHEST tricity provider because the town must SOUTH get their plans approved by the Physi- AFRICA ity to receive the final inspection in all rely on inspectors from the neighboring cal Planning, Public Health and Land ISIOLO OECD localities. If the inspection Range determines town of Meru. 127 in Kenya Departments and the National Environ- SOUTH 11 is in that the building LOCALITYfull compliance 175 The average cost to comply with all AFRICA AVERAGE ment Management Authority. While the 104 with all requirements, an occupancy cer- requirements to build a warehouse and GARISSA, SUB SAHARAN 132 LOWEST requirements are similar, implementa- MOMBASA AFRICA 69 tificate is issued. NYERI obtain utility connections is 174.5% of 14 OECD tion varies. In Kisumu, allNAROKentrepre- 12 an The time needed to get all approvals OECD gross national income per capita. This neur has to doSINGAPORE a building plan 10 is submit to SINGAPORE build a commercial warehouse and SOUTH AFRICA average cost would rank the 11 Kenyan toKISUMUKisumu Municipal Council and hook it up to utilities ranges from 69 days the SINGAPORE localities 96th among 183 economies wait for it to be approved. The Municipal Procedures Time in Narok to 127 days in Isiolo. Narok, Cost globally. Nyeri is the cheapest, with (days) (% of Council will forward the plan to all the with 36 daysincome a construction permit to get per capita) 132%, while Kisumu and Kilifi are twice relevant Business database. authorities, includ- Source: Doing approving and occupancy certificate, and 33 days as expensive, with 237% and 284% of income per capita, respectively. FIGURE 3.2 On average, 63% of total costs ac- Building permit approvals and utility connections--the biggest bottlenecks count for utilities, with the electricity Time (days) 0 30 60 90 120 connection being the most expensive Narok (figure 3.3). This is predominantly due Garissa Mombasa to the lack of proper infrastructure, es- Kisumu pecially in smaller localities. In most Nyeri instances, if an entrepreneur wants to Kili get a three-phase electricity connection, Malaba as specified in the case study, she has Eldoret to pay substantially higher fees. If the Nairobi warehouse is located in an area beyond Thika Isiolo the radius covered by the transformers provided by the Kenya Power & Light- Building Occupancy Utilities and permit certi cate inspections ing Company (KPLC), the cost increases approval at least sixfold. The local KPLC office Source: Doing Business database. in Isiolo calculated the cost for a three- FIGURE 3.3 High utility costs in most of the cities Cost (% of income per capita) 127 11 LOCALITY SOUTH Building Occupancy 175 AFRICA Utilities and AVERAGE permit certi 104 cate inspections GARISSA, SUB SAHARAN approval 132 LOWEST MOMBASA AFRICA NYERI 69 12 Doing Business database. kenya NAROK Source: 14 OECD Doing Business in 2010 OECD 12 SINGAPORE SOUTH 10 FIGURE 3.3 SINGAPORE AFRICA KISUMU company and then forward the plans to High utility costs in most of the cities SINGAPORE Procedures Time Cost the relevant departments for approval. Cost (% of income per capita) 0 50 (days) 100 (% 150 of income 200 250 This is a good practice, but it is not opti- per capita) Nyeri Source: Doing Business database. mal, since many town councils lack the Isiolo necessary human resources to forward FIGURE 3.2Narok and follow-up on the documents. The Building permit approvals and utility connections--the biggest bottlenecks Malaba challenge is to convince departments Garissa 0 Time (days) 30 60 90 120 (both at the national and local level) to Nairobi Narok send representatives to a centralized lo- Mombasa Garissa Eldoret cation and delegate decision-making au- Mombasa Thika thority to them. In some countries, the Kisumu Kisumu compromise solution was to work out a Nyeri Kili Kili part-time system, whereby representa- Malaba Construction-related Utilities tives from the different agencies work at Eldoret approvals the one-stop shop regularly a few times Nairobi Source: Doing Business database. a week. For instance, delegated officers Thika from the physical planning department, phase3.4 Isiolo FIGURE connection to be KES 54,000 (US$ What to reform? health department, and other depart- Best if the Building 673) practices: high potential for improvement warehouse location is within Occupancy Utilities and ments could spend agreed-upon hours permit radius of certi cate 11 LOCALITYconsoLidate cLearances a 600-meter11 LOCALITY the existing trans- approval inspections 11 LOCALITY or days at the town-council premises to 12 AVERAGE former. For connections outside of the Source: Doing Business database. 104 In Garissa, Isiolo, and other175 AVERAGE AVERAGE localities, review and approve building plans. radius covered by the transformer, the obtain builders have toLOWEST a number of KENYA 132 cost increases to more than 10 300,000 FIGURE 3.3 KENYA LOWEST KES clearances when applying for building introduce on-Line appLications KENYA (US$ utility costs in most of the cities LOWEST High 3,736). 69 permits. These require personal visits For BuiLding pLan approvaL and Cost (% of income per capita) localities stand utiLities connections Although Kenyan to various agencies, including the town- 0 50 100 150 200 250 out in sub-Saharan Africa, sharing best planning department, the public-health In Singapore, builders submit permit Nyeri practices among themselves is crucial. GLOBAL Isiolo department, and the land department. 0.6 applications electronically. Developers LOWEST "Kenyana," aDENMARK that Italy, hypothetical locality SINGAPOREIn 25 companies had to make separate 6 QATAR in Austria, Denmark, Iceland, Malay- Narok implements best practices that exist in visits to the fire department, worker- Cost sia, Norway, and the United States also Malaba Time Procedures (% of income the country, would rank 19th among safety department, water department, Garissa (days) per capita) complete their applications online. In Source: Doing Business database. 183 economies on the ease of dealing Nairobi sanitation department, health depart- Kenya, building applications and the fil- withMombasa construction permits, comparable ment, and tax department. That process ing of drawings are processed manually. Eldoret to Berlin and Paris. This ranking is much took an average of eight months. Now all In the future, it would be advantageous Thika better than the Kenyan average: 2 proce- project clearances are centralized in one to computerize the system so that build- Kisumu dures, 35Kili days, and 42% of income per office--cutting the time to go through ing information could be stored in an capita less--which means there is much the bureaucracy to four months. Locali- easily accessible fashion and develop- Construction-related Utilities room for improvement (figure 3.4). approvals ties like Eldoret, Kilifi and Nairobi receive ment requests could be cross-checked Source: Doing Business database. the building plans from the construction for ownership, compliance, permits, and inspections. A first step would be to FIGURE 3.4 offer application forms online. Several Best practices: high potential for improvement municipalities have websites in place but they do not offer services related to 11 LOCALITY 11 LOCALITY 11 LOCALITY AVERAGE 12 AVERAGE 104 AVERAGE 175 building permits online. It is expected that the electronic registry of licenses KENYA LOWEST 132 being prepared by the Business Regula- KENYA LOWEST 10 KENYA LOWEST 69 tory Reform Unit at the Treasury De- partment will provide key information on construction permits and related is- sues. Utility service providers also have GLOBAL 0.6 LOWEST DENMARK 6 SINGAPORE 25 QATAR well-established websites where an en- Cost trepreneur can easily access contact in- Procedures Time (days) (% of income per capita) formation and information regarding Source: Doing Business database. application procedures. As a next step, DeaLing witH ConstruC tion PerMits 13 making it possible for individuals and rationaLize inspections firms to apply on-line for new connec- While in most Kenyan localities munici- tions would save applicants and utility pal bylaws require several inspections 1. World Bank. 2007. Enterprise Surveys Database. Washington, D.C.: The World companies time. for a construction project, Denmark re- Bank Group. quires only one. This does not imply 2. See the detailed description of the stan- puBLicLy dispLay inFormation that buildings in Denmark are less safe. dard case in the Data notes. aBout the construction-permit Random inspections are not necessarily process 3. World Bank. 2005. Doing Business 2006: the best way to guarantee the safety of Creating Jobs. Washington, D.C.: The Builders need to understand how the a building. One way to make inspec- World Bank Group. process works. Flowcharts displayed in tions more efficient is to change from public places or on the Internet help. In a system of random inspections to one 2001, the municipal authorities in Riga that is risk-based, in which inspections (Latvia) created a step-by-step guide are performed at critical phases of the with a list of required documents and construction process. Another popular flowcharts showing which offices to visit, approach among best-performing econo- when and with what documents, and mies is the privatization of the inspection listing the offices' addresses, working process. The Czech Republic adopted this hours, and contact numbers. This simple method, creating a new and independent reform cut two months off the process profession: authorized inspectors. If a and gave builders confidence and trust in business engages the services of an au- the construction-permit process.3 thorized inspector, it can speed up the Utility companies in Kenya fail process of obtaining construction per- to provide detailed information about mits by five weeks. Nevertheless, effective application and installation costs. Cur- implementation of this recommendation rently, in order to find out the cost of a requires that there be safeguards against utility connection, one has to call the corruption and real accountability for utility companies, spending a consider- approvals issued by private inspectors. able amount of time on the phone. Best practices exist within Kenya, too. In Nairobi, a construction firm can have all inspections during the construction phase done by a licensed structural en- gineer and a professional plumber. Other Kenyan municipalities could follow suit. 14 Doing Business in kenya 2010 Registering property Felix is one of the best safari guides erty registration is Saudi Arabia, where Although the same procedures are re- in Kilifi. Since he inherited his father's an entrepreneur only needs to go through quired across Kenya, there are significant guesthouse two years ago, he has been 2 procedures that take 2 days. The trans- differences in the time and cost needed improving the business in order to offer action is free of charge. On average, for registering property among the lo- more services to his visitors from all over for a Kenyan entrepreneur, it takes 8 calities included in this report. These the world. His savings are not sufficient procedures, 53 days, and costs 6% of the differences are mainly due to variations to buy the fully equipped safari jeep he property value to do the same. The same in the administrative efficiency of the has set his eyes on. But, luckily he owns 8 procedures are required across Kenya. agencies involved, local fees and taxes, as the guesthouse. He hopes his bank will These involve interactions with agencies well as whether there is a local branch of accept it as a guarantee for a loan. such as the Lands Office, the local au- the respective national agency present in An efficient property-registration thority and private banks, among others. the locality (table 4.1). system allows entrepreneurs such as Felix In neighboring Tanzania and Uganda, an With 23 days needed to register a to use their property as collateral. Having entrepreneur has to undertake more pro- property, Mombasa is the fastest local- access to credit is crucial for businesses to cedures--9 and 13, respectively. How- ity (figure 4.1). Internationally, Mom- grow and generate employment. Because ever, Kenya lags behind the sub-Saharan basa compares favorably with Namibia the private sector is the main engine of African regional average of 7 procedures. or South Africa (figure 4.2). Registering growth, improving and facilitating prop- FIGURE 4.1 erty registration in Kenya will benefit not Time and cost to register property in Mombasa and Garissa only individual entrepreneurs but the Time (days) whole economy--including government Garissa time 80 Garissa 88 days functions and services because of an Mombasa Lodge the completion 30 increase in tax revenues. 70 documents with the Lands O ce days Doing Business records the full se- for registration of the transfer quence of procedures, time and costs 60 necessary to transfer a property title from one business to another, when a 50 company purchases a piece of land and Obtain Land Rent 40 Clearance Certi cate 30 a building. All procedures are recorded days until the buyer can house his business on 30 Mombasa time the property, sell the property to another 23 days company or use the property as collateral 20 1 to obtain a loan. Every procedure re- Obtain valuation 19 7 day of the property days days quired by law or necessary in practice is 10 8 included, whether it is the responsibility days 0 of the seller or the buyer or must be com- 1 8 pleted by a third party on their behalf.1 Procedures The global best performer in prop- Source: Doing Business database. FIGURE 4.2 FIGURE 4.3 Big range in time to register property Expensive to register property in Isiolo 1 8 Procedures Source: Doing Business database. registering ProPert y 15 Table 4.1 FIGURE 4.2 FIGURE 4.3 Where is registering property easy-- Big range in time to register property Expensive to register property in Isiolo and where not? Days % of property value 100 25 Cost (% of Isiolo 24.2% Time property rank Locality Procedures (days) value) 90 20 1 Mombasa 8 23 4.14 Garissa Nigeria 2 kisumu 8 30 4.11 80 Sub-Saharan Africa 3 narok 8 46 4.11 Isiolo regional average 15 4 Thika 8 60 4.09 Kili 70 5 Malaba 8 29 4.17 6 Eldoret 8 37 4.29 Eldoret 10 Nairobi Garissa 7 kilifi 8 75 4.14 60 Thika Kili 8 nyeri 8 53 4.21 Kisumu 9 nairobi 8 64 4.20 Nyeri Malaba 50 Mombasa 5 10 Garissa 8 87 4.14 Nairobi Between 4.1% Narok Narok and 4.3% 11 Isiolo 8 77 24.16 India 40 Nyeri Note: rankings are the average of the locality rankings on the Thika 0 number of procedures, the associated time and cost (% of property Eldoret value) required to register property. see the Data notes for details. Ghana Source: Doing Business database. Source: Doing Business database Kisumu 30 China Malaba sales tax is one of the charges levied by South Africa property is slowest in Garissa and Isiolo, Mombasa 20 Namibia the County Council in order to obtain Indonesia with 87 and 77 days--almost 4 times the Council's consent to register the Botswana longer than in Mombasa. Large locali- property with the Nairobi Land Registry. 10 ties like Mombasa and Kisumu benefit In total, an entrepreneur who wants to United Kingdom from the fact that all paperwork can be Singapore transfer a property in Isiolo has to pay taken care of locally. On the other hand, 0 Best performers-- 24.2% of the property value, only slightly New Zealand, entrepreneurs from lagging localities like Saudi Arabia, below the most expensive country in the Thailand and Garissa or Isiolo have to travel to bigger United Arab Emirates world, Syrian Arab Republic, with 28% towns in their region or even to Nairobi Source: Doing Business database. of property value. to obtain needed documents, such as FIGURE 5.2 "I cannot afford to pay one fourth the Land Rent Clearance Certificate. "I With the a commercial Isiolo, in of the Kenya Cost of enforcingexception of contractthecourt acrossvalue of the property to register have to wake up very early in the morn- average claim) Cost (% of cost to transfer property is 4.2% the sale," says Douglas, who had to put ing, and the days I spend in Nairobi 0 10 of property value across the localities 20 30 on hold his plans to expand his business, Isiolo 38.4 are days I lose money," says Ben, an measured in this report. Thika, Narok, because the cost of buying a land plot is Garissa 38.7 entrepreneur in Thika who cannot take and Kisumu are least expensive at 4.1% Narok too high. 38.9 care of his business when he is away. In property value. These localities are of Eldoret On the global ranking, Kenya, rep- 39.0 addition, poor customer service at the cheaper than Mexico and Mauritius-- Malaba resented by Nairobi, is ranked 125th 39.2 Lands Registry demands a permanent with 5.2% and 10.7%, respectively--but Thika among 183 economies, on the ease of 39.5 personal follow-up from the client. "You still need to improve to compete against Kili registering property. If Nairobi adopted 39.8 have to constantly make sure that your Mombasa Brazil and China--2.7% and 3.2%, re- Mombasa's practice regarding the time 39.9 Average 40.2 file is being processed, otherwise you spectively. Costs stem largely from the to register property and Thika's practice Nyeri 40.3 come back the next week and find your stamp duty--4% of property value--and regarding the cost, Kenya would jump 36 Kisumu 41.2 documents in the same place you left from the fees paid to obtain the Land Nairobi positions on this indicator. 47.2 them," says Andy, another entrepreneur Rent Clearance Certificate at the Lands from Thika. Attorney fees Office and the Rates Clearance Certificate What to reform? Court fees Enforcement fees Another source of delays comes from the local government. Source: Doing Business database. from obtaining the property valuation computerize Land registries FIGUREIsiolo is the town with the highest 5.1 from a government assessor. This pro- cost for registering property--6 times The lengthiest delays occur during the trial andTitle searches and registration are still judgment phase cedure alone can slow down the process Time expensive than the others. On more(days) done manually at the Land Offices in 0 100 200 300 400 for more than one month, especially in top of the 4% of property value paid for Kenya. This causes delays. Computer- Malaba 240 towns like Isiolo, where the entrepreneur stamp duty, an entrepreneur in Isiolo ization would digitalize files and these Garissa 300 has to wait for a government assessor must pay a separate sales tax, worth 20% Narok 270 would no longer have to be physically from Meru--a town 45 kilometers away. of the property value (figure 4.3). This handled. This would expedite property Average 339 Kili 365 Kisumu 365 Eldoret 365 16 Doing Business in kenya 2010 registration and reduce the danger of introduce a FLat Fee For stamp duty instead oF a percentage losing documents. This would also be oF the property vaLue the first step in a more ambitious reform linking all registries in the country and Replacing the current fee system with allowing users to make online registra- a fixed fee reduces the incentive for tions. Zambia computerized its land reg- property owners to either undervalue istry and set up a customer service center their plots or not register their property to eliminate the backlog of registration altogether. In 2007, the Arab Republic requests. The time to register property of Egypt introduced a low fixed fee for fell from 70 days to 39 days between 2007 stamp duty replacing the 3% registra- and 2008. Saudi Arabia became the best tion fee. This led to a boom of property performer in the world by computerizing registrations that increased government procedures in 2007, making it possible revenues by 39% six months after the re- to register property with 2 procedures form.3 In 2008, Rwanda replaced the 6% and 2 days.2 stamp duty with a low flat fee. In Kenya, the introduction of a flat fee would go open LocaL Branches beyond simply cutting the cost to register Entrepreneurs from small localities have property: with a flat fee, there would be to go to regional centers or even Nairobi no need to have the property assessed by to complete procedures, such as obtain- the government at the time of sale. This ing the Land Rent Clearance Certifi- would be reflected in significant time cate. Having to travel to other localities savings, since obtaining the valuation involves delays and higher registration alone may take more than one month in costs. Furthermore, the demand from some cases. other localities affects the already con- gested Nairobi offices such as the Ardhi House, which is in charge of issuing clearances. Having local branches, in- 1. See the detailed description of the stan- dard case in the Data notes. dependent and authorized to process 2. World Bank. 2008. Doing Business 2009. applications on site, would also help the Washington, D.C.: The World Bank national government to have better con- Group. trol of property transactions and reduce 3. World Bank. 2007. Doing Business 2008. tax evasion. Washington, D.C.: The World Bank Group. Enforcing contracts Makini, a litigation lawyer in Nyeri, has availability, as the afternoon has been ized commercial dispute. It looks at the spent the entire morning sitting in the reserved for judgments and rulings. This time, cost, and procedural steps needed courtroom waiting for his suit to be is exasperating for Makini and his client, to enforce a contract through the courts.2 heard. Lawyers from both sides are ready as the lawyers check their diaries for The process of resolving commer- to proceed and both witnesses are in mutual availability and proceed to the cial disputes in Kenyan courts is regu- court. The unexpected injunctions oc- registry to apply for another trial date. lated mainly by the Civil Procedure Act, casioned by his opponent in the past will Makini's frustrations are shared by Chapter (Cap) 21 of the Laws of Kenya, therefore clearly not be an issue this time his colleagues in the various localities, together with the Civil Procedure Rules. around. His case is fourth on the list, where on average, it takes 418 days to A number of other statutes come into and since it is pretty straightforward, enforce an identical contract at a cost play for substantive law, for example the with only four witnesses, should be fully of 40% of the claim value and requires Evidence Act, Cap 80; the Auctioneers' heard today. But alas, that is not to be. It 40 procedural steps. Overall, in the sub- Act, Act No. 5 of 1996; and the Law of has been five hours and the first case is Saharan African region, it takes on aver- Contract Act, Cap 23. still proceeding. The magistrate has to age 644 days, costs 49.26% of the claim Despite the identical body of laws take down all the evidence by longhand, value, and requires 39 procedural steps and regulations and the central manage- painstakingly writing down everything to enforce an identical contractual dis- ment of the court system in Kenya, the under the watchful eyes of the lawyers, pute. In this region, as in many other time to enforce a contract varies among so that nothing is left out of the record. developing parts of the world, a common the different localities. An entrepreneur Given that it is now one o'clock, the court obstacle to doing business is the absence would have to wait for 11 months to adjourns and the remaining matters are of strong courts. As a result, 80% of the enforce the contract in Malaba--two allocated for other days, depending on people turn to informal institutions to months more than in Namibia. In Ga- Table 5.1 seek justice.1 rissa, where contract enforcement is eas- Where is enforcing contracts easiest-- An open, efficient, and globally in- iest (table 5.1) and Narok he would have and where is it the most difficult? tegrated business environment requires to wait for an additional 3 weeks (a total Locality RAnk an effective contract-enforcement re- of 351 days) before getting the judgment Garissa (easiest) 1 gime and a well-functioning judiciary. satisfied, which is exactly the same time narok 2 In their absence, firms undertake fewer that it takes in Antigua and Barbuda. In Malaba 3 Isiolo 4 investments and business transactions. Nairobi, the waiting period would be at Eldoret 5 Weak judicial systems undermine com- least 15-and-a-half months, the longest kilifi 6 mercial trust because firms and people time among the localities measured in Thika 7 will prefer to interact only with those Kenya, and almost twice the amount of kisumu 8 whose trust they have gained through time that it takes in Hong Kong, China. Mombasa 9 nyeri 10 past interactions, inevitably reducing the In measuring the time it takes to nairobi (most difficult) 11 scope of commercial activity. enforce the contract, Doing Business Note: rankings are the average of the locality rankings on the num- The Doing Business enforcing con- analyses the entire commercial litigation ber of procedures, the associated time and cost to resolve a com- mercial dispute through the courts. see the Data notes for details. tracts indicator measures the efficiency of process for a standardized case, from fil- Source: Doing Business database the judicial system to resolve a standard- ing and serving court papers; the pretrial Nairobi 47.2 Attorney fees Court fees Enforcement 18 Doing Business in kenya 2010 fees Source: Doing Business database. and trial process, including judgment; FIGURE 5.1 The lengthiest delays occur during the trial and judgment phase up to the satisfaction of the judgment Time (days) through enforcement processes. Through 0 100 200 300 400 this analysis, various points emerge as Malaba 240 the time-consuming elements of the dis- Garissa 300 pute-resolution process. Narok 270 Average 339 The filing and service period var- Kili 365 ies across localities, although the upper Kisumu 365 time limits are established by the Civil Eldoret 365 Procedure Rules. In some cities, it takes Isiolo 365 a shorter period to serve the initial docu- Mombasa 365 ments once they are filed. In Garissa and Nyeri 365 Narok, it takes 21 days for filing and Thika 365 Nairobi 365 service, 6% of the total time to enforce the contract. The process takes longest in Service and ling Trial and judgement Enforcement Nairobi--40 days for filing and service Source: Doing Business database. of initial court documents--almost six times longer than in Accra, Ghana. various guidelines have been issued to of time is spent in the trial and judgment FIGURE 5.3 After the filing and service period, limit the number of courts in Africa help reduce The reasons for contracts Specialized commercialinjunctions. Some to phase. delays in enforcingthis are mainly the first hurdle that many lawyers have magistrates tend to grant more injunc- Time to enforce a contract (days) the adjournments and delays in getting to jump is that of obtaining a hearing tions than others. This is a problem that 800 Democratic the trial date. In Malaba, the trial and Nigeria Republic date, once all relevant court documents 2004 all the localities covered. cuts across takes 72.7% of the total judgement time of Congo have been filed and exchanged between Moreover, adjournments are a dou- time to enforce a contract. This amounts the parties. The availability of a trial date 600 ble-edged sword. Not only do they cause to 240 days, 50 days more than in Mexico Ghana Burkina depends upon how congested the court unnecessary costs and inconvenience, City. In Kisumu and Kilifi, it takes about Faso diary is. In Nairobi, the diary for the but they may also delay the trial signifi- 2009 Mauritania 85.9% of the total time, amounting to Rwanda 400 entire year is typically full by the end of cantly. Once an adjournment is granted, 365 days each, 7 months longer than the first quarter of the year. This means the suit falls off the diary track and must in Singapore. On average, the trial and that if the parties are ready to apply for a be 200 allocated a new date. If the court diary judgment period for a contractual dis- hearing date at the beginning of May, the is full for the next months, this piles pute takes about 339 days or 80.9% of earliest date that they would get would be delay on top of delay. Source: Doing Business database. In some courts, the the total time to enforce the contract in January of the following year. The same magistrates may grant another hearing (figure 5.1). applies in Thika. In Kisumu and Nyeri, date for adjournments while in court. Many of the enforcement proce- the delay is much shorter; parties can This is typically easier and is done for dures are provided for in the Civil Pro- typically get a date within two to three example in Narok. In most other courts, cedure Rules as well as the Auctioneers' months of closure of pleadings. Courts one would have to get a date in the regis- Act. Delays may be occasioned by the in Mombasa have a unique closed-diary try. The courts in Bungoma, where com- fact that parties need to obtain court system, in which the court diary is open mercial disputes relating to Malaba are dates to have `mention' proceedings in in quarters according to the calendar heard, tend to be strict on adjournments. court as a prerequisite for confirma- year. This makes the fixing of hearing This contributes to the speed of enforce- tion of the judgment execution by auc- dates much faster. This is a practice that ment in Malaba. tion. The period ranges from 30 days in the other courts could consider adopting. Once the hearing has been con- Kisumu, Kilifi, and Garissa, to 60 days in Adjournments also slow down the cluded, parties may spend a significant Nairobi, Thika, Nyeri, Narok, Mombasa, trial period considerably. The nature of amount of time awaiting judgment. The Malaba, and Isiolo. the judicial process being an adversarial law does not provide for a mandatory A number of reforms are being dis- one means that the progress of the suit is period during which judgments must cussed or implemented. These include for the most part at the pace of the parties be delivered at the lower (magistrates') the pending amendments to the Civil and their lawyers. The role of judges is to courts. There is a 42-day guideline pro- Procedure Act and Rules. Part of the neutrally referee the trial. Often lawyers vided for High Court matters, which problem has been the complexity of take advantage of this latitude to delay the magistrates' courts are by implication these provisions of law and the goal is to trial through obtaining injunctions. The expected to follow. Rarely is this done in simplify them for faster judicial process law does not limit the number of injunc- practice, however. as well as to modernize them so that they tions that a party may be given. However, In all the localities covered, the bulk are in line with contemporary commer- 0 Best performers-- New Zealand, Saudi Arabia, Thailand and United Arab Emirates Source: Doing Business database. enForCing ContraC ts 19 FIGURE 5.2 court interest rates by the winning party. Cost of enforcing a commercial contract in court across Kenya Cost (% of claim) It is much higher than in Tanzania (0%), 0 10 20 30 Namibia (0.8%) and Botswana (1.5%). Isiolo 38.4 If one were to create a hypotheti- Garissa 38.7 cal city, "Kenyana," composed of the Narok 38.9 best contract-enforcement features, one Eldoret 39.0 would combine the total time required Malaba 39.2 in Malaba (330 days) and the cost in- Thika 39.5 Kili 39.8 volved in Isiolo (38.4%). It would rank Mombasa 39.9 as 92nd overall in enforcing contracts, Average 40.2 rather than 126th, as Kenya now does Nyeri 40.3 (table 5.2). Kisumu 41.2 Nairobi 47.2 What to reform? Attorney fees Court fees Enforcement fees Running an efficient court system is by no Source: Doing Business database. means an easy task; it poses a continuous FIGURE 5.1 cial realities. There are also discussions matter of agreement between the parties. challenge even to more industrialized The lengthiest delays occur during the trial and judgment phase to increase paralegal staff in courts and Expert fees as a percentage of court costs countries. Kenya is certainly no excep- Time (days) to set procedural time limits. 0 100 200 are the lowest at 38.5% in Garissa, and 300 400 tion. Economies that score well on the The Malaba fees and costs related to lawsuits 240 highest at 47.3% in Kisumu. The main ease of enforcing contracts keep courts Garissa are regulated by standard laws across the 300 reasons for the differences are the avail- efficient by streamlining case-processing Narok As a result, the variances be- country. 270 ability of experts and the extent to which from filing through appeals. They make Average 339 tween the cities are not significant. In they are flexible in their fees. enforcement of judgments faster and Kili 365 Malaba, where enforcement takes the 365 Kisumu Enforcement costs include reg- cheaper by introducing early-settlement least time, it costs 39.23% of the claim 365 Eldoret istering the judgment, organizing for options, case-management systems, the value, proving that efficiency in con- 365 public sale of the goods, and other Isiolo strict procedural time limits, and special- tract enforcement does not necessarily 365 Mombasa enforcement costs. In Kenya, the costs ized commercial courts. Kenya can learn Nyeri go hand-in-hand with lower costs. The 365 extracting the decree are regulated of from some of these reforms. costThikaMalaba is comparable to that in 365 in and standardized under the law. The Nairobi 365 Zambia. The highest cost in enforcing auctioneers' fees are also regulated5 al- introduce smaLL cLaims courts Service and ling at 47.2% of the judgement depending on the Enforcement contracts is in Nairobi, Trial and though competition, A major contributor to the backlog of claim value. The average of the cost in Source: Doing Business database. there is room for negotiation with the cases is the large number of small claims the 11 localities is 40.2% almost double client. In Malaba, the auctioneer's fee filed. Given that it takes an average of the cost in Australia (figure 5.2). amounts to 72.1% of the enforcement 418 days at a cost of 40.2% of the claim FIGURE 5.3 regulated under reduce delays in enforcing it amounts Lawyers' fees arecourts in Africa help to costs while in Mombasa,contracts to Specialized commercial value to prosecute a commercial dispute specific guidelines, as Time to enforce a contract (days) a result of which 83.9%. Auctioneers' fees generally tend through the courts, it would be more cost Democratic these do not vary across the different lo- to relate in direct proportion to the size 800 and time effective to establish a separate Nigeria Republic calities. 3 The law sets the minimum fees 2004 It is less of the locality. of Congo than 80% of stream of courts to handle disputes below chargeable for specific services, thereby the enforcement costs in Malaba, Isiolo, a certain threshold. Such a court could be 600 preventing undercutting. It is also im- Garissa, and Kilifi whereas Burkina Ghana it is above regulated under a simplified procedural portant to note that the law allows for Faso 80% in Kisumu, Mombasa, Narok, Nyeri, regime, so that parties could file and winning parties to recover the costs of and Thika. In some towns, for example, 2009 Mauritania Rwanda handle matters without the need for 400 the suit including attorney's fees, court Narok, the main issue is the availability lawyers, which would further reduce the costs, and enforcement costs. of auctioneers. Because there is only one costs. In Africa, this reform has recently 200 Court costs include case filing fees, auctioneer, litigants are forced to travel been undertaken in Botswana, where expert fees, and other court costs. The to Nakuru, about three hours away by small-claims courts have been added as filing fees are regulated by law4 and are Source: Doing Business database. road. Because auctioneers are licensed to an additional layer in the magistrates' computed in the various registries upon practice by province, litigants cannot use courts, with a threshold of BWP 7,000 filing the claim. The main variations in auctioneers outside the province6 even equivalent to KES 78,309 (USD 1,035). court costs are related to expert fees. where these may be nearer. The average South Africa, Mauritius and Zambia are The experts may be members of differ- total enforcement costs amount to 5% other sub-Saharan African countries ent professions and the fee is therefore a of the claim. These can be recovered at with small-claims courts. Service and ling Trial and judgement Enforcement Source: Doing Business database. 20 Doing Business in kenya 2010 Table 5.2 FIGURE 5.3 how do Kenyan localities compare Specialized commercial courts in Africa help to reduce delays in enforcing contracts globally and regionally in enforcing Time to enforce a contract (days) contracts? 800 Democratic (selected economies) Nigeria Republic 2004 of Congo economy region ranking Singapore EAP 13 600 Ghana Burkina Tanzania SSA 31 Faso namibia SSA 41 2009 Mauritania Rwanda Ghana SSA 47 400 Malaysia EAP 59 Mauritius SSA 66 South Africa SSA 85 200 "Kenyana" ssa 92 Kenya (nairobi) ssa 126 Source: Doing Business database. Jamaica LAC 128 United Arab Emirates MEnA 134 Keep statistics and measure the Egypt, Arab Republic MEnA 148 impact oF reForms for progress to be measured. In Macedo- India SA 182 Statistical information helps assess court nia, FYR, the number of cases pending eaP: east asia and Pacific; LaC: Latin america and the Caribbean performance. Statistics are already being for more than three years was reduced by oeCD: oeCD high income; sa: south asia; ssa: sub-saharan africa. kept on the number of commercial cases 46%. Litigants in longstanding disputes source: Doing Business database. being handled and disposed of, the clear- were summoned to appear in court on ance rate on how long cases take to be set days and if neither appeared, the case increase proceduraL eFFiciency By streamLining the triaL and resolved, and the appeals rate. What was dismissed. The reform cut the time judgment process is currently missing is a more detailed to enforce a contract in court from 509 The trial process revolves around how tracking of the time it takes for differ- days to 385 days.8 proactive the litigating parties are and ent types of commercial cases to move the availability of the magistrate to ref- through the court process. Such statis- introduce speciaLized eree the process. When magistrates go on tics will inform management decisions commerciaL courts leave or when they are transferred to new and the development of improved poli- Most magistrates' courts in Kenya oper- duty stations, the trial process is put on cies and recommendations for legislative ate both as civil and criminal courts. In hold. Not only does this add to the back- changes. Improved statistical capacities some, like in Nyeri, specific days are al- log, it considerably drives up the time will also allow for careful analysis of the located to civil and to criminal matters. and cost involved for the parties. Matters actual impact of the ongoing reforms to This slows down the process of commer- become more complicated if the hearing guide the direction of future policies of cial dispute resolution. In Nairobi, there is closed and all that is awaited is the judicial reform. are specialized commercial courts at the judgment. Often a magistrate transferred magistrate level. The government can to a new duty station has to be called reduce BacKLog oF cases consider introducing the same to other back to his or her old duty station to The backlog of cases in the Kenyan judi- localities, beginning with those with the pronounce judgments of cases that they cial system is related to the adversarial higher number of filed cases, and gradu- were handling. Only in extreme cases is nature of the system, which requires the ally expanding to others. This requires the file passed on to another magistrate. action of the parties to proceed. Many in- significant planning and structuring. Because magistrates have to transcribe active, long-unprosecuted cases lie dor- Countries that have specialized courts all the evidence by hand, often there is mant, taking up space in the registries or specialized commercial sections in a need to have the proceedings typed and hampering efficient case allocation the general courts resolve commercial in order for the appointed magistrate among magistrates. Macedonia, FYR and disputes about 40% faster than countries to read them and write a judgment. The Botswana are examples of countries that that do not. A number of African econo- court administration can address such is- faced similar problems and introduced mies have seen reductions in the time to sues by setting up a changeover system to bold measures to tackle the problem. enforce contracts after introducing these ensure smooth continuation of matters In Botswana, judicial officers set aside a courts (figure 5.3). If reforms in the spe- even with the movement of the magis- number of days to conduct roll calls on cialized courts yield satisfied users, they trates handling them. aged matters and dismissed the unre- embolden governments to implement sponsive ones.7 The reform is too recent broader reforms.9 enForCing ContraC ts 21 1. Wojkowska, Ewa. 2006. "Doing Justice: How Informal Justice Systems Can Con- tribute." Oslo, Norway: Oslo Governance Centre, United Nations Development Programme. 2. See the detailed description of the stan- dard case in the Data notes. 3. The Advocates (Remuneration) (Amend- ment) Order, 2009. 4. The Judicature Act, Cap 8 of the Laws of Kenya. 5. The Auctioneers' Act, Act No. 5 of 1996. 6. Both Narok and Nakuru are in the Rift Valley Province, one of the eight prov- inces in the country. 7. Case Management System introduced in Botswana on February 1, 2008. 8. World Bank. 2006. Doing Business 2007: How to Reform. Washington, D.C.: The World Bank Group. 9. World Bank. 2007. Doing Business 2008. Washington, D.C.: The World Bank Group. 22 Doing Business 2010 Data notes economy characteristics Gross nationaL income (Gni) exchanGe rate per capita The exchange rate used in this report is Doing Business in Kenya 2010 reports 2008 1 US$ = 80.29 KES (Kenyan Shillings) income per capita and population as pub- lished in the World Bank's World Develop- popuLation ment Indicators 2009. Income is calculated Doing Business uses the World Bank re- using the Atlas method (current US$). For gional and income group classifications, cost indicators expressed as a percentage available at http://www of income per capita, 2008 GNI in local cur- .worldbank.org/data/countryclass. rency units is used as the denominator. Kenya's GNI per capita in 2008 = US$ 767 The indicators presented and analyzed case of Kenya. Surveys are administered comparisons and benchmarks are valid in Doing Business in Kenya 2010 mea- through more than 115 local experts, across economies. Finally, the data not sure business regulation and the pro- including lawyers, business consultants, only highlight the extent of specific regu- tection of property rights--and their accountants, government officials and latory obstacles to doing business but effect on businesses, especially small other professionals routinely administer- also identify their source and point to and medium-size domestic firms. First, ing or advising on legal and regulatory what might be reformed. the indicators document the degree of requirements. These experts have sev- regulation, such as the number of pro- eral rounds of interaction with the Sub- Limits to what is measured cedures to start a business, to construct national Doing Business team, through The Doing Business methodology applied a warehouse or to register and transfer face-to-face interviews, conference calls, to Doing Business in Kenya 2010 has 4 commercial property. Second, they gauge written correspondence and visits by the limitations that should be considered regulatory outcomes, such as the time team. For Doing Business in Kenya 2010 when interpreting the data. First, the and cost to enforce a contract. For details the team members visited Kenya two data often focus on a specific business on how the rankings on these indicators times to recruit respondents, verify data form--generally a limited liability com- are constructed, see Aggregate Ranking and meet with local government officials. pany (or its legal equivalent) of a speci- at the end of this section. The team also invited local government fied size--and may not be representative In this project, Doing Business indi- officials and judges to review the prelimi- of the regulation on other businesses, for cators have been created for 11 Kenyan nary results and offered them a right of example, sole proprietorships. Second, localities--the complete list is available reply period. The data from surveys are transactions described in a standardized on page 29. The data for all sets of indica- subjected to numerous tests for robust- case scenario refer to a specific set of is- tors in Doing Business in Kenya 2010 are ness, which lead to revisions or expan- sues and may not represent the full set current as of June 2009. sions of the information collected. of issues a business encounters. Third, The Doing Business methodology of- the measures of time involve an ele- Methodology fers several advantages. It is transparent, ment of judgment by the expert respon- using factual information about what dents. When sources indicate different The Doing Business in Kenya 2010 data laws and regulations say and allowing estimates, the time indicators reported in are collected in a standardized way, fol- multiple interactions with local respon- Doing Business represent the median val- lowing the methodology developed by dents to clarify potential misinterpreta- ues of several responses given under the the Doing Business team. To start, the tions of questions. Having representative assumptions of the standardized case. Doing Business team, with academic ad- samples of respondents is not an issue, Finally, the methodology assumes visers, designs a survey. The survey uses as the texts of the relevant laws and that a business has full information on a simple business case to ensure com- regulations are collected and answers what is required and does not waste parability across economies and over checked for accuracy. The methodology time when completing procedures. In time--with assumptions about the legal is inexpensive and easily replicable, so practice, completing a procedure may form of the business, its size, its location data can be collected in a large sample take longer if the business lacks informa- and the nature of its operations. Then, of economies. Because standard assump- tion or is unable to follow up promptly. the survey is customized to the particular tions are used in the data collection, Alternatively, the business may choose DATA noTes 23 to disregard some burdensome proce- · Operates in the economy's selected same website but require separate filings, dures. For both reasons the time delays localities. they are counted as 2 procedures. reported in Doing Business in Kenya · Is 100% domestically owned and has Both pre- and post-incorporation 2010 would differ from the recollection 5 owners, none of whom is a legal procedures that are officially required of entrepreneurs reported in the World entity. for an entrepreneur to formally operate a Bank Enterprise Surveys or other percep- · Has start-up capital of 10 times business are recorded. tion surveys. income per capita at the end of 2008, Procedures required for official cor- paid in cash. respondence or transactions with public Starting a buSineSS · Performs general industrial or com- agencies are also included. For example, mercial activities, such as the produc- if a company seal or stamp is required Doing Business in Kenya 2010 records all tion or sale to the public of products on official documents, such as tax dec- procedures that are officially required or services. The business does not larations, obtaining the seal or stamp is for an entrepreneur to start up and for- perform foreign trade activities and counted. Similarly, if a company must mally operate an industrial or commer- does not handle products subject to a open a bank account before registering cial business. These include obtaining all special tax regime, for example, liquor for sales tax or value added tax, this necessary licenses and permits and com- or tobacco. It is not using heavily pol- transaction is included as a procedure. pleting any required notifications, verifi- luting production processes. Shortcuts are counted only if they fulfill 4 cations or inscriptions for the company · Leases the commercial plant and criteria: they are legal, they are available and employees with relevant authorities. offices and is not a proprietor of real to the general public, they are used by After a study of laws, regulations estate. the majority of companies, and avoiding and publicly available information on · Does not qualify for investment them causes substantial delays. business entry, a detailed list of proce- incentives or any special benefits. Only procedures required of all busi- dures is developed, along with the time · Has at least 10 and up to 50 employees nesses are covered. Industry-specific pro- and cost of complying with each proce- 1 month after the commencement of cedures are excluded. For example, pro- dure under normal circumstances and operations, all of them nationals. cedures to comply with environmental the paid-in minimum capital require- · Has a turnover of at least 100 times regulations are included only when they ments. Subsequently, local incorpora- income per capita. apply to all businesses conducting gen- tion lawyers and government officials · Has a company deed 10 pages long. eral commercial or industrial activities. complete and verify the data. Procedures that the company undergoes Information is also collected on the procedures to connect to electricity, water, gas and sequence in which procedures are to A procedure is defined as any interaction waste disposal services are not included. be completed and whether procedures of the company founders with external may be carried out simultaneously. It is parties (for example, government agen- time assumed that any required information cies, lawyers, auditors or notaries). In- Time is recorded in calendar days. The is readily available and that all agencies teractions between company founders or measure captures the median duration involved in the start-up process function company officers and employees are not that incorporation lawyers indicate is without corruption. If answers by local counted as procedures. Procedures that necessary to complete a procedure with experts differ, inquiries continue until must be completed in the same build- minimum follow-up with government the data are reconciled. ing but in different offices are counted agencies and no extra payments. It is as- To make the data comparable across as separate procedures. If founders have sumed that the minimum time required economies, several assumptions about the to visit the same office several times for for each procedure is 1 day. Although business and the procedures are used. different sequential procedures, each is procedures may take place simultane- counted separately. The founders are as- ously, they cannot start on the same day assumptions about the business sumed to complete all procedures them- (that is, simultaneous procedures start The business: selves, without middlemen, facilitators, on consecutive days). A procedure is · Is a limited liability company. If there accountants or lawyers, unless the use considered completed once the company is more than one type of limited of such a third party is mandated by has received the final document, such liability company in the economy, the law. If the services of professionals are as the company registration certificate limited liability form most popular required, procedures conducted by such or tax number. It is assumed that the among domestic firms is chosen. professionals on behalf of the company entrepreneur does not waste time and Information on the most popular are counted separately. Each electronic commits to completing each remaining form is obtained from incorporation procedure is counted separately. If 2 pro- procedure without delay. The time that lawyers or the statistical office. cedures can be completed through the the entrepreneur spends on gathering 24 Doing Business 2010 information is ignored. It is assumed The data details on starting a business · Has 5 owners, none of whom is a legal that the entrepreneur is aware of all entry can be found for each economy at http:// entity. regulations and their sequence from the www.doingbusiness.org by selecting the · Is fully licensed and insured to carry beginning but has had no prior contact economy in the drop-down list. This meth- out construction projects, such as with any of the officials. odology was developed in Djankov and building warehouses. others (2002) and is adopted here with · Has 60 builders and other employees, cost minor changes. all of them nationals with the Cost is recorded as a percentage of the technical expertise and professional economy's income per capita. It includes dealing with conStruction experience necessary to obtain all official fees and fees for legal or pro- perMitS construction permits and approvals. fessional services if such services are · Has at least 1 employee who is a required by law. Fees for purchasing and Doing Business in Kenya 2010 records all licensed architect and registered with legalizing company books are included procedures required for a business in the the local association of architects. if these transactions are required by law. construction industry to build a stan- · Has paid all taxes and taken out all The company law, the commercial code dardized warehouse. These procedures necessary insurance applicable to its and specific regulations and fee sched- include submitting all relevant project- general business activity (for example, ules are used as sources for calculating specific documents (for example, build- accidental insurance for construction costs. In the absence of fee schedules, a ing plans and site maps) to the authori- workers and third-person liability government officer's estimate is taken ties; obtaining all necessary clearances, insurance). as an official source. In the absence of a licenses, permits and certificates; com- · Owns the land on which the government officer's estimate, estimates pleting all required notifications; and re- warehouse is built. of incorporation lawyers are used. If ceiving all necessary inspections. Doing several incorporation lawyers provide Business in Kenya 2010 also records pro- assumptions about the warehouse different estimates, the median reported cedures for obtaining connections for value is applied. In all cases the cost ex- electricity, water, sewerage and a fixed The warehouse: cludes bribes. land line. Procedures necessary to regis- · Will be used for general storage ter the property so that it can be used as activities, such as storage of books or paid-in minimum capitaL collateral or transferred to another entity stationery. The warehouse will not be The paid-in minimum capital require- are also counted. The survey divides the used for any goods requiring special ment reflects the amount that the entre- process of building a warehouse into dis- conditions, such as food, chemicals or preneur needs to deposit in a bank or tinct procedures and calculates the time pharmaceuticals. with a notary before registration and up to and cost of completing each procedure in · Has 2 stories, both above ground, 3 months following incorporation and is practice under normal circumstances. with a total surface of approximately recorded as a percentage of the economy's Information is collected from experts 1,300.6 square meters (14,000 square income per capita. The amount is typi- in construction licensing, including ar- feet). Each floor is 3 meters (9 feet, 10 cally specified in the commercial code or chitects, construction lawyers, construc- inches) high. the company law. Many economies have a tion firms, utility service providers and · Has road access and is located in minimum capital requirement but allow public officials who deal with building the periurban area of the economy's businesses to pay only a part of it before regulations, including approvals and in- selected localities (that is, on the registration, with the rest to be paid after spections. To make the data comparable fringes of the localities but still within the first year of operation. In Italy in across economies, several assumptions their official limits). June 2009, the minimum capital require- about the business, the warehouse project · Is not located in a special economic ment for limited liability companies was and the utility connections are used. or industrial zone. The zoning 10,000, of which at least 2,500 was requirements for warehouses are met payable before registration. The paid-in assumptions about the by building in an area where similar minimum capital recorded for Italy is construction company warehouses can be found. therefore 2,500, or 9.7% of income per The business (BuildCo): · Is located on a land plot of 929 square capita. In Mexico the minimum capital · Is a limited liability company. meters (10,000 square feet) that requirement was 50,000 pesos, of which · Operates in the economy's selected is 100% owned by BuildCo and is one-fifth needed to be paid before reg- localities. accurately registered in the cadastre istration. The paid-in minimum capital · Is 100% domestically and privately and land registry. recorded for Mexico is therefore 10,000 owned. · Is a new construction (there was no pesos, or 8.9% of income per capita. previous construction on the land). DATA noTes 25 · Has complete architectural and The telephone connection: dures to legally build a warehouse are technical plans prepared by a licensed · Is 10 meters (32 feet, 10 inches) from recorded, including those associated architect. the main telephone network. with obtaining land use approvals and · Will include all technical equipment · Is a fixed land line. preconstruction design clearances; re- required to make the warehouse fully ceiving inspections before, during and operational. procedures after construction; getting utility con- A procedure is any interaction of the nections; and registering the warehouse assumptions about the utiLity company's employees or managers with property. Nonrecurring taxes required connections external parties, including government for the completion of the warehouse The electricity connection: agencies, notaries, the land registry, the project also are recorded. The building · Is 10 meters (32 feet, 10 inches) from cadastre, utility companies, public and code, information from local experts and the main electricity network. private inspectors and technical experts specific regulations and fee schedules are · Is a medium-tension, 3-phase, 4-wire apart from in-house architects and en- used as sources for costs. If several local Y, 140-kVA connection. Three-phase gineers. Interactions between company partners provide different estimates, the service is available in the construction employees, such as development of the median reported value is used. area. warehouse plans and inspections con- · Will be delivered by an overhead ducted by employees, are not counted The data details on dealing with con- service, unless overhead service is not as procedures. Procedures that the com- struction permits can be found for each available in the periurban area. pany undergoes to connect to electricity, economy at http://www.doingbusiness.org · Consists of a simple hookup unless water, sewerage and telephone services by selecting the economy in the drop- installation of a private substation are included. All procedures that are down list. (transformer) or extension of network legally or in practice required for build- is required. ing a warehouse are counted, even if they regiStering property · Requires the installation of only one may be avoided in exceptional cases. electricity meter. Doing Business in Kenya 2010 records BuildCo is assumed to have a licensed time the full sequence of procedures neces- electrician on its team to complete the Time is recorded in calendar days. The sary for a business (buyer) to purchase a internal wiring for the warehouse. measure captures the median duration property from another business (seller) that local experts indicate is necessary to and to transfer the property title to the The water and sewerage connection: complete a procedure in practice. It is as- buyer's name so that the buyer can use · Is 10 meters (32 feet, 10 inches) from sumed that the minimum time required the property for expanding its business, the existing water source and sewer for each procedure is 1 day. Although use the property as collateral in taking tap. procedures may take place simultane- new loans or, if necessary, sell the prop- · Does not require water for ously, they cannot start on the same day erty to another business. The process fire protection reasons; a fire (that is, simultaneous procedures start starts with obtaining the necessary docu- extinguishing system (dry system) on consecutive days). If a procedure can ments, such as a copy of the seller's title if will be used instead. If a wet fire be accelerated legally for an additional necessary, and conducting due diligence protection system is required by law, cost, the fastest legal procedure available if required. The transaction is considered it is assumed that the water demand and used by the majority of construc- complete when it is opposable to third specified below also covers the water tion companies is chosen. It is assumed parties and when the buyer can use the needed for fire protection. that BuildCo does not waste time and property, use it as collateral for a bank · Has an average water use of 662 liters commits to completing each remaining loan or resell it. (175 gallons) a day and an average procedure without delay. The time that Every procedure required by law wastewater flow of 568 liters (150 BuildCo spends on gathering information or necessary in practice is included, gallons) a day. is ignored. It is assumed that BuildCo is whether it is the responsibility of the · Has a peak water use of 1,325 liters aware of all building requirements and seller or the buyer or must be completed (350 gallons) a day and a peak their sequence from the beginning. by a third party on their behalf. Local wastewater flow of 1,136 liters (300 property lawyers, notaries and property gallons) a day. cost registries provide information on pro- · Will have a constant level of water Cost is recorded as a percentage of the cedures as well as the time and cost to demand and wastewater flow economy's income per capita. Only of- complete each of them. throughout the year. ficial costs are recorded. All the fees To make the data comparable across associated with completing the proce- economies, several assumptions about 26 Doing Business 2010 the parties to the transaction, the prop- procedures agencies or lawyers. Other taxes, such as erty and the procedures are used. A procedure is defined as any interaction capital gains tax or value added tax, are of the buyer or the seller, their agents (if excluded from the cost measure. Both assumptions about the parties an agent is legally or in practice required) costs borne by the buyer and those borne The parties (buyer and seller): or the property with external parties, by the seller are included. If cost esti- · Are limited liability companies. including government agencies, inspec- mates differ among sources, the median · Are located in the periurban area of tors, notaries and lawyers. Interactions reported value is used. the economy's selected localities. between company officers and employ- · Are 100% domestically and privately ees are not considered. All procedures The data details on registering property owned. that are legally or in practice required for can be found for each economy at http:// · Have 50 employees each, all of whom registering property are recorded, even www.doingbusiness.org by selecting the are nationals. if they may be avoided in exceptional economy in the drop-down list. · Perform general commercial cases. It is assumed that the buyer fol- activities. lows the fastest legal option available and enforcing contractS used by the majority of property owners. assumptions about the property Although the buyer may use lawyers or Indicators on enforcing contracts mea- The property: other professionals where necessary in sure the efficiency of the judicial system · Has a value of 50 times income per the registration process, it is assumed in resolving a commercial dispute. The capita. The sale price equals the value. that it does not employ an outside fa- data are built by following the step-by- · Is fully owned by the seller. cilitator in the registration process unless step evolution of a commercial sale dis- · Has no mortgages attached and has legally or in practice required to do so. pute before local courts. The data are col- been under the same ownership for lected through study of the codes of civil the past 10 years. time procedure and other court regulations as · Is registered in the land registry or Time is recorded in calendar days. The well as surveys completed by local litiga- cadastre, or both, and is free of title measure captures the median duration tion lawyers as well as by judges. disputes. that property lawyers, notaries or registry · Is located in a periurban commercial officials indicate is necessary to complete Assumptions about the case: zone, and no rezoning is required. a procedure. It is assumed that the mini- · The value of the claim equals 200% of · Consists of land and a building. The mum time required for each procedure the economy's income per capita. land area is 557.4 square meters is 1 day. Although procedures may take · The dispute concerns a lawful trans- (6,000 square feet). A 2-story place simultaneously, they cannot start action between 2 businesses (Seller warehouse of 929 square meters on the same day. It is assumed that the and Buyer), located in the economy's (10,000 square feet) is located on the buyer does not waste time and commits selected localities. Seller sells goods land. The warehouse is 10 years old, is to completing each remaining procedure worth 200% of the economy's income in good condition and complies with without delay. If a procedure can be accel- per capita to Buyer. After Seller deliv- all safety standards, building codes erated for an additional cost, the fastest ers the goods to Buyer, Buyer refuses and other legal requirements. The legal procedure available and used by the to pay for the goods on the grounds property of land and building will be majority of property owners is chosen. If that the delivered goods were not of transferred in its entirety. procedures can be undertaken simultane- adequate quality. · Will not be subject to renovations ously, it is assumed that they are. It is as- · Seller (the plaintiff) sues Buyer (the or additional building following the sumed that the parties involved are aware defendant) to recover the amount purchase. of all regulations and their sequence from under the sales agreement (that is, · Has no trees, natural water sources, the beginning. Time spent on gathering 200% of the economy's income per natural reserves or historical information is not considered. capita). Buyer opposes Seller's claim, monuments of any kind. saying that the quality of the goods is · Will not be used for special purposes, cost not adequate. The claim is disputed and no special permits, such as for Cost is recorded as a percentage of the on the merits. residential use, industrial plants, property value, assumed to be equiva- · A court in the economy's largest waste storage or certain types of lent to 50 times income per capita. Only business city with jurisdiction over agricultural activities, are required. official costs required by law are re- commercial cases worth 200% of · Has no occupants (legal or illegal), corded, including fees, transfer taxes, income per capita decides the dispute. and no other party holds a legal stamp duties and any other payment to · Seller attaches Buyer's movable assets interest in it. the property registry, notaries, public (for example, office equipment, DATA noTes 27 vehicles) prior to obtaining a time aggregate ranking judgment because Seller fears that Time is recorded in calendar days, Buyer may become insolvent. counted from the moment the plaintiff The aggregate ranking index ranks local- · Expert opinions are given on the files the lawsuit in court until payment. ities from 1 to 11. The index is calculated quality of the delivered goods. If it This includes both the days when ac- as the ranking on the simple average of is standard practice in the economy tions take place and the waiting peri- locality percentile rankings on each of for each party to call its own expert ods between. The average duration of the 4 topics covered in Doing Business in witness, the parties each call one different stages of dispute resolution is Kenya 2010. The ranking on each topic is expert witness. If it is standard recorded: the completion of service of the simple average of the percentile rank- practice for the judge to appoint an process (time to file the case), the issu- ings on its component indicators. independent expert, the judge does ance of judgment (time for the trial and The aggregate ranking index is lim- so. In this case the judge does not obtaining the judgment) and the mo- ited in scope. It does not account for an allow opposing expert testimony. ment of payment (time for enforcement economy's proximity to large markets, · The judgment is 100% in favor of of judgment). the quality of its infrastructure services Seller: the judge decides that the (other than services related to trading goods are of adequate quality and that cost across borders or construction permits), Buyer must pay the agreed price. Cost is recorded as a percentage of the the security of property from theft and · Buyer does not appeal the judgment. claim, assumed to be equivalent to 200% looting, macroeconomic conditions or The judgment becomes final. of income per capita. No bribes are re- the strength of underlying institutions. · Seller takes all required steps for corded. Three types of costs are recorded: There remains a large unfinished agenda prompt enforcement of the judgment. court costs, enforcement costs and aver- for research into what regulation consti- The money is successfully collected age attorney fees. tutes binding constraints, what package through a public sale of Buyer's Court costs include all costs Seller of reforms is most effective and how movable assets (for example, office (plaintiff) must advance to the court these issues are shaped by the context equipment, vehicles). regardless of the final cost to Seller. Ex- of an economy. The Doing Business in- pert fees, if required by law or necessary dicators provide a new empirical data procedures in practice, are included in court costs. set that may improve understanding of The list of procedural steps compiled Enforcement costs are all costs Seller these issues. for each economy traces the chronol- (plaintiff) must advance to enforce the ogy of a commercial dispute before the judgment through a public sale of Buyer's relevant court. A procedure is defined movable assets, regardless of the final as any interaction between the parties, cost to Seller. Average attorneys fees are or between them and the judge or court the fees Seller (plaintiff) must advance to officer. This includes steps to file the case, a local attorney to represent Seller in the steps for trial and judgment and steps standardized case. necessary to enforce the judgment. The survey allows respondents to The data details on enforcing contracts record procedures that exist in civil law can be found for each economy at http:// but not common law jurisdictions, and www.doingbusiness.org by selecting the vice versa. For example, in civil law economy in the drop-down list. This meth- countries the judge can appoint an in- odology was developed in Djankov and dependent expert, while in common law others (2003) and is adopted here with countries each party submits a list of minor changes. expert witnesses to the court. To indicate overall efficiency, 1 procedure is sub- tracted from the total number for econo- mies that have specialized commercial courts, and 1 procedure for economies that allow electronic filing of court cases. Some procedural steps that take place simultaneously with or are included in other procedural steps are not counted in the total number of procedures. 28 Doing Business in kenya 2010 Doing Business Indicators Doing Business inDiCaToRs 29 Starting a business Dealing with construction permits Paid-in Ease of minimum Ease of Cost dealing with Cost capital starting a (% of construction Procedures Time (% of income (% of income business Procedures Time income permits (number) (days) per capita) per capita) (rank) (number) (days) per capita) (rank) Eldoret 12 74 50.8 0 5 11 117 168.7 7 Garissa 12 78 52.4 0 11 14 80 156.9 5 Isiolo 12 62 55.5 0 4 13 127 134.8 11 Kilifi 12 68 57.0 0 7 11 103 283.6 8 Kisumu 12 74 51.8 0 7 10 99 237.1 4 Malaba 12 70 58.9 0 10 11 111 137.0 3 Mombasa 12 72 50.3 0 3 14 96 162.9 9 Nairobi 12 34 36.5 0 1 11 120 161.7 5 Narok 12 81 44.3 0 9 11 69 136.5 1 Nyeri 12 80 42.2 0 5 11 100 132.4 2 Thika 12 47 39.1 0 2 11 123 208.4 10 Registering property Enforcing contracts Ease of Ease of Cost registering enforcing Procedures Time (% of property property Procedures Time Cost contracts (number) (days) value) (rank) (number) (days) (% of claim) (rank) Eldoret 8 37 4.3 6 40 435 39.0 5 Garissa 8 87 4.1 10 40 351 38.7 1 Isiolo 8 77 24.2 11 40 455 38.4 4 Kilifi 8 75 4.1 7 40 425 39.8 6 Kisumu 8 30 4.1 2 40 425 41.2 8 Malaba 8 29 4.2 5 40 330 39.2 3 Mombasa 8 23 4.1 1 40 455 39.9 9 Nairobi 8 64 4.2 9 40 465 47.2 11 Narok 8 46 4.1 3 40 351 38.9 2 Nyeri 8 53 4.2 8 40 455 40.3 10 Thika 8 60 4.1 4 40 455 39.5 7 30 Doing Business in kenya 2010 Locality tables LoCaLiT y TaBLes 31 EldorEt Aggregate rank 8 Starting a business (rank) 5 Registering property (rank) 6 Procedures (number) 12 Procedures (number) 8 Time (days) 74 Time (days) 37 Cost (% of income per capita) 50.8 Cost (% of property value) 4.3 Paid in Min. Capital (% of income per capita) 0 Enforcing contracts (rank) 5 Dealing with construction permits (rank) 7 Procedures (number) 40 Procedures (number) 11 Time (days) 435 Time (days) 117 Cost (% of claim) 39.0 Cost (% of income per capita) 168.7 Garissa Aggregate rank 7 Starting a business (rank) 11 Registering property (rank) 10 Procedures (number) 12 Procedures (number) 8 Time (days) 78 Time (days) 87 Cost (% of income per capita) 52.4 Cost (% of property value) 4.1 Paid in Min. Capital (% of income per capita) 0 Enforcing contracts (rank) 1 Dealing with construction permits (rank) 5 Procedures (number) 40 Procedures (number) 14 Time (days) 351 Time (days) 80 Cost (% of claim) 38.7 Cost (% of income per capita) 156.9 isiolo Aggregate rank 11 Starting a business (rank) 4 Registering property (rank) 11 Procedures (number) 12 Procedures (number) 8 Time (days) 62 Time (days) 77 Cost (% of income per capita) 55.5 Cost (% of property value) 24.2 Paid in Min. Capital (% of income per capita) 0 Enforcing contracts (rank) 4 Dealing with construction permits (rank) 11 Procedures (number) 40 Procedures (number) 13 Time (days) 455 Time (days) 127 Cost (% of claim) 38.4 Cost (% of income per capita) 134.8 Kilifi Aggregate rank 9 Starting a business (rank) 7 Registering property (rank) 7 Procedures (number) 12 Procedures (number) 8 Time (days) 68 Time (days) 75 Cost (% of income per capita) 57.0 Cost (% of property value) 4.1 Paid in Min. Capital (% of income per capita) 0 Enforcing contracts (rank) 6 Dealing with construction permits (rank) 8 Procedures (number) 40 Procedures (number) 11 Time (days) 425 Time (days) 103 Cost (% of claim) 39.8 Cost (% of income per capita) 283.6 32 Doing Business in kenya 2010 Kisumu Aggregate rank 4 Starting a business (rank) 7 Registering property (rank) 2 Procedures (number) 12 Procedures (number) 8 Time (days) 74 Time (days) 30 Cost (% of income per capita) 51.8 Cost (% of property value) 4.1 Paid in Min. Capital (% of income per capita) 0 Enforcing contracts (rank) 8 Dealing with construction permits (rank) 4 Procedures (number) 40 Procedures (number) 10 Time (days) 425 Time (days) 99 Cost (% of claim) 41.2 Cost (% of income per capita) 237.1 malaba Aggregate rank 2 Starting a business (rank) 10 Registering property (rank) 5 Procedures (number) 12 Procedures (number) 8 Time (days) 70 Time (days) 29 Cost (% of income per capita) 58.9 Cost (% of property value) 4.2 Paid in Min. Capital (% of income per capita) 0 Enforcing contracts (rank) 3 Dealing with construction permits (rank) 3 Procedures (number) 40 Procedures (number) 11 Time (days) 330 Time (days) 111 Cost (% of claim) 39.2 Cost (% of income per capita) 137.0 mombasa Aggregate rank 5 Starting a business (rank) 3 Registering property (rank) 1 Procedures (number) 12 Procedures (number) 8 Time (days) 72 Time (days) 23 Cost (% of income per capita) 50.3 Cost (% of property value) 4.1 Paid in Min. Capital (% of income per capita) 0 Enforcing contracts (rank) 9 Dealing with construction permits (rank) 9 Procedures (number) 40 Procedures (number) 14 Time (days) 455 Time (days) 96 Cost (% of claim) 39.9 Cost (% of income per capita) 162.9 Nairobi Aggregate rank 10 Starting a business (rank) 1 Registering property (rank) 9 Procedures (number) 12 Procedures (number) 8 Time (days) 34 Time (days) 64 Cost (% of income per capita) 36.5 Cost (% of property value) 4.2 Paid in Min. Capital (% of income per capita) 0 Enforcing contracts (rank) 11 Dealing with construction permits (rank) 5 Procedures (number) 40 Procedures (number) 11 Time (days) 465 Time (days) 120 Cost (% of claim) 47.2 Cost (% of income per capita) 161.7 LoCaLiT y TaBLes 33 NaroK Aggregate rank 1 Starting a business (rank) 9 Registering property (rank) 3 Procedures (number) 12 Procedures (number) 8 Time (days) 81 Time (days) 46 Cost (% of income per capita) 44.3 Cost (% of property value) 4.1 Paid in Min. Capital (% of income per capita) 0 Enforcing contracts (rank) 2 Dealing with construction permits (rank) 1 Procedures (number) 40 Procedures (number) 11 Time (days) 351 Time (days) 69 Cost (% of claim) 38.9 Cost (% of income per capita) 136.5 NyEri Aggregate rank 6 Starting a business (rank) 5 Registering property (rank) 8 Procedures (number) 12 Procedures (number) 8 Time (days) 80 Time (days) 53 Cost (% of income per capita) 42.2 Cost (% of property value) 4.2 Paid in Min. Capital (% of income per capita) 0 Enforcing contracts (rank) 10 Dealing with construction permits (rank) 2 Procedures (number) 40 Procedures (number) 11 Time (days) 455 Time (days) 100 Cost (% of claim) 40.3 Cost (% of income per capita) 132.4 thiKa Aggregate rank 3 Starting a business (rank) 2 Registering property (rank) 4 Procedures (number) 12 Procedures (number) 8 Time (days) 47 Time (days) 60 Cost (% of income per capita) 39.0 Cost (% of property value) 4.0 Paid in Min. Capital (% of income per capita) 0 Enforcing contracts (rank) 7 Dealing with construction permits (rank) 10 Procedures (number) 40 Procedures (number) 11 Time (days) 455 Time (days) 123 Cost (% of claim) 39.5 Cost (% of income per capita) 208.4 List of procedures Starting a business Dealing with construction permits Registering property LIST OF PROCEDURES · STARTING A BUSINESS 35 a. Stamped memorandum and articles of association; LIST OF PrOcedureS b. Statement of capital; Starting a business c. Form 201, Particulars of directors and secretary; d. Form 203, Notice of proposed registered office; e. Form 208, Declaration of compliance and the prescribed registration fees; Eldoret f. Copy of the company name approval. Standard company legal form: Private Corporation Fee schedule for registration is the following: Paid-in-minimum capital requirement: none a. For the first KES 100,000 of nominal capital: KES 2,200; Data as of: June 2009 b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, Procedure: 1. Obtain approval for the company name from the subject to a maximum of KES 60,000; Registrar of Companies c. Filing fee for three forms: KES 600. Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days) The common practice is for the company's founder to hire a lawyer to undertake the administrative incorporation procedures in Nairobi. Given that the use of lawyers Cost: KES 2,100 (filing fee: KES 100 + transportation: KES 2,000) for such purposes is not mandatory in Eldoret, lawyer fees are not accounted on the Comments: The company name reservation lasts 30 days but can be renewed for overall incorporation costs. On average, a lawyer will charge KES 15,000 for the entire a similar period. This procedure can only be done in Nairobi. Usually, the company's incorporation process. promoters will hire an Eldoret lawyer whose agent will travel to Nairobi to undertake the necessary procedures. The common practice is that procedures one to five are Procedure: 6. Register with the Tax Department for a PIN performed in Nairobi given that the applicant, or the company's agent, is already in town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How- Time: 1 day ever, it takes 1 day to travel from Eldoret to Nairobi and 1 day to go back. Travel time Cost: No cost is considered within this procedure. The cost of this procedure is KES 100. The bus Comments: Registration for a personal and a company identification number fare from Eldoret to Nairobi is KES 2,000 and is also considered within this procedure. (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 shareholders or a director and the secretary are required), the local service tax, and Procedure: 2. Stamp the memorandum and articles and a the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration statement of the nominal capital and a copy of the memorandum and articles of association. This procedure is done Time: 16 days in Eldoret town. Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum Procedure: 7. Register with the VAT office and articles of association) Time: 3 days Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over stamp duty collection from the Ministry of Lands and Housing. As an administrative Cost: No cost requirement, the KRA now requires the personal identification numbers (PINs) of Comments: The application for a VAT certificate must be supported with application all parties on whose behalf duty-stamped documents are submitted. Documents form, copies of the certificate of incorporation, the PIN certificates for the company must be first assessed by the Stamp Duty Office before payment can be processed and 2 of its directors and memorandum and articles of association. The VAT depart- by the KRA-designated banks. The process was lengthened initially to about 2 weeks ment is under the KRA. This procedure can be done at the KRA offices in Eldoret because the Stamp Duty Office waited to receive confirmation of bank payment town. after clearance of funds. However, the time was reduced in 2008 as a result of better communication between the Ministry of Lands and Housing and Kenya Revenue Procedure: 8. Apply for a business permit Authority (KRA) to 5-10 days. Time: 5 days This procedure is usually done in Nairobi since the applicant is already in town. How- Cost: KES 10,000 ever, this procedure can also be undertaken in Eldoret since there are KRA offices in Eldoret Town. Comments: The fee to apply for a business permit varies by type of business, number of employees, and size of the company's premises. The fee is payable to the Eldoret Municipal Council. The Municipal Council will issue a business permit. Procedure: 3. Pay stamp duty at bank Fee schedule for business permit is the following: Time: 1 day a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises Cost: KES 100 50­300 square meters (fair location): KES 10,000 on average; Comments: This procedure can be done either in Eldoret or in Nairobi. The common b. Mid-size business of 50 employees and premises 300 square meters: about KES practice is for applicants to stay in Nairobi since the applicant is already in the city to 20,000 to KES 50,000 depending on the nature of the business. perform the previous procedures. KES 100 relates to the cost of the banker's check which is the mode of payment of the stamp duty. The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- ber 2006 and came into effect on May 1, 2007), amends the Local Government Act Procedure: 4. Declaration of compliance (Form 208) is signed (Cap. 265) by reducing the number of business permits required for a distributor of goods or provider of services to carry on its business activities. Applicants having before a Commissioner for Oaths obtained a business permit to operate from one local authority will not be required Time: 1 day to obtain another business permit in another local authority. In addition, business Cost: KES 500 permit applicants will have an opportunity to elect whether to apply for a 1- or Comments: According to the Companies Act (Cap. 486), an advocate engaged in 2-year permit. The 2006 law also eliminated the requirement to obtain a trading the formation of the company or a director or company secretary named in the license in addition to the permit. For a first time business permit, the process takes, Articles must sign Form 208, the declaration of compliance, which accompanies the on average 5 days. registration documents to be submitted to the Registrar of Companies. The common practice is for this procedure to be done by a private lawyer with the power to com- Procedure: 9. Register with the National Social Security Fund mission documents. (NSSF) Time: 1 day Procedure: 5. File deed and details with the Registrar of Cost: No cost Companies at the Attorney General's Chamber in Nairobi (Sheria Comments: The National Social Security Fund provides the employee with a lump- House) sum retirement benefit. Historically, the rate of return paid by the state is consider- Time: 30 days ably less than that achieved by private schemes, but participation is mandatory. The Cost: KES 5,893 employer pays a standard contribution of about 1% of salary, subject to a maximum Comments: The applicant must file with the Registrar of Companies the incorpora- of KES 400 per month. Half of the contribution is deductible from the employee's tion deed and the required documents and forms, which include: salary. The precise amount of the contribution (where less than the maximum) is de- termined by reference to salary bands. This procedure is commonly done is Eldoret. 36 DOING BUSINESS IN kENyA 2010 Procedure: 10. Register with the National Hospital Insurance Procedure: 4. Declaration of compliance (Form 208) is signed Fund (NHIF) before a Commissioner for Oaths Time: 1 day Time: 1 day Cost: No cost Cost: KES 200 Comments: The employee contributes a fixed sum to the National Hospital Insur- Comments: According to the Companies Act (Cap. 486), an advocate engaged in ance Fund (NHIF), which must be deducted by the employer from the employees' the formation of the company or a director or company secretary named in the salary. The maximum contribution is KES 320 per month. The contributions are used Articles must sign Form 208, the declaration of compliance, which accompanies the to offset the costs of medical treatment, but they only cover a fraction of actual costs. registration documents to be submitted to the Registrar of Companies. The common Hence, most companies provide employees with medical insurance. This procedure practice is for this procedure to be done by a private lawyer with the power to com- is done at the Eldoret NHIF office. mission documents. Procedure: 11. Register for PAYE Procedure: 5. File deed and details with the Registrar of Time: 1 day Companies at the Attorney General's Chamber in Nairobi (Sheria Cost: No cost House) Comments: This procedure is commonly done in Eldoret Town. Time: 29 days Cost: KES 5,893 Procedure: 12. Make a company seal after a certificate of Comments: The applicant must file with the Registrar of Companies the incorpora- incorporation has been issued tion deed and the required documents and forms, which include: Time: 10 days a. Stamped memorandum and articles of association; Cost: KES 4,500 (company's seal: KES 4,000 + courier: KES 500) b. Statement of capital; Comments: Seals are made by private entities who require sight of a copy of the c. Form 201, Particulars of directors and secretary; certificate of incorporation. The average price of the company seal is KES 4,000. The d. Form 203, Notice of proposed registered office; common practice is for applicants to obtain the company seal in Nairobi. Applicants order this seal after filing the incorporation deed and before returning to Eldoret. e. Form 208, Declaration of compliance and the prescribed registration fees; Once the company seal is ready, private providers will send the seal by courier. The f. Copy of the company name approval. average cost of mailing the seal is KES 500. Fee schedule for registration is the following: a. For the first KES 100,000 of nominal capital: KES 2,200; * This procedure can be completed simultaneously with previous procedures b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, subject to a maximum of KES 60,000; STarTIng a buSIneSS c. Filing fee for three forms: KES 600. Garissa The common practice is for the company's founder to hire a lawyer to undertake the administrative incorporation procedures in Nairobi. Given that the use of lawyers Standard company legal form: Private Corporation for such purposes is not mandatory in Garissa, lawyer fees are not accounted on the Paid-in-minimum capital requirement: none overall incorporation costs. On average, a lawyer will charge KES 25,000 for the entire Data as of: June 2009 incorporation process. Procedure: 1. Obtain approval for the company name from the Procedure: 6. Register with the Tax Department for a PIN Registrar of Companies Time: 1 day Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days) Cost: No cost Cost: KES 1,100 (filing fee: KES 100 + transportation: KES 1,000) Comments: Registration for a personal and a company identification number Comments: The company name reservation lasts 30 days but can be renewed for a (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 similar period. The time to do this procedure is 2 days, once the applicant is in Nai- shareholders or a director and the secretary are required), the local service tax, and robi. However, it takes one day to travel from Garissa to Nairobi and 1 day to go back. the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration Travel time is considered within this procedure. The cost of this procedure is KES 100. and a copy of the memorandum and articles of association. This procedure is done The bus fare from Garissa to Nairobi is KES 1,000 (roundtrip) and is considered within in Garissa. the cost of this procedure. Procedure: 7. Register with the VAT office Procedure: 2. Stamp the memorandum and articles and a Time: 1 day statement of the nominal capital Cost: No cost Time: 23 days Comments: The application for a VAT certificate must be supported with application Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum form, copies of the certificate of incorporation, the PIN certificates for the company and articles of association) and 2 of its directors and memorandum and articles of association. The VAT depart- Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over ment is under the KRA. This procedure can be done at the KRA offices in Garissa. stamp duty collection from the Ministry of Lands and Housing. As an administrative requirement, the KRA now requires the personal identification numbers (PINs) of Procedure: 8. Apply for a business permit all parties on whose behalf duty-stamped documents are submitted. Documents Time: 8 days must be first assessed by the Stamp Duty Office before payment can be processed by the KRA-designated banks. The process was lengthened initially to about 2 weeks Cost: KES 12,000 because the Stamp Duty Office waited to receive confirmation of bank payment Comments: The fee to apply for a business permit varies by type of business, after clearance of funds. However, the time was reduced in 2008 as a result of better number of employees, and size of the company's premises. The fee is payable to the communication between the Ministry of Lands and Housing and Kenya Revenue Garissa Municipal Council. The Municipal Council will issue a business permit. Authority (KRA) to 5-10 days. Fee schedule for business permit is the following: This procedure is usually done in Nairobi since the applicant is already in town. a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises However, this procedure can also be undertaken in Garissa since there are KRA 50­300 square meters (fair location): KES 12,000 on average; offices in Garissa. b. Mid-size business of 50 employees and premises 300 square meters: about KES 20,000 to KES 50,000 depending on the nature of the business; Procedure: 3. Pay stamp duty at bank The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- Time: 1 day ber of 2006 and came into effect on May 1, 2007), amends the Local Government Cost: KES 100 Act (Cap. 265) by reducing the number of business permits required for a distributor Comments: The cost relates to the banker's check which is the mode of payment of of goods or provider of services to carry on its business activities. Applicants having the stamp duty. obtained a business permit to operate from one local authority will not be required LIST OF PROCEDURES · STARTING A BUSINESS 37 to obtain another business permit in another local authority. In addition, business Procedure: 2. Stamp the memorandum and articles and a permit applicants will have an opportunity to elect whether to apply for a 1- or 2-year permit. The 2006 law also eliminated the requirement to obtain a trading statement of the nominal capital license in addition to the permit. For a first time business permit, the process takes, Time: 21 days on average 8 days. Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum and articles of association) Procedure: 9. Register with the National Social Security Fund Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over (NSSF) stamp duty collection from the Ministry of Lands and Housing. As an administrative Time: 1 day requirement, the KRA now requires the personal identification numbers (PINs) of Cost: No cost all parties on whose behalf duty-stamped documents are submitted. Documents must be first assessed by the Stamp Duty Office before payment can be processed Comments: The National Social Security Fund provides the employee with a lump- by the KRA-designated banks. The process was lengthened initially to about 2 weeks sum retirement benefit. Historically, the rate of return paid by the state is consider- because the Stamp Duty Office waited to receive confirmation of bank payment ably less than that achieved by private schemes, but participation is mandatory. The after clearance of funds. However, the time was reduced in 2008 as a result of better employer pays a standard contribution of about 1% of salary, subject to a maximum communication between the Ministry of Lands and Housing and Kenya Revenue of KES 400 per month. Half of the contribution is deductible from the employee's Authority (KRA) to 5-10 days. salary. The precise amount of the contribution (where less than the maximum) is de- termined by reference to salary bands. This procedure is commonly done is Garissa. This procedure is usually done in Nairobi since the applicant is already in town. However, this procedure can also be undertaken in Meru town, one hour away from Isiolo, since there are KRA offices in Meru. Procedure: 10. Register with the National Hospital Insurance Fund (NHIF) Procedure: 3. Pay stamp duty at bank Time: 1 day Time: 1 day Cost: No cost Cost: KES 100 Comments: The employee contributes a fixed sum to the National Hospital Insur- Comments: The cost of this procedure relates to the banker's check which is the ance Fund (NHIF), which must be deducted by the employer from the employees' mode of payment of stamp duty. salary. The maximum contribution is KES 320 per month. The contributions are used to offset the costs of medical treatment, but they only cover a fraction of actual costs. Hence, most companies provide employees with medical insurance. This procedure Procedure: 4. Declaration of compliance (Form 208) is signed is done at the Garissa NHIF office. before a Commissioner for Oaths Time: 1 day Procedure: 11. Register for PAYE Cost: KES 200 Time: 1 day Comments: According to the Companies Act (Cap. 486), an advocate engaged in Cost: No cost the formation of the company or a director or company secretary named in the Comments: This procedure is commonly done is Garissa. Articles must sign Form 208, the declaration of compliance, which accompanies the registration documents to be submitted to the Registrar of Companies. The common practice is for this procedure to be done by a private lawyer with the power Procedure: 12. Make a company seal after a certificate of to commission documents immediately after procedures 2 and 3, since the person incorporation has been issued incorporating the company is already in town. The minimum cost provided by the Time: 7 days Advocates Remuneration Order is KES 200. However, advocates charge on average Cost: KES 4,800 (company's seal: KES 4,000 + courier: KES 800) KES 400 to perform this procedure. Lawyer fees are not considered since the use of Comments: Seals are made by private entities who require sight of a copy of the lawyers is not mandatory. certificate of incorporation. The average price of the company seal is KES 4,000. The common practice is for applicants to obtain the company seal in Nairobi. Applicants Procedure: 5. File deed and details with the Registrar of order this seal after filing the incorporation deed and before returning to Garissa. Companies at the Attorney General's Chamber in Nairobi (Sheria Once the company seal is ready, private providers will send the seal by courier. The House) average cost of mailing the seal is KES 800. Time: 14 days Cost: KES 5,893 * This procedure can be completed simultaneously with previous procedures Comments: The applicant must file with the Registrar of Companies the incorpora- tion deed and the required documents and forms, which include: STarTIng a buSIneSS a. Stamped memorandum and articles of association; Isiolo b. Statement of capital; Standard company legal form: Private Corporation c. Form 201, Particulars of directors and secretary; Paid-in-minimum capital requirement: none d. Form 203, Notice of proposed registered office; Data as of: June 2009 e. Form 208, Declaration of compliance and the prescribed registration fees; f. Copy of the company name approval. Procedure: 1. Obtain approval for the company name from the Fee schedule for registration is the following: Registrar of Companies a. For the first KES 100,000 of nominal capital: KES 2,200; Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days) b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, Cost: KES 2,100 (filing fee: KES 100 + transportation: KES 2,000) subject to a maximum of KES 60,000; Comments: The company name reservation lasts 30 days but can be renewed for a c. Filing fee for three forms: KES 600. similar period. This procedure can only be done in Nairobi. In Isiolo, there are few law firms and the common practice is to use the main branches in Nairobi to carry out The common practice is for the company's founder to hire a lawyer to undertake the procedures one to five. The time to do this procedure is 2 days, once the applicant is administrative incorporation procedures in Nairobi. Given that the use of lawyers in Nairobi. However, it takes one day to travel from Isiolo to Nairobi and 1 day to go for such purposes is not mandatory in Isiolo, lawyer fees are not accounted on the back. Travel time is considered within this procedure. The cost of this procedure is overall incorporation costs. On average, a lawyer will charge KES 25,000 for the entire KES 100. The bus fare to Nairobi is KES 2,000 roundtrip. incorporation process. Procedure: 6. Register with the Tax Department for a PIN Time: 1 day (time to register: 1 day + roundtrip: 2 hours) Cost: KES 400 (transportation) 38 DOING BUSINESS IN kENyA 2010 Comments: Registration for a personal and a company identification number Procedure: 12. Make a company seal after a certificate of (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 incorporation has been issued shareholders or a director and the secretary are required), the local service tax, and Time: 7 days the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration and a copy of the memorandum and articles of association. Cost: KES 4,900 (company's seal: KES 4,000 + courier: KES 900) This procedure is done in Meru, 1 hour away from Isiolo. Given the proximity be- Comments: Seals are made by private entities who require sight of a copy of the tween these localities, additional time is not considered. The bus fare from Meru to certificate of incorporation. The average price of the company seal is KES 4,000. The Isiolo is KES 400 roundtrip. This procedure has no cost. However, transportation costs common practice is for applicants to obtain the company seal in Nairobi. Applicants are considered within the cost of this procedure. Procedures 6 and 7 are performed order this seal after filing the incorporation deed and before returning to Isiolo. Once in Meru since the applicant is already in town. the company seal is ready, private providers will send the seal by courier. The average cost of mailing the seal is KES 900. Procedure: 7. Register with the VAT office Time: 1 day * This procedure can be completed simultaneously with previous procedures Cost: No cost Comments: The application for a VAT certificate must be supported with application STarTIng a buSIneSS form, copies of the certificate of incorporation, the PIN certificates for the company Kilifi and 2 of its directors and memorandum and articles of association. The VAT depart- ment is under the KRA. This procedure can be done at the KRA offices in Meru. Standard company legal form: Private Corporation Paid-in-minimum capital requirement: none Procedure: 8. Apply for a business permit Data as of: June 2009 Time: 6 days Procedure: 1. Obtain approval for the company name from the Cost: KES 12,000 Registrar of Companies Comments: The fee to apply for a business permit varies by type of business, num- Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days) ber of employees, and size of the company's premises. The fee is payable to the Isiolo County Council. The County Council will issue a business permit. Cost: KES 2,700 (filing fee: KES 100 + transportation: KES 2,600) Fee schedule for business permit is the following: Comments: The company name reservation lasts 30 days but can be renewed for a similar period. This procedure can only be done in Nairobi. Usually, the company's a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises promoters will hire a Kilifi lawyer whose agent will travel to Nairobi to undertake 50­300 square meters (fair location): KES 12,000 on average; the necessary procedures. The common practice is that procedures one to five are b. Mid-size business of 50 employees and premises 300 square meters: about KES performed in Nairobi given that the applicant, or the company's agent, is already in 20,000 to KES 50,000 depending on the nature of the business. town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How- The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- ever, it takes 1 day to travel from Kilifi to Nairobi and 1 day to go back. Travel time is ber of 2006 and came into effect on May 1, 2007), amends the Local Government considered within this procedure. The cost of this procedure is KES 100. The bus fare Act (Cap. 265) by reducing the number of business permits required for a distributor from Kilifi to Nairobi is KES 2,600 and is also considered within this procedure. of goods or provider of services to carry on its business activities. Applicants having Given that the use of lawyers is not mandatory for company incorporation around all obtained a business permit to operate from one local authority will not be required the localities in Kenya, lawyer fees are not considered in the present report. to obtain another business permit in another local authority. In addition, business permit applicants will have an opportunity to elect whether to apply for a 1- or Procedure: 2. Stamp the memorandum and articles and a 2-year permit. The 2006 law also eliminated the requirement to obtain a trading statement of the nominal capital license in addition to the permit. For a first time business permit, the process takes, on average 6 days. Time: 21 days Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum Procedure: 9. Register with the National Social Security Fund and articles of association) (NSSF) Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over stamp duty collection from the Ministry of Lands and Housing. As an administrative Time: 1 day (time to register: 1 day + roundtrip: 2 hours) requirement, the KRA now requires the personal identification numbers (PINs) of Cost: KES 400 (registration fee: No cost + transportation: KES 400) all parties on whose behalf duty-stamped documents are submitted. Documents Comments: The National Social Security Fund provides the employee with a lump- must be first assessed by the Stamp Duty Office before payment can be processed sum retirement benefit. Historically, the rate of return paid by the state is consider- by the KRA-designated banks. The process was lengthened initially to about 2 weeks ably less than that achieved by private schemes, but participation is mandatory. The because the Stamp Duty Office waited to receive confirmation of bank payment employer pays a standard contribution of about 1% of salary, subject to a maximum after clearance of funds. However, the time was reduced in 2008 as a result of better of KES 400 per month. Half of the contribution is deductible from the employee's communication between the Ministry of Lands and Housing and Kenya Revenue salary. The precise amount of the contribution (where less than the maximum) is Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction determined by reference to salary bands. This procedure is commonly done is Meru. are also due. This procedure is usually done in Nairobi since the applicant is already in town. Procedure: 10. Register with the National Hospital Insurance However, this procedure can also be undertaken in Malindi or Mombasa since there Fund (NHIF) are KRA offices in both localities. Time: 4 days Cost: No cost Procedure: 3. Pay stamp duty at bank Comments: The employee contributes a fixed sum to the National Hospital Insur- Time: 3 days ance Fund (NHIF), which must be deducted by the employer from the employees' Cost: KES 100 salary. The maximum contribution is KES 320 per month. The contributions are used Comments: The cost relates to the banker's check which is the mode of payment of to offset the costs of medical treatment, but they only cover a fraction of actual the stamp duty. costs. Hence, most companies provide employees with medical insurance. There is a branch of the NHIF that recently opened in Isiolo. However, the common practice is Procedure: 4. Declaration of compliance (Form 208) is signed for applicants to perform this procedure in Meru Town since they register to the NSSF before a Commissioner for Oaths in Meru Town too. Time: 1 day Procedure: 11. Register for PAYE Cost: KES 200 Time: 1 day Comments: According to the Companies Act (Cap. 486), an advocate engaged in the formation of the company or a director or company secretary named in the Cost: No cost Articles must sign Form 208, the declaration of compliance, which accompanies Comments: This procedure commonly done at the KRA Offices in Meru Town. the registration documents to be submitted to the Registrar of Companies. The common practice is for this procedure to be done by a private lawyer with the power LIST OF PROCEDURES · STARTING A BUSINESS 39 to commission documents immediately after procedures 2 and 3, since the person permit applicants will have an opportunity to elect whether to apply for a 1- or incorporating the company is already in town. The minimum cost provided by the 2-year permit. The 2006 law also eliminated the requirement to obtain a trading Advocates Remuneration Order is KES 200. However, advocates charge on average license in addition to the permit. For a first time business permit, the process takes, KES 400 to perform this procedure. Lawyer fees are not considered since the use of on average 7 days. lawyers is not mandatory. Procedure: 9. Register with the National Social Security Fund Procedure: 5. File deed and details with the Registrar of (NSSF) Companies at the Attorney General's Chamber in Nairobi (Sheria Time: 1 day (time to register: 1 day + roundtrip: 2 hours) House) Cost: KES 500 (registration fee: No cost + transportation: KES 500) Time: 21 days Comments: The National Social Security Fund provides the employee with a lump- Cost: KES 5,893 sum retirement benefit. Historically, the rate of return paid by the state is consider- Comments: The applicant must file with the Registrar of Companies the incorpora- ably less than that achieved by private schemes, but participation is mandatory. The tion deed and the required documents and forms, which include: employer pays a standard contribution of about 1% of salary, subject to a maximum a. Stamped memorandum and articles of association; of KES 400 per month. Half of the contribution is deductible from the employee's sal- ary. The precise amount of the contribution (where less than the maximum) is deter- b. Statement of capital; mined by reference to salary bands. This procedure is commonly done is Mombasa. c. Form 201, Particulars of directors and secretary; d. Form 203, Notice of proposed registered office; Procedure: 10. Register with the National Hospital Insurance e. Form 208, Declaration of compliance and the prescribed registration fees; Fund (NHIF) f. Copy of the company name approval. Time: 1 day Fee schedule for registration is the following: Cost: No cost a. For the first KES 100,000 of nominal capital: KES 2,200; Comments: The employee contributes a fixed sum to the National Hospital Insur- b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, ance Fund (NHIF), which must be deducted by the employer from the employees' subject to a maximum of KES 60,000; salary. The maximum contribution is KES 320 per month. The contributions are used to offset the costs of medical treatment, but they only cover a fraction of actual costs. c. Filing fee for three forms: KES 600. Hence, most companies provide employees with medical insurance. This procedure The common practice is for the company's founder to hire a lawyer to undertake the is done at the Mombasa NHIF office. administrative incorporation procedures in Nairobi. Given that the use of lawyers for such purposes is not mandatory in Kilifi, lawyer fees are not accounted on the Procedure: 11. Register for PAYE overall incorporation costs. On average, a lawyer will charge KES 50,000 for the entire incorporation process. Time: 1 day Cost: No cost Procedure: 6. Register with the Tax Department for a PIN Comments: This procedure is commonly done is Mombasa. Time: 1 day (time to register: 1 day + roundtrip: 4 hours) Cost: KES 500 (transportation) Procedure: 12. Make a company seal after a certificate of incorporation has been issued Comments: Registration for a personal and a company identification number (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 Time: 6 days shareholders or a director and the secretary are required), the local service tax, and Cost: KES 5,000 the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration Comments: Seals are made by private entities who require sight of a copy of the and a copy of the memorandum and articles of association. certificate of incorporation. The average price of the company seal is KES 5,000. The This procedure is done in Mombasa, 2 hours away from Kilifi. Given the proximity common practice is for applicants from Kilifi to obtain the company seal in Mom- between these localities, additional time is not considered. The bus fare from Mom- basa. This seal is a way to make documents formal and legally solid. The seal provides basa to Kilifi is KES 500 roundtrip. This procedure has no cost. However, transporta- the directors of the company a tool to control what are the contracts the company tion costs are considered within the cost of this procedure. Procedures 6 and 7 are honors and what are the ones the company will not honor. performed in Mombasa since the applicant is already in town. * This procedure can be completed simultaneously with previous procedures Procedure: 7. Register with the VAT office Time: 1 day STarTIng a buSIneSS Cost: No cost Kisumu Comments: The application for a VAT certificate must be supported with application form, copies of the certificate of incorporation, the PIN certificates for the company Standard company legal form: Private Corporation and 2 of its directors and memorandum and articles of association. The VAT depart- Paid-in-minimum capital requirement: none ment is under the KRA. This procedure can be done at the KRA offices in Mombasa. Data as of: June 2009 Procedure: 8. Apply for a business permit Procedure: 1. Obtain approval for the company name from the Time: 7 days Registrar of Companies Cost: KES 12,000 Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days) Comments: The fee to apply for a business permit varies by type of business, num- Cost: KES 2,500 (filing fee: KES 100 + transportation: KES 2,400) ber of employees, and size of the company's premises. The fee is payable to the Kilifi Comments: The company name reservation lasts 30 days but can be renewed for County Council. The County Council will issue a business permit. a similar period. This procedure can only be done in Nairobi. Usually, the company's Fee schedule for business permit is the following: promoters will hire a Kisumu lawyer whose agent will travel to Nairobi to undertake the necessary procedures. The common practice is that procedures one to five are a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises performed in Nairobi given that the applicant, or the company's agent, is already in 50­300 square meters (fair location): KES 12,000 on average; town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How- b. Mid-size business of 50 employees and premises 300 square meters: about KES ever, it takes 1 day to travel from Kisumu to Nairobi and 1 day to go back. Travel time 20,000 to KES 50,000 depending on the nature of the business. is considered within this procedure. The cost of this procedure is KES 100. The bus The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- fare from Kisumu to Nairobi is KES 2,400 and is also considered within this procedure. ber of 2006 and came into effect on May 1, 2007), amends the Local Government Given that the use of lawyers is not mandatory for company incorporation around all Act (Cap. 265) by reducing the number of business permits required for a distributor the localities in Kenya, lawyer fees are not considered in the present report. of goods or provider of services to carry on its business activities. Applicants having obtained a business permit to operate from one local authority will not be required Procedure: 2. Stamp the memorandum and articles and a to obtain another business permit in another local authority. In addition, business statement of the nominal capital Time: 25 days 40 DOING BUSINESS IN kENyA 2010 Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum Comments: Registration for a personal and a company identification number and articles of association) (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over shareholders or a director and the secretary are required), the local service tax, and stamp duty collection from the Ministry of Lands and Housing. As an administrative the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration requirement, the KRA now requires the personal identification numbers (PINs) of and a copy of the memorandum and articles of association. This procedure is done all parties on whose behalf duty-stamped documents are submitted. Documents in Kisumu. must be first assessed by the Stamp Duty Office before payment can be processed by the KRA-designated banks. The process was lengthened initially to about 2 weeks Procedure: 7. Register with the VAT office because the Stamp Duty Office waited to receive confirmation of bank payment Time: 1 day after clearance of funds. However, the time was reduced in 2008 as a result of better Cost: No cost communication between the Ministry of Lands and Housing and Kenya Revenue Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction Comments: The application for a VAT certificate must be supported with application are also due. form, copies of the certificate of incorporation, the PIN certificates for the company and 2 of its directors and memorandum and articles of association. The VAT depart- This procedure is usually done in Nairobi since the applicant is already in town. ment is under the KRA. This procedure can be done at the KRA offices in Kisumu. However, this procedure can also be undertaken in Kisumu since there are KRA offices in Kisumu. Procedure: 8. Apply for a business permit Procedure: 3. Pay stamp duty at bank Time: 5 days Time: 1 day Cost: KES 10,000 Cost: KES 100 Comments: The fee to apply for a business permit varies by type of business, number of employees, and size of the company's premises. The fee is payable to the Comments: The cost relates to the banker's check which is the mode of payment of Kisumu City Council. The City Council will issue a business permit. the stamp duty. Fee schedule for business permit is the following: Procedure: 4. Declaration of compliance (Form 208) is signed a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises before a Commissioner for Oaths 50­300 square meters. (fair location): KES 10,000 on average; Time: 5 days b. Mid-size business of 50 employees and premises 300 square meters: about KES 20,000 to KES 50,000 depending on the nature of the business. Cost: KES 200 The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- Comments: According to the Companies Act (Cap. 486), an advocate engaged in ber of 2006 and came into effect on May 1, 2007), amends the Local Government the formation of the company or a director or company secretary named in the Act (Cap. 265) by reducing the number of business permits required for a distributor Articles must sign Form 208, the declaration of compliance, which accompanies of goods or provider of services to carry on its business activities. Applicants having the registration documents to be submitted to the Registrar of Companies. The obtained a business permit to operate from one local authority will not be required common practice is for this procedure to be done by a private lawyer with the power to obtain another business permit in another local authority. In addition, business to commission documents immediately after procedures 2 and 3, since the person permit applicants will have an opportunity to elect whether to apply for a 1- or incorporating the company is already in town. The minimum cost provided by the 2-year permit. The 2006 law also eliminated the requirement to obtain a trading Advocates Remuneration Order is KES 200. However, advocates charge on average license in addition to the permit. For a first time business permit, the process takes, KES 400 to perform this procedure. Lawyer fees are not considered since the use of on average 5 days. lawyers is not mandatory. Procedure: 9. Register with the National Social Security Fund Procedure: 5. File deed and details with the Registrar of (NSSF) Companies at the Attorney General's Chamber in Nairobi (Sheria Time: 1 day House) Cost: No cost Time: 21 days Comments: The National Social Security Fund provides the employee with a lump- Cost: KES 5,893 sum retirement benefit. Historically, the rate of return paid by the state is consider- Comments: The applicant must file with the Registrar of Companies the incorpora- ably less than that achieved by private schemes, but participation is mandatory. The tion deed and the required documents and forms, which include: employer pays a standard contribution of about 1% of salary, subject to a maximum a. Stamped memorandum and articles of association; of KES 400 per month. Half of the contribution is deductible from the employee's b. Statement of capital; salary. The precise amount of the contribution (where less than the maximum) is de- termined by reference to salary bands. This procedure is commonly done is Kisumu. c. Form 201, Particulars of directors and secretary; d. Form 203, Notice of proposed registered office; Procedure: 10. Register with the National Hospital Insurance e. Form 208, Declaration of compliance and the prescribed registration fees; Fund (NHIF) f. Copy of the company name approval. Time: 1 day Fee schedule for registration is the following: Cost: No cost a. For the first KES 100,000 of nominal capital: KES 2,200; Comments: The employee contributes a fixed sum to the National Hospital Insur- b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, ance Fund (NHIF), which must be deducted by the employer from the employees' subject to a maximum of KES 60,000; salary. The maximum contribution is KES 320 per month. The contributions are used c. Filing fee for three forms: KES 600. to offset the costs of medical treatment, but they only cover a fraction of actual costs. The common practice is for the company's founder to hire a lawyer to undertake the Hence, most companies provide employees with medical insurance. This procedure administrative incorporation procedures in Nairobi. Given that the use of lawyers is done at the Kisumu NHIF office. for such purposes is not mandatory in Kisumu, lawyer fees are not accounted on the overall incorporation costs. On average, a lawyer will charge KES 20,000 for the entire Procedure: 11. Register for PAYE incorporation process. Time: 3 days Cost: No cost Procedure: 6. Register with the Tax Department for a PIN Comments: This procedure is commonly done is Kisumu. Time: 1 day Cost: No cost Procedure: 12. Make a company seal after a certificate of incorporation has been issued Time: 6 days Cost: KES 5,000 (company's seal: KES 4,000 + courier: KES 1000) LIST OF PROCEDURES · STARTING A BUSINESS 41 Comments: Seals are made by private entities who require sight of a copy of the Procedure: 5. File deed and details with the Registrar of certificate of incorporation. The average price of the company seal is KES 4,000. The Companies at the Attorney General's Chamber in Nairobi (Sheria common practice is for applicants to obtain the company seal in Nairobi. Applicants House) order this seal after filing the incorporation deed and before returning to Kisumu. Once the company seal is ready, private providers will send the seal by courier. The Time: 22 days average cost of mailing the seal is KES 1,000. Cost: KES 5,893 Comments: The applicant must file with the Registrar of Companies the incorpora- * This procedure can be completed simultaneously with previous procedures tion deed and the required documents and forms, which include: a. Stamped memorandum and articles of association; STarTIng a buSIneSS b. Statement of capital; c. Form 201, Particulars of directors and secretary; Malaba d. Form 203, Notice of proposed registered office; Standard company legal form: Private Corporation e. Form 208, Declaration of compliance and the prescribed registration fees; Paid-in-minimum capital requirement: none f. Copy of the company name approval. Data as of: June 2009 Fee schedule for registration is the following: Procedure: 1. Obtain approval for the company name from the a. For the first KES 100,000 of nominal capital: KES 2,200; Registrar of Companies b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days) subject to a maximum of KES 60,000; Cost: KES 4,100 (filing fee: KES 100 + transportation: KES 4,000) c. Filing fee for three forms: KES 600. Comments: The company name reservation lasts 30 days but can be renewed for The common practice is for the company's founder to hire a lawyer to undertake the a similar period. This procedure can only be done in Nairobi. Usually, the company's administrative incorporation procedures in Nairobi. Given that the use of lawyers promoters will hire a Malaba lawyer whose agent will travel to Nairobi to undertake for such purposes is not mandatory in Malaba, lawyer fees are not accounted on the the necessary procedures. The common practice is that procedures one to five are overall incorporation costs. On average, a lawyer will charge KES 25,000 for the entire performed in Nairobi given that the applicant, or the company's agent, is already in incorporation process. town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How- ever, it takes 1 day to travel from Malaba to Nairobi and 1 day to go back. Travel time Procedure: 6. Register with the Tax Department for a PIN is considered within this procedure. The cost of this procedure is KES 100. The bus Time: 1 day (time to register: 1 day + roundtrip: 2 hours) fare from Malaba to Nairobi is KES 4,000 and is also considered within this procedure. Cost: KES 400 (transportation) Given that the use of lawyers is not mandatory for company incorporation around all the localities in Kenya, lawyer fees are not considered in the present report. Comments: Registration for a personal and a company identification number (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 shareholders or a director and the secretary are required), the local service tax, and Procedure: 2. Stamp the memorandum and articles and a the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration statement of the nominal capital and a copy of the memorandum and articles of association. Time: 22 days This procedure is done in Bungoma, 1 hour away from Malaba. Given the proximity Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum between these localities, additional time is not considered. The bus fare is from and articles of association) Bungoma to Malaba is KES 400 roundtrip. This procedure has no cost. However, Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over transportation costs are considered within the cost of this procedure. Procedures 6 stamp duty collection from the Ministry of Lands and Housing. As an administrative and 7 are performed in Mombasa since the applicant is already in town. requirement, the KRA now requires the personal identification numbers (PINs) of all parties on whose behalf duty-stamped documents are submitted. Documents Procedure: 7. Register with the VAT office must be first assessed by the Stamp Duty Office before payment can be processed Time: 1 day by the KRA-designated banks. The process was lengthened initially to about 2 weeks Cost: No cost because the Stamp Duty Office waited to receive confirmation of bank payment after clearance of funds. However, the time was reduced in 2008 as a result of better Comments: The application for a VAT certificate must be supported with application communication between the Ministry of Lands and Housing and Kenya Revenue form, copies of the certificate of incorporation, the PIN certificates for the company Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction and 2 of its directors and memorandum and articles of association. The VAT depart- are also due. ment is under the KRA. This procedure can be done at the KRA offices in Bungoma. This procedure is usually done in Nairobi since the applicant is already in town. However, this procedure can also be undertaken in Malaba since there are KRA Procedure: 8. Apply for a business permit offices in Malaba. Time: 8 days Cost: KES 12,000 Procedure: 3. Pay stamp duty at bank Comments: The fee to apply for a business permit varies by type of business, Time: 1 day number of employees, and size of the company's premises. The fee is payable to the Cost: KES 100 Malaba County Council. The County Council will issue a business permit. Comments: The cost relates to the banker's check which is the mode of payment of Fee schedule for business permit is the following: the stamp duty. a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises 50­300 square meters (fair location): KES 12,000 on average; Procedure: 4. Declaration of compliance (Form 208) is signed b. Mid-size business of 50 employees and premises 300 square meters: about KES before a Commissioner for Oaths 20,000 to KES 50,000 depending on the nature of the business. Time: 1 day The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- Cost: KES 200 ber of 2006 and came into effect on May 1, 2007), amends the Local Government Act (Cap. 265) by reducing the number of business permits required for a distributor Comments: According to the Companies Act (Cap. 486), an advocate engaged in of goods or provider of services to carry on its business activities. Applicants having the formation of the company or a director or company secretary named in the obtained a business permit to operate from one local authority will not be required Articles must sign Form 208, the declaration of compliance, which accompanies to obtain another business permit in another local authority. In addition, business the registration documents to be submitted to the Registrar of Companies. The permit applicants will have an opportunity to elect whether to apply for a 1- or common practice is for this procedure to be done by a private lawyer with the power 2-year permit. The 2006 law also eliminated the requirement to obtain a trading to commission documents immediately after procedures 2 and 3, since the person license in addition to the permit. For a first time business permit, the process takes, incorporating the company is already in town. The minimum cost provided by the on average 8 days. Advocates Remuneration Order is KES 200. However, advocates charge on average KES 400 to perform this procedure. Lawyer fees are not considered since the use of lawyers is not mandatory. 42 DOING BUSINESS IN kENyA 2010 Procedure: 9. Register with the National Social Security Fund Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over (NSSF) stamp duty collection from the Ministry of Lands and Housing. As an administrative requirement, the KRA now requires the personal identification numbers (PINs) of Time: 1 day (time to register: 1 day + roundtrip: 2 hours) all parties on whose behalf duty-stamped documents are submitted. Documents Cost: KES 400 (transportation) must be first assessed by the Stamp Duty Office before payment can be processed Comments: The National Social Security Fund provides the employee with a lump- by the KRA-designated banks. The process was lengthened initially to about 2 weeks sum retirement benefit. Historically, the rate of return paid by the state is consider- because the Stamp Duty Office waited to receive confirmation of bank payment ably less than that achieved by private schemes, but participation is mandatory. The after clearance of funds. However, the time was reduced in 2008 as a result of better employer pays a standard contribution of about 1% of salary, subject to a maximum communication between the Ministry of Lands and Housing and Kenya Revenue of KES 400 per month. Half of the contribution is deductible from the employee's sal- Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction ary. The precise amount of the contribution (where less than the maximum) is deter- are also due. mined by reference to salary bands. This procedure is commonly done is Bungoma. This procedure is usually done in Nairobi since the applicant is already in town. However, this procedure can also be undertaken in Mombasa since there are KRA Procedure: 10. Register with the National Hospital Insurance offices in Mombasa. Fund (NHIF) Time: 1 day Procedure: 3. Pay stamp duty at bank Cost: No cost Time: 1 day Comments: The employee contributes a fixed sum to the National Hospital Insur- Cost: KES 100 ance Fund (NHIF), which must be deducted by the employer from the employees' Comments: This procedure can be done either in Mombasa or in Nairobi. The com- salary. The maximum contribution is KES 320 per month. The contributions are used mon practice is for applicants to stay in Nairobi since the applicant is already in the to offset the costs of medical treatment, but they only cover a fraction of actual costs. city to perform the previous procedures. KES 100 relates to the cost of the banker's Hence, most companies provide employees with medical insurance. This procedure check which is the mode of payment of the stamp duty. is done at the Bungoma NHIF office. Procedure: 4. Declaration of compliance (Form 208) is signed Procedure: 11. Register for PAYE before a Commissioner for Oaths Time: 3 days Time: 1 day Cost: No cost Cost: KES 200 Comments: This procedure is commonly done is Bungoma. Comments: According to the Companies Act (Cap. 486), an advocate engaged in the formation of the company or a director or company secretary named in the Procedure: 12. Make a company seal after a certificate of Articles must sign Form 208, the declaration of compliance, which accompanies incorporation has been issued the registration documents to be submitted to the Registrar of Companies. The Time: 5 days common practice is for this procedure to be done by a private lawyer with the power to commission documents immediately after procedures 2 and 3, since the person Cost: KES 5,000 (company's seal: KES 4,000 + courier: KES 1000) incorporating the company is already in town. The minimum cost provided by the Comments: Seals are made by private entities who require sight of a copy of the Advocates Remuneration Order is KES 200. However, advocates charge on average certificate of incorporation. The average price of the company seal is KES 4,000. The KES 400 to perform this procedure. Lawyer fees are not considered since the use of common practice is for applicants to obtain the company seal in Nairobi. Applicants lawyers is not mandatory. order this seal after filing the incorporation deed and before returning to Malaba. Once the company seal is ready, private providers will send the seal by courier. The Procedure: 5. File deed and details with the Registrar of average cost of mailing the seal is KES 1,000. Companies at the Attorney General's Chamber in Nairobi (Sheria House) * This procedure can be completed simultaneously with previous procedures Time: 28 days Cost: KES 5,893 STarTIng a buSIneSS Comments: The applicant must file with the Registrar of Companies the incorpora- Mombasa tion deed and the required documents and forms, which include: Standard company legal form: Private Corporation a. Stamped memorandum and articles of association; Paid-in-minimum capital requirement: none b. Statement of capital; Data as of: June 2009 c. Form 201, Particulars of directors and secretary; d. Form 203, Notice of proposed registered office; Procedure: 1. Obtain approval for the company name from the Registrar of Companies e. Form 208, Declaration of compliance and the prescribed registration fees; f. Copy of the company name approval. Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days) Fee schedule for registration is the following: Cost: KES 3,100 (filing fee: KES 100 + transportation: KES 3,000) a. For the first KES 100,000 of nominal capital: KES 2,200; Comments: The company name reservation lasts 30 days but can be renewed for a similar period. This procedure can only be done in Nairobi. Usually, the company's b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, promoters will hire a Mombasa lawyer whose agent will travel to Nairobi to under- subject to a maximum of KES 60,000; take the necessary procedures. The common practice is that procedures one to five c. Filing fee for three forms: KES 600. are performed in Nairobi given that the applicant, or the company's agent, is already The common practice is for the company's founder to hire a lawyer to undertake the in town. The time to do this procedure is 2 days, once the applicant is in Nairobi. administrative incorporation procedures in Nairobi. Given that the use of lawyers for However, it takes 1 day to travel from Mombasa to Nairobi and 1 day to go back. such purposes is not mandatory in Mombasa, lawyer fees are not accounted on the Travel time is considered within this procedure. The cost of this procedure is KES 100. overall incorporation costs. On average, a lawyer will charge KES 10,000 for the entire The bus fare from Mombasa to Nairobi is KES 3,000 and is also considered within this incorporation process. procedure. Given that the use of lawyers is not mandatory for company incorporation around all Procedure: 6. Register with the Tax Department for a PIN the localities in Kenya, lawyer fees are not considered in the present report. Time: 1 day Cost: No cost Procedure: 2. Stamp the memorandum and articles and a statement of the nominal capital Time: 23 days Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum and articles of association) LIST OF PROCEDURES · STARTING A BUSINESS 43 Comments: Registration for a personal and a company identification number Comments: Providers are hired in Mombasa. This seal is a way to make documents (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 formal and legally solid. The seal provides the directors of the company a tool to shareholders or a director and the secretary are required), the local service tax, and control what are the contracts the company honors and what are the ones the the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration company will not honor. and a copy of the memorandum and articles of association. This procedure is done in Mombasa. * This procedure can be completed simultaneously with previous procedures Procedure: 7. Register with the VAT office STarTIng a buSIneSS Time: 1 day Cost: No cost Nairobi Comments: The application for a VAT certificate must be supported with application Standard company legal form: Private Corporation form, copies of the certificate of incorporation, the PIN certificates for the company Paid-in-minimum capital requirement: none and 2 of its directors and memorandum and articles of association. The VAT depart- Data as of: June 2009 ment is under the KRA. This procedure can be done at the KRA offices in Mombasa. Procedure: 1. Obtain approval for the company name from the Procedure: 8. Apply for a business permit Registrar of Companies Time: 5 days Time: 3 days Cost: KES 8,500 Cost: KES 100 Comments: The fee to apply for a business permit varies by type of business, Comments: The company name reservation lasts 30 days but can be renewed for a number of employees, and size of the company's premises. The fee is payable to the similar period. Mombasa City Council. The City Council will issue a business permit. Fee schedule for business permit is the following: Procedure: 2. Stamp the memorandum and articles and a a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises statement of the nominal capital 50­300 square meters (fair location): KES 8,500 on average; Time: 8 days b. Mid-size business of 50 employees and premises 300 square meters: about KES Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum 20,000 to KES 50,000, depending on the nature of the business. and articles of association) The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over ber of 2006 and came into effect on May 1, 2007), amends the Local Government stamp duty collection from the Ministry of Lands and Housing. As an administrative Act (Cap. 265) by reducing the number of business permits required for a distributor requirement, the KRA now requires the personal identification numbers (PINs) of of goods or provider of services to carry on its business activities. Applicants having all parties on whose behalf duty-stamped documents are submitted. Documents obtained a business permit to operate from one local authority will not be required must be first assessed by the Stamp Duty Office before payment can be processed to obtain another business permit in another local authority. In addition, business by the KRA-designated banks. The process was lengthened initially to about 2 weeks permit applicants will have an opportunity to elect whether to apply for a 1- or because the Stamp Duty Office waited to receive confirmation of bank payment 2-year permit. The 2006 law also eliminated the requirement to obtain a trading after clearance of funds. However, the time was reduced in 2008 as a result of better license in addition to the permit. For a first time business permit, the process takes, communication between the Ministry of Lands and Housing and Kenya Revenue on average 5 days. Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction are also due. Procedure: 9. Register with the National Social Security Fund (NSSF) Procedure: 3*. Pay stamp duty at bank Time: 1 day Time: 1 day Cost: No cost Cost: KES 100 Comments: The National Social Security Fund provides the employee with a lump- Comments: KES 100 relates to the cost of the banker's check which is the mode of sum retirement benefit. Historically, the rate of return paid by the state is consider- payment of the stamp duty. ably less than that achieved by private schemes, but participation is mandatory. The employer pays a standard contribution of about 1% of salary, subject to a maximum Procedure: 4. Declaration of compliance (Form 208) is signed of KES 400 per month. Half of the contribution is deductible from the employee's sal- before a Commissioner for Oaths ary. The precise amount of the contribution (where less than the maximum) is deter- Time: 1 day mined by reference to salary bands. This procedure is commonly done is Mombasa. Cost: KES 200 Procedure: 10. Register with the National Hospital Insurance Comments: According to the Companies Act (Cap. 486), an advocate engaged in Fund (NHIF) the formation of the company or a director or company secretary named in the Articles must sign Form 208, the declaration of compliance, which accompanies Time: 1 day the registration documents to be submitted to the Registrar of Companies. The Cost: No cost common practice is for this procedure to be done by a private lawyer with the power Comments: The employee contributes a fixed sum to the National Hospital Insur- to commission documents immediately after procedures 2 and 3, since the person ance Fund (NHIF), which must be deducted by the employer from the employees' incorporating the company is already in town. The minimum cost provided by the salary. The maximum contribution is KES 320 per month. The contributions are used Advocates Remuneration Order is KES 200. However, advocates charge on average to offset the costs of medical treatment, but they only cover a fraction of actual costs. KES 400 to perform this procedure. Lawyer fees are not considered since the use of Hence, most companies provide employees with medical insurance. This procedure lawyers is not mandatory. is done at the Mombasa NHIF office. Procedure: 5. File deed and details with the Registrar of Procedure: 11. Register for PAYE Companies at the Attorney General's Chamber in Nairobi (Sheria Time: 1 day House) Cost: No cost Time: 10 days Comments: This procedure is commonly done is Mombasa. Cost: KES 5,893 Comments: The applicant must file with the Registrar of Companies the incorpora- Procedure: 12. Make a company seal after a certificate of tion deed and the required documents and forms, which include: incorporation has been issued a. Stamped memorandum and articles of association; Time: 5 days b. Statement of capital; Cost: KES 5,000 c. Form 201, Particulars of directors and secretary; d. Form 203, Notice of proposed registered office; 44 DOING BUSINESS IN kENyA 2010 e. Form 208, Declaration of compliance and the prescribed registration fees; Comments: The employee contributes a fixed sum to the National Hospital Insur- f. Copy of the company name approval. ance Fund (NHIF), which must be deducted by the employer from the employees' salary. The maximum contribution is KES 320 per month. The contributions are used Fee schedule for registration is the following: to offset the costs of medical treatment, but they only cover a fraction of actual costs. a. For the first KES 100,000 of nominal capital: KES 2,200; Hence, most companies provide employees with medical insurance. b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, subject to a maximum of KES 60,000; Procedure: 11. Register for PAYE c. Filing fee for three forms: KES 600. Time: 1 day The common practice is for the company's founder to hire a lawyer to undertake the Cost: No cost administrative incorporation procedures in Nairobi. Given that the use of lawyers for such purposes is not mandatory in Nairobi, lawyer fees are not accounted on the Procedure: 12. Make a company seal after a certificate of overall incorporation costs. On average, a lawyer will charge KES 15,000 for the entire incorporation has been issued incorporation process. Time: 2 days Procedure: 6. Register with the Tax Department for a PIN Cost: KES 3,000 Time: 1 day Comments: Seals are made by private entities that require sight of a copy of the certificate of incorporation. The average price of the company seal is KES 3,000. Cost: No cost Comments: Registration for a personal and a company identification number (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 * This procedure can be completed simultaneously with previous procedures shareholders or a director and the secretary are required), the local service tax, and the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration STarTIng a buSIneSS and a copy of the memorandum and articles of association. Narok Procedure: 7. Register with the VAT office Standard company legal form: Private Corporation Time: 1 day Paid-in-minimum capital requirement: none Cost: No cost Data as of: June 2009 Comments: The application for a VAT certificate must be supported with application Procedure: 1. Obtain approval for the company name from the form, copies of the certificate of incorporation, the PIN certificate for the company Registrar of Companies and 2 of its directors and memorandum and articles of association. The VAT depart- ment is under the KRA. Time: 2 days (time to obtain approval: 2 days + roundtrip: 4 hours) Cost: KES 900 (filing fee: KES 100 + transportation: KES 800) Procedure: 8. Apply for a business permit Comments: The company name reservation lasts 30 days but can be renewed for Time: 5 days a similar period. This procedure can only be done in Nairobi. Usually, the company's Cost: KES 5,000 promoters will hire a Narok lawyer whose agent will travel to Nairobi to undertake the necessary procedures. The common practice is that procedures one to five are Comments: The fee to apply for a business permit varies by type of business, performed in Nairobi given that the applicant, or the company's agent, is already in number of employees, and size of the company's premises. The fee is payable to the town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How- Nairobi City Council. The City Council will issue a business permit. ever, it takes 2 hours to travel from Narok to Nairobi and 2 hours to go back. Given Fee schedule for business permit is the following: the proximity between these localities, travel time is not considered within this a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises procedure. The cost of this procedure is KES 100. The bus fare from Narok to Nairobi 50­300 square meters (fair location): KES 5,000 on average; is KES 800 and is also considered within this procedure. b. Mid-size business of 50 employees and premises 300 square meters: about KES Given that the use of lawyers is not mandatory for company incorporation around all 20,000 to KES 50,000 depending on the nature of the business. the localities in Kenya, lawyer fees are not considered in the present report. The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- ber of 2006 and came into effect on May 1, 2007), amends the Local Government Procedure: 2. Stamp the memorandum and articles and a Act (Cap. 265) by reducing the number of business permits required for a distributor statement of the nominal capital of goods or provider of services to carry on its business activities. Applicants having Time: 30 days obtained a business permit to operate from one local authority will not be required Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum to obtain another business permit in another local authority. In addition, business and articles of association) permit applicants will have an opportunity to elect whether to apply for a 1- or 2-year permit. The 2006 law also eliminated the requirement to obtain a trading Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over license in addition to the permit. For a first time business permit, the process takes, stamp duty collection from the Ministry of Lands and Housing. As an administrative on average 5 days. requirement, the KRA now requires the personal identification numbers (PINs) of all parties on whose behalf duty-stamped documents are submitted. Documents must be first assessed by the Stamp Duty Office before payment can be processed Procedure: 9. Register with the National Social Security Fund by the KRA-designated banks. The process was lengthened initially to about 2 weeks (NSSF) because the Stamp Duty Office waited to receive confirmation of bank payment Time: 1 day after clearance of funds. However, the time was reduced in 2008 as a result of better Cost: No cost communication between the Ministry of Lands and Housing and Kenya Revenue Comments: The National Social Security Fund provides the employee with a lump- Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction sum retirement benefit. Historically, the rate of return paid by the state is consider- are also due. ably less than that achieved by private schemes, but participation is mandatory. The This procedure is usually done in Nairobi since the applicant is already in town. employer pays a standard contribution of about 1% of salary, subject to a maximum However, this procedure can also be undertaken in Narok since there are KRA offices of KES 400 per month. Half of the contribution is deductible from the employee's in Narok. salary. The precise amount of the contribution (where less than the maximum) is determined by reference to salary bands. Procedure: 3. Pay stamp duty at bank Time: 1 day Procedure: 10. Register with the National Hospital Insurance Cost: KES 100 Fund (NHIF) Comments: The cost relates to the banker's check which is the mode of payment of Time: 1 day the stamp duty. Cost: No cost LIST OF PROCEDURES · STARTING A BUSINESS 45 The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- Procedure: 4. Declaration of compliance (Form 208) is signed ber of 2006 and came into effect on May 1, 2007), amends the Local Government before a Commissioner for Oaths Act (Cap. 265) by reducing the number of business permits required for a distributor Time: 3 days of goods or provider of services to carry on its business activities. Applicants having Cost: KES 200 obtained a business permit to operate from one local authority will not be required Comments: According to the Companies Act (Cap. 486), an advocate engaged in to obtain another business permit in another local authority. In addition, business the formation of the company or a director or company secretary named in the permit applicants will have an opportunity to elect whether to apply for a 1- or Articles must sign Form 208, the declaration of compliance, which accompanies 2-year permit. The 2006 law also eliminated the requirement to obtain a trading the registration documents to be submitted to the Registrar of Companies. The license in addition to the permit. For a first time business permit, the process takes, common practice is for this procedure to be done by a private lawyer with the power on average 8 days. to commission documents immediately after procedures 2 and 3, since the person incorporating the company is already in town. The minimum cost provided by the Procedure: 9. Register with the National Social Security Fund Advocates Remuneration Order is KES 200. However, advocates charge on average (NSSF) KES 400 to perform this procedure. Lawyer fees are not considered since the use of Time: 1 day lawyers is not mandatory. Cost: No cost Comments: The National Social Security Fund provides the employee with a lump- Procedure: 5. File deed and details with the Registrar of sum retirement benefit. Historically, the rate of return paid by the state is consider- Companies at the Attorney General's Chamber in Nairobi (Sheria ably less than that achieved by private schemes, but participation is mandatory. The House) employer pays a standard contribution of about 1% of salary, subject to a maximum Time: 28 days of KES 400 per month. Half of the contribution is deductible from the employee's Cost: KES 5,893 salary. The precise amount of the contribution (where less than the maximum) is determined by reference to salary bands. This procedure is commonly done is Narok. Comments: The applicant must file with the Registrar of Companies the incorpora- tion deed and the required documents and forms, which include: Procedure: 10. Register with the National Hospital Insurance a. Stamped memorandum and articles of association; Fund (NHIF) b. Statement of capital; Time: 1 day c. Form 201, Particulars of directors and secretary; Cost: No cost d. Form 203, Notice of proposed registered office; Comments: The employee contributes a fixed sum to the National Hospital Insur- e. Form 208, Declaration of compliance and the prescribed registration fees; ance Fund (NHIF), which must be deducted by the employer from the employees' f. Copy of the company name approval. salary. The maximum contribution is KES 320 per month. The contributions are used Fee schedule for registration is the following: to offset the costs of medical treatment, but they only cover a fraction of actual costs. a. For the first KES 100,000 of nominal capital: KES 2,200; Hence, most companies provide employees with medical insurance. This procedure is done at the Narok NHIF office. b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, subject to a maximum of KES 60,000; Procedure: 11. Register for PAYE c. Filing fee for three forms: KES 600. Time: 1 day The common practice is for the company's founder to hire a lawyer to undertake the Cost: No cost administrative incorporation procedures in Nairobi. Given that the use of lawyers for such purposes is not mandatory in Narok, lawyer fees are not accounted on the Comments: This procedure is commonly done is Narok. overall incorporation costs. On average, a lawyer will charge KES 25,000 for the entire incorporation process. Procedure: 12. Make a company seal after a certificate of incorporation has been issued Procedure: 6. Register with the Tax Department for a PIN Time: 4 days Time: 1 day Cost: KES 4,500 (company's seal: KES 4,000 + courier: KES 500) Cost: No cost Comments: Seals are made by private entities who require sight of a copy of the Comments: Registration for a personal and a company identification number certificate of incorporation. The average price of the company seal is KES 4,000. The (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 common practice is for applicants to obtain the company seal in Nairobi. Applicants shareholders or a director and the secretary are required), the local service tax, and order this seal after filing the incorporation deed and before returning to Narok. the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration Once the company seal is ready, private providers will send the seal by courier. The and a copy of the memorandum and articles of association. This procedure is done average cost of mailing the seal is KES 500. in Narok. * This procedure can be completed simultaneously with previous procedures Procedure: 7. Register with the VAT office Time: 1 day STarTIng a buSIneSS Cost: No cost Nyeri Comments: The application for a VAT certificate must be supported with an ap- plication form, copies of the certificate of incorporation, the PIN certificate for the Standard company legal form: Private Corporation company and two of its directors and memorandum and articles of association. The Paid-in-minimum capital requirement: none VAT department is under the KRA. This procedure can be done at the KRA offices in Data as of: June 2009 Narok. Procedure: 1. Obtain approval for the company name from the Procedure: 8. Apply for a business permit Registrar of Companies Time: 8 days Time: 2 days (time to obtain approval: 2 days + roundtrip: 6 hours) Cost: KES 7,500 Cost: KES 800 (filing fee: KES 100 + transportation: KES 700) Comments: The fee to apply for a business permit varies by type of business, Comments: The company name reservation lasts 30 days but can be renewed for number of employees, and size of the company's premises. The fee is payable to the a similar period. This procedure can only be done in Nairobi. Usually, the company's Narok Municipal Council. The Municipal Council will issue a business permit. promoters will hire a Nyeri lawyer whose agent will travel to Nairobi to undertake Fee schedule for business permit is the following: the necessary procedures. The common practice is that procedures one to five are performed in Nairobi given that the applicant, or the company's agent, is already in a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How- 50­300 square meters (fair location): KES 7,500 on average; ever, it takes 3 hours to travel from Nyeri to Nairobi and 3 hours to go back. Given b. Mid-size business of 50 employees and premises 300 square meters: about KES 20,000 to KES 50,000 depending on the nature of the business. 46 DOING BUSINESS IN kENyA 2010 the proximity between these localities, travel time is not considered within this Procedure: 6. Register with the Tax Department for a PIN procedure. The cost of this procedure is KES 100. The bus fare from Nyeri to Nairobi is Time: 1 day KES 700 and is also considered within this procedure. Cost: No cost Given that the use of lawyers is not mandatory for company incorporation around all the localities in Kenya, lawyer fees are not considered in the present report. Comments: Registration for a personal and a company identification number (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 shareholders or a director and the secretary are required), the local service tax, and Procedure: 2. Stamp the memorandum and articles and a the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration statement of the nominal capital and a copy of the memorandum and articles of association. This procedure is done Time: 27 days in Nyeri. Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum and articles of association) Procedure: 7. Register with the VAT office Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over Time: 1 day stamp duty collection from the Ministry of Lands and Housing. As an administrative Cost: No cost requirement, the KRA now requires the personal identification numbers (PINs) of Comments: The application for a VAT certificate must be supported with application all parties on whose behalf duty-stamped documents are submitted. Documents form, copies of the certificate of incorporation, the PIN certificate for the company must be first assessed by the Stamp Duty Office before payment can be processed and 2 of its directors and memorandum and articles of association. The VAT depart- by the KRA-designated banks. The process was lengthened initially to about 2 weeks ment is under the KRA. This procedure can be done at the KRA offices in Nyeri. because the Stamp Duty Office waited to receive confirmation of bank payment after clearance of funds. However, the time was reduced in 2008 as a result of better communication between the Ministry of Lands and Housing and Kenya Revenue Procedure: 8. Apply for a business permit Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction Time: 6 days are also due. Cost: KES 6,000 This procedure is usually done in Nairobi since the applicant is already in town. Comments: The fee to apply for a business permit varies by type of business, num- However, this procedure can also be undertaken in Nyeri since there are KRA offices ber of employees, and size of the company's premises. The fee is payable to the Nyeri in Nyeri. Municipal Council. The Municipal Council will issue a business permit. Fee schedule for business permit is the following: Procedure: 3. Pay stamp duty at bank a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises Time: 1 day 50­300 square meters. (fair location): KES 6,000 on average; Cost: KES 100 b. Mid-size business of 50 employees and premises 300 square meters: about KES Comments: The cost relates to the banker's check which is the mode of payment of 20,000 to KES 50,000 depending on the nature of the business. the stamp duty. The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- ber of 2006 and came into effect on May 1, 2007), amends the Local Government Procedure: 4. Declaration of compliance (Form 208) is signed Act (Cap. 265) by reducing the number of business permits required for a distributor before a Commissioner for Oaths of goods or provider of services to carry on its business activities. Applicants having Time: 3 days obtained a business permit to operate from one local authority will not be required to obtain another business permit in another local authority. In addition, business Cost: KES 200 permit applicants will have an opportunity to elect whether to apply for a 1- or Comments: According to the Companies Act (Cap. 486), an advocate engaged in 2-year permit. The 2006 law also eliminated the requirement to obtain a trading the formation of the company or a director or company secretary named in the license in addition to the permit. For a first time business permit, the process takes, Articles must sign Form 208, the declaration of compliance, which accompanies on average 6 days. the registration documents to be submitted to the Registrar of Companies. The common practice is for this procedure to be done by a private lawyer with the power Procedure: 9. Register with the National Social Security Fund to commission documents immediately after procedures 2 and 3, since the person (NSSF) incorporating the company is already in town. The minimum cost provided by the Advocates Remuneration Order is KES 200. However, advocates charge on average Time: 1 day KES 400 to perform this procedure. Lawyer fees are not considered since the use of Cost: No cost lawyers is not mandatory. Comments: The National Social Security Fund provides the employee with a lump- sum retirement benefit. Historically, the rate of return paid by the state is consider- Procedure: 5. File deed and details with the Registrar of ably less than that achieved by private schemes, but participation is mandatory. The Companies at the Attorney General's Chamber in Nairobi (Sheria employer pays a standard contribution of about 1% of salary, subject to a maximum House) of KES 400 per month. Half of the contribution is deductible from the employee's Time: 30 days salary. The precise amount of the contribution (where less than the maximum) is determined by reference to salary bands. This procedure is commonly done is Nyeri. Cost: KES 5,893 Comments: The applicant must file with the Registrar of Companies the incorpora- Procedure: 10. Register with the National Hospital Insurance tion deed and the required documents and forms, which include: Fund (NHIF) a. Stamped memorandum and articles of association; Time: 1 day b. Statement of capital; Cost: No cost c. Form 201, Particulars of directors and secretary; Comments: The employee contributes a fixed sum to the National Hospital Insur- d. Form 203, Notice of proposed registered office; ance Fund (NHIF), which must be deducted by the employer from the employees' e. Form 208, Declaration of compliance and the prescribed registration fees; salary. The maximum contribution is KES 320 per month. The contributions are used f. Copy of the company name approval. to offset the costs of medical treatment, but they only cover a fraction of actual costs. Hence, most companies provide employees with medical insurance. This procedure Fee schedule for registration is the following: is done at the Nyeri NHIF office. a. For the first KES 100,000 of nominal capital: KES 2,200; b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, Procedure: 11. Register for PAYE subject to a maximum of KES 60,000; Time: 1 day c. Filing fee for three forms: KES 600. Cost: No cost The common practice is for the company's founder to hire a lawyer to undertake the Comments: This procedure is commonly done is Nyeri. administrative incorporation procedures in Nairobi. Given that the use of lawyers for such purposes is not mandatory in Nyeri, lawyer fees are not accounted on the overall incorporation costs. On average, a lawyer will charge KES 30,000 for the entire incorporation process. LIST OF PROCEDURES · STARTING A BUSINESS 47 Comments: According to the Companies Act (Cap. 486), an advocate engaged in Procedure: 12. Make a company seal after a certificate of the formation of the company or a director or company secretary named in the incorporation has been issued Articles must sign Form 208, the declaration of compliance, which accompanies Time: 6 days the registration documents to be submitted to the Registrar of Companies. The Cost: KES 4,800 (company's seal: KES 4,000 + courier: KES 800) common practice is for this procedure to be done by a private lawyer with the power Comments: Seals are made by private entities who require sight of a copy of the to commission documents immediately after procedures 2 and 3, since the person certificate of incorporation. The average price of the company seal is KES 4,000. The incorporating the company is already in town. The minimum cost provided by the common practice is for applicants to obtain the company seal in Nairobi. Applicants Advocates Remuneration Order is KES 200. However, advocates charge on average order this seal after filing the incorporation deed and before returning to Nyeri. Once KES 400 to perform this procedure. Lawyer fees are not considered since the use of the company seal is ready, private providers will send the seal by courier. The average lawyers is not mandatory. cost of mailing the seal is KES 800. Procedure: 5. File deed and details with the Registrar of Companies at the Attorney General's Chamber in Nairobi (Sheria * This procedure can be completed simultaneously with previous procedures House) Time: 14 days STarTIng a buSIneSS Cost: KES 5,387 Thika Comments: The applicant must file with the Registrar of Companies the incorpora- Standard company legal form: Private Corporation tion deed and the required documents and forms, which include: Paid-in-minimum capital requirement: none a. Stamped memorandum and articles of association; Data as of: June 2009 b. Statement of capital; Procedure: 1. Obtain approval for the company name from the c. Form 201, Particulars of directors and secretary; Registrar of Companies d. Form 203, Notice of proposed registered office; Time: 2 days (time to obtain approval: 2 days + roundtrip: 1 hour) e. Form 208, Declaration of compliance and the prescribed registration fees; Cost: KES 300 (filing fee: KES 100 + transportation: KES 200) f. Copy of the company name approval. Comments: The company name reservation lasts 30 days but can be renewed for Fee schedule for registration is the following: a similar period. This procedure can only be done in Nairobi. Usually, the company's a. For the first KES 100,000 of nominal capital: KES 2,200; promoters will hire a Thika lawyer whose agent will travel to Nairobi to undertake b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, the necessary procedures. The common practice is that procedures one to five are subject to a maximum of KES 60,000; performed in Nairobi given that the applicant, or the company's agent, is already c. Filing fee for three forms: KES 600. in town. The time to do this procedure is 2 days, once the applicant is in Nairobi. However, it takes 30 minutes to travel from Thika to Nairobi and 30 minutes to go The common practice is for the company's founder to hire a lawyer to undertake the back. Given the proximity between these localities, travel time is not considered administrative incorporation procedures in Nairobi. Given that the use of lawyers within this procedure. The cost of this procedure is KES 100. The bus fare from Thika for such purposes is not mandatory in Thika, lawyer fees are not accounted on the to Nairobi is KES 200 and is also considered within this procedure. overall incorporation costs. On average, a lawyer will charge KES 15,000 for the entire incorporation process. Given that the use of lawyers is not mandatory for company incorporation around all the localities in Kenya, lawyer fees are not considered in the present report. Procedure: 6. Register with the Tax Department for a PIN Procedure: 2. Stamp the memorandum and articles and a Time: 1 day statement of the nominal capital Cost: No cost Time: 14 days Comments: Registration for a personal and a company identification number (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 Cost: KES 7,317 (1% of nominal capital + KES 2,005 stamp duty on memorandum shareholders or a director and the secretary are required), the local service tax, and and articles of association) the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over and a copy of the memorandum and articles of association. This procedure is done stamp duty collection from the Ministry of Lands and Housing. As an administrative in Thika. requirement, the KRA now requires the personal identification numbers (PINs) of all parties on whose behalf duty-stamped documents are submitted. Documents Procedure: 7. Register with the VAT office must be first assessed by the Stamp Duty Office before payment can be processed by the KRA-designated banks. The process was lengthened initially to about 2 weeks Time: 1 day because the Stamp Duty Office waited to receive confirmation of bank payment Cost: No cost after clearance of funds. However, the time was reduced in 2008 as a result of better Comments: The application for a VAT certificate must be supported with application communication between the Ministry of Lands and Housing and Kenya Revenue form, copies of the certificate of incorporation, the PIN certificate for the company Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction and 2 of its directors and memorandum and articles of association. The VAT depart- are also due. ment is under the KRA. This procedure can be done at the KRA offices in Thika. This procedure is usually done in Nairobi since the applicant is already in town. However, this procedure can also be undertaken in Thika since there are KRA offices Procedure: 8. Apply for a business permit in Thika. Time: 6 days Cost: KES 6,500 Procedure: 3. Pay stamp duty at bank Comments: The fee to apply for a business permit varies by type of business, num- Time: 1 day ber of employees, and size of the company's premises. The fee is payable to the Thika Cost: KES 100 Municipal Council. The Municipal Council will issue a business permit. Comments: This procedure can be done either in Thika or in Nairobi. The common Fee schedule for business permit is the following: practice is for applicants to stay in Nairobi since the applicant is already in the city to a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises perform the previous procedures. KES 100 relates to the cost of the banker's check 50­300 square meters (fair location): KES 6,500 on average; which is the mode of payment of the stamp duty. b. Mid-size business of 50 employees and premises 300 square meters: about KES 20,000 to KES 50,000 depending on the nature of the business. Procedure: 4. Declaration of compliance (Form 208) is signed before a Commissioner for Oaths The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- ber of 2006 and came into effect on May 1, 2007), amends the Local Government Time: 1 day Act (Cap. 265) by reducing the number of business permits required for a distributor Cost: KES 200 of goods or provider of services to carry on its business activities. Applicants having obtained a business permit to operate from one local authority will not be required to obtain another business permit in another local authority. In addition, business 48 DOING BUSINESS IN kENyA 2010 permit applicants will have an opportunity to elect whether to apply for a 1- or Finally, the building plans are endorsed by the full Council. 2-year permit. The 2006 law also eliminated the requirement to obtain a trading license in addition to the permit. For a first time business permit, the process takes, Procedure 2. Obtain approval from the National Environment on average 6 days. Management Authority (NEMA) Time: 30 days Procedure: 9. Register with the National Social Security Fund Cost: KES 16,250 (NSSF) Comments: Following the enactment of a new Environmental Management and Time: 1 day Co-ordination Act on February 27, 2009, companies now have to obtain approval of Cost: No cost the project from the National Environment Management Authority. Projects of all Comments: The National Social Security Fund provides the employee with a lump- risk categories are subject to approval and environmental impact assessment (EIA), sum retirement benefit. Historically, the rate of return paid by the state is consider- including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES ably less than that achieved by private schemes, but participation is mandatory. The 32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value. employer pays a standard contribution of about 1% of salary, subject to a maximum The regulation regarding environmental impact assessment approval for Kenya has of KES 400 per month. Half the contribution is deductible from the employee's salary. been in place since 1999. However, in recent years NEMA has started enforcing the The precise amount of the contribution (where less than the maximum) is deter- rules more vigorously. NEMA conducts periodic inspections during the construction. mined by reference to salary bands. This procedure is commonly done is Thika. If new projects at the moment of inspection do not have an environmental impact assessment they may order the project be closed and erected objects demolished. Procedure: 10. Register with the National Hospital Insurance Therefore, construction companies are now obtaining the environmental approval Fund (NHIF) before the building is completed. Nevertheless, the legislation is not clear on which Time: 1 day categories of buildings this regulation would apply to. Cost: No cost Procedure 3. Notify the Eldoret Municipal Council of the Comments: The employee contributes a fixed sum to the National Hospital Insur- commencement of building work and receive a routine on-site ance Fund (NHIF), which must be deducted by the employer from the employees' salary. The maximum contribution is KES 320 per month. The contributions are used inspection to offset the costs of medical treatment, but they only cover a fraction of actual costs. Time: 1 day Hence, most companies provide employees with medical insurance. This procedure Cost: No cost is done at the Thika NHIF office. Comments: Inspectors from the Eldoret Municipal Council are available during business hours every day. There are several inspections required by the municipal Procedure: 11. Register for PAYE by-laws. However, the common practice is that inspectors only come for routine Time: 1 day checks during the construction phase. They stop by the construction site while the Cost: No cost construction continues and check if everything is being built in accordance with the architectural plans submitted initially. The cost for this inspection is included in the Comments: This procedure is commonly done is Thika. scrutiny fees paid in procedure 1. Procedure: 12. Make a company seal after a certificate of Procedure 4. Request an occupancy certificate and receive a final incorporation has been issued on-site inspection by the municipal authority Time: 4 days Time: 2 days Cost: KES 4,250 (company's seal: KES 4,000 + courier: KES 250) Cost: No cost Comments: Seals are made by private entities who require sight of a copy of the Comments: BuildCo informs the Municipal Council Engineer's Department that the certificate of incorporation. The average price of the company seal is KES 4,000. The warehouse is completed. The municipal engineer or other officers inspect the ware- common practice is for applicants to obtain the company seal in Nairobi. Applicants house and confirm whether the structure conforms to all the relevant building plans. order this seal after filing the incorporation deed and before returning to Thika. Once the company seal is ready, private providers will send the seal by courier. The average cost of mailing the seal is KES 250. Procedure 5. Obtain an occupancy certificate from the municipal authority Time: 1 day * This procedure can be completed simultaneously with previous procedures Cost: No cost Comments: The inspection card (PPA1) is fully filled and an occupancy certificate is LIST OF PrOcedureS issued by the Municipal Engineer's Department. The cost for the occupancy certifi- Dealing with construction permits cate is paid in procedure 1. Procedure 6. Apply for water and sewerage connection Eldoret Time: 1 day Cost: No cost Procedures to build a warehouse Comments: To apply for water and sewerage connection, BuildCo has to submit the Warehouse value: US$ 404,783 = KES 32,500,000 following: Data as of: June 2009 a. Application form; Procedure 1. Request approval of the architectural plans from b. Identification card; the Eldoret Municipal Council c. Personal identification number (PIN); Time: 50 days d. Sketch map of the warehouse site. Cost: KES 21,626 (KES 2,000 for the building occupancy certificate, KES 10,486 for At this stage no costs are absorbed since BuildCo has to wait for the Eldoret Water scrutiny fees, KES 200 for submission forms, KES 3,640 for structural fees, KES 300 for and Sewerage Company (ELDOWAS) officers to visit the site and ascertain whether the Physical Planning Act 1 form (PPA1), and KES 5,000 for public health fees) there is an existing water line near the building site and whether there will be suf- Comments: BuildCo submits the approval request together with the building plans. ficient supply in the future. The building plans are circulated for approval to the following departments: a. The Physical Planning Department; Procedure 7. Pay water and sewerage installation costs and b. The Municipal Engineer's Department; obtain connection c. The Public Health Department; Time: 3 days d. The Finance Department; Cost: KES 3,660 (KES 1,250 for water, KES 810 for sewerage, KES 1,000 for meter deposit, and KES 600 for supervision costs during meter installation) e. The Municipal Planning Committee. LIST OF PROCEDURES · DEALING WITH CONSTRUCTION PERmITS 49 Comments: There are plans to adjust the tariffs upwards and a notice to introducing Procedure 3. Submit project plans and get approval from the the new tariffs was gazetted on January 1, 2009. Public Health Department Time: 3 days Procedure 8*. Request electricity connection from the local Cost: KES 3,000 (public health fee) electricity provider Comments: BuildCo submits the project plans for approval to the Public Health Time: 1 day Department (PHD). A PHD officer approves the plans and signs the applicable sec- Cost: No cost tion of the PPA1 form. Comments: According to the Kenya Power & Lighting Co. Ltd (KPLC), BuildCo needs to fill an Enquiry for Supply of Electricity form and submit it to the KPLC local office Procedure 4. Submit project plans and signed PPA1 form to the with the following documents: Municipal Council Engineer's Department and obtain approval a. Copy of the national identity card of the person who is applying on BuildCo's Time: 7 days behalf (non-Kenyans will be required to provide a copy of a valid passport); Cost: KES 12,000 b. Copy of the lease agreement or a title deed of the premises to be supplied with Comments: The municipal council engineer reviews the building plans and checks electricity or a signed letter of tenancy from the responsible landlord with a copy if all approvals have been obtained in the PPA1 form. Construction can commence of his/her identify card; only after the municipal council engineer has given approval of the plans. c. Detailed route sketch of the premises (this should include roads and other salient features). Corporate customers are required to also provide a copy of their Procedure 5. Obtain approval from the National Environment personal identification number (PIN) certificate and certificate of incorporation. Management Authority Procedure 9*. Apply and pay for telephone connection Time: 30 days Time: 1 day Cost: KES 16,250 Cost: KES 2,300 Comments: Following the enactment of a new Environmental Management and Co-ordination Act on February 27, 2009, companies now have to obtain approval of Comments: BuildCo applies for telephone connection at the local Telkom Kenya the project from the National Environment Management Authority. Projects of all office where readily available forms can be immediately filled out and submitted. risk categories are subject to approval and environmental impact assessment (EIA), To obtain a commercial connection, the applicant needs to submit, along with the including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES application, the following: 32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value. a. Proof of ownership of the business; The regulation regarding environmental impact assessment approval for Kenya has b. Identification card. been in place since 1999. However, in recent years NEMA has started enforcing the The same tariff and connection fee apply across the country. rules more vigorously. NEMA conducts periodic inspections during the construction. If new projects at the moment of inspection do not have an environmental impact Procedure 10*. Receive an on-site inspection by the local assessment they may order the project be closed and erected objects demolished. electricity provider Therefore, construction companies are now obtaining the environmental approval before the building is completed. Nevertheless, the legislation is not clear on which Time: 1 day categories of buildings this regulation would apply to. Cost: No cost Comments: KPLC will conduct a survey on the construction site and send a letter to Procedure 6. Notify the Garissa Municipal Council of the BuildCo quoting the amount of capital contribution and deposit to be paid. commencement of building work and receive a routine on-site inspection Procedure 11. Obtain electricity connection Time: 1 day Time: 28 days Cost: No cost Cost: KES 60,000 (inclusive of 16% VAT) Comments: There are several inspections required by the municipal by-laws. How- Comments: For new connections, if the warehouse site is within six hundred meters ever, the common practice is that the inspectors only come for routine checks during from the power transformer, it costs KES 36,980 to get a one-phase connection (in- the construction phase. They stop by the construction site while the construction cludes VAT and account deposit). Beyond six hundred meters, the cost is determined continues and check if everything is being built in accordance with the architectural by KPLC designers and surveyors. A three-phase connection cost varies with the user plans submitted initially. requirements. The minimum cost for a three-phase connection is KES 60,000. Procedure 7. Request an occupancy certificate and receive a final * This procedure can be completed simultaneously with previous procedures on-site inspection by the municipal authority Time: 2 days deaLIng wITh cOnSTrucTIOn PermITS Cost: No cost Garissa Comments: BuildCo informs the Garissa Municipal Council once construction is completed. Procedures to build a warehouse Warehouse value: US$ 404,783 = KES 32,500,000 Procedure 8. Obtain an occupancy certificate Data as of: June 2009 Time: 5 days Procedure 1. Request approval of the architectural plans and get Cost: No cost a Physical Planning Act 1 form (PPA1) from the Garissa Municipal Comments: An officer from the Municipal Engineer's Department issues an occu- Council pancy certificate, after having inspected the building (procedure 7). The cost for the Time: 1 day occupancy certificate is included in procedure 4. Cost: KES 2,000 (PPA1 form) Procedure 9. Apply for water and sewerage connection Procedure 2. Submit project plans and get approval from the Time: 1 day Physical Planning Department Cost: KES 2,000 (application fee) Time: 3 days Comments: After submitting the application form to the Garissa Water and Sewer- age Company (GAWASCO), a plumber comes onsite to assess the requirements and Cost: No cost costs of connection and advises BuildCo on the same. If BuildCo agrees on the cost, Comments: BuildCo submits the project plans for approval to the Physical Planning then the information is forwarded to a technical manager of the GAWASCO for ap- Department (PPD). A PPD officer approves the plans and signs the applicable section proval and issuance of the meter. of the PPA1 form. 50 DOING BUSINESS IN kENyA 2010 Procedure 10*. Pay water and sewerage installation costs and Procedure 3. Submit project plans and get approval from the obtain connection Public Health Department Time: 5 days Time: 2 days Cost: KES 5,000 Cost: KES 1,500 Comments: BuildCo submits a supply agreement form obtained from GAWASCO Comments: BuildCo submits the project plans for approval to the Public Health detailing the property location, postal address and an attached receipt for water Department (PHD). A PHD officer approves the plans and signs the PPA1 form. deposit. Procedure 4. Submit project plans and signed PPA1 form to Procedure 11*. Request electricity connection from the local the Municipal Council Engineer's Department and get project electricity provider approval Time: 1 day Time: 10 days Cost: No cost Cost: KES 12,200 Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec- Comments: The municipal council engineer reviews the building plans, checks if all tricity form and submit it to the KPLC local office with the following documents: approvals have been obtained in the PPA1 form and then issues the building permit. a. Copy of the national identity card of the person who is applying on BuildCo's behalf (non-Kenyans will be required to provide a copy of a valid passport); Procedure 5. Notify the Isiolo Municipal Council of the b. Copy of the lease agreement or a title deed of the premises to be supplied with commencement of building work and receive a routine on-site electricity or a signed letter of tenancy from the responsible landlord with a copy inspection of his/her identify card; Time: 1 day c. Detailed route sketch of the premises (this should include roads and other Cost: KES 2,000 salient features). Corporate customers are required to also provide a copy of their Comments: There are several inspections required by the municipal by-laws. How- personal identification number (PIN) certificate and certificate of incorporation. ever, the common practice is that the inspectors only come for routine checks during the construction phase. They stop by the construction site while the construction Procedure 12*. Apply and pay for telephone connection continues and check if everything is being built in accordance with the architectural Time: 3 days plans submitted initially. Cost: KES 2,300 Comments: BuildCo applies for telephone connection at the local Telkom Kenya Procedure 6. Request an occupancy certificate and receive a final office where readily available forms can be immediately filled out and submitted. on-site inspection by the municipal authority To obtain a commercial connection, the applicant needs to submit, along with the Time: 3 days application, the following: Cost: KES 2,000 a. Proof of ownership of the business; Comments: BuildCo informs the Isiolo Municipal Council once construction is b. Identification card. completed. The Municipal Council sends inspectors to the construction site before The same tariff and connection fee apply across the country. the occupancy certificate is issued. Procedure 13. Receive an on-site inspection by the local Procedure 7. Obtain an occupancy certificate electricity provider Time: 10 days Time: 1 day Cost: KES 2,000 Cost: No cost Comments: KPLC will conduct a survey on the construction site and send a letter to Procedure 8. Apply for water and sewerage connection BuildCo quoting the amount of capital contribution and deposit to be paid. Time: 2 days Cost: No cost Procedure 14. Obtain electricity connection Time: 21 days Procedure 9*. Pay water and sewerage installation costs and Cost: KES 54,000 (inclusive of 16% VAT) obtain connection Comments: The minimum cost for a three-phase connection is KES 54,000. The cost Time: 5 days includes connection fee, meter fee, and VAT. Cost: KES 7,000 (deposit fee of KES 5,000, sewerage processing fee of KES 1,500 and water processing fee of KES 500) * This procedure can be completed simultaneously with previous procedures Comments: BuildCo presents an approved PPA1 form. A representative from the Isiolo Water and Sewerage Company visits and inspects the site to determine mate- rial requirements and water pressure available. The process takes 5 days on average deaLIng wITh cOnSTrucTIOn PermITS because there are only specific days of the week on which the Isiolo Water and Isiolo Sewerage Company crew can come for installation. The deposit fee is refundable in Procedures to build a warehouse case BuildCo decides to discontinue the water and sewerage service. Warehouse value: US$ 404,783 = KES 32,500,000 Procedure 10*. Request electricity connection from the local Data as of: June 2009 electricity provider Procedure 1. Request approval of architectural plans and get a Time: 1 day Physical Planning Act 1 form (PPA1) from the Isiolo Municipal Cost: No cost Council Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec- Time: 1 day tricity form and submit it to the KPLC local office with the following documents: Cost: No cost a. Copy of the national identity card of the person who is applying on BuildCo's behalf (non-Kenyans will be required to provide a copy of a valid passport); Procedure 2. Submit project plans and get approval from the b. Copy of the lease agreement or a title deed of the premises to be supplied with Physical Planning Department electricity or a signed letter of tenancy from the responsible landlord with a copy Time: 2 days of his/her identify card; Cost: No cost c. Detailed route sketch of the premises (this should include roads and other salient features). Corporate customers are required to also provide a copy of their Comments: BuildCo submits the project plans for approval to the Physical Planning personal identification number (PIN) certificate and certificate of incorporation. Department (PPD). A PPD officer approves the plans and signs the PPA1 form. LIST OF PROCEDURES · DEALING WITH CONSTRUCTION PERmITS 51 Procedure 11*. Apply and pay for telephone connection Procedure 3. Notify the Kilifi Municipal Council of the Time: 14 days commencement of building work and receive a routine on-site Cost: KES 2,300 inspection Comments: BuildCo applies for telephone connection at the local Telkom Kenya Time: 2 days office where readily available forms can be immediately filled out and submitted. Cost: No cost To obtain a commercial connection, the applicant needs to submit, along with the application, the following: Procedure 4. Request an occupancy certificate and receive a final a. Proof of ownership of the business; on-site inspection by the municipal authority b. Identification card. Time: 2 days The same tariff and connection fee apply across the country. Cost: No cost Comments: The company has to file an inspection request and an officer from the Procedure 12. Receive an on-site inspection by the local Municipal Engineer's Department performs an on-site inspection the next day. electricity provider Time: 21 days Procedure 5. Obtain an occupancy certificate Cost: No cost Time: 14 days Comments: KPLC has no inspection office in Isiolo. In order to perform the inspec- Cost: No cost tion, KPLC representatives have to come from Meru or Nyeri. This adds significantly Comments: If the warehouse is found to be in compliance with the inspection to the time required to complete this procedure. requirements, an occupancy certificate is issued by the Kilifi Municipal Council. Procedure 13. Obtain electricity connection Procedure 6. Apply for water and sewerage connection Time: 60 days Time: 2 days Cost: KES 54,000 (inclusive of 16% VAT) Cost: No cost Comments: The connection fees to obtain electricity within the radius of the Comments: Along with the application form, BuildCo needs to submit the follow- already existing power transformer in Isiolo are KES 54,000. To obtain electricity ing: outside of the area covered by the transformer, the cost can go up to KES 1,400,000. a. Sketch map of the building site; b. Copy of certificate of incorporation; * This procedure can be completed simultaneously with previous procedures c. PIN number. deaLIng wITh cOnSTrucTIOn PermITS Procedure 7*. Pay water and sewerage installation costs and Kilifi obtain connection Procedures to build a warehouse Time: 13 days Warehouse value: US$ 404,783 = KES 32,500,000 Cost: KES 10,000 Data as of: June 2009 Procedure 8*. Request electricity connection from the local Procedure 1. Request and get approval of the architectural plans electricity provider from the Kilifi Municipal Council Time: 1 day Time: 21 days Cost: No cost Cost: KES 25,001 (KES 12,751 for the Kilifi Municipal Council, KES 5,000 for the Public Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec- Health Department, KES 3,500 for the Physical Planning Department, and KES 3,750 tricity form and submit it to the KPLC local office with the following documents: for the Land Department) a. Copy of the national identity card of the person who is applying on BuildCo's Comments: The company submits the architectural and structural drawings and behalf (non-Kenyans will be required to provide a copy of a valid passport); proof of ownership to the Kilifi Municipal Council. The Municipal Council circulates b. Copy of the lease agreement or a title deed of the premises to be supplied with the documents to the following departments: electricity or a signed letter of tenancy from the responsible landlord with a copy a. The District Public Health department; of his/her identify card; b. The District Land Department; c. Detailed route sketch of the premises (this should include roads and other c. The District Physical Planner; salient features). Corporate customers are required to also provide a copy of their personal identification number (PIN) certificate and certificate of incorporation. d. The District Public Works Department. The fees paid to the Kilifi Municipal Council cover the cost for inspections and the Procedure 9*. Apply and pay for telephone connection cost for the occupancy certificate. Time: 3 days Procedure 2. Obtain approval from National Environment Cost: KES 2,300 Management Authority Comments: BuildCo applies for telephone connection at the local Telkom Kenya Time: 30 days office where readily available forms can be immediately filled out and submitted. To obtain a commercial connection, the applicant needs to submit, along with the Cost: KES 16,250 application, the following: Comments: Following the enactment of a new Environmental Management and a. Proof of ownership of the business; Co-ordination Act on February 27, 2009, companies now have to obtain approval of the project from the National Environment Management Authority. Projects of all b. Identification card. risk categories are subject to approval and environmental impact assessment (EIA), The same tariff and connection fee apply across the country. including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES 32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value. Procedure 10. Receive an on-site inspection by the local The regulation regarding environmental impact assessment approval for Kenya has electricity provider been in place since 1999. However, in recent years NEMA has started enforcing the Time: 3 days rules more vigorously. NEMA conducts periodic inspections during the construction. Cost: No cost If new projects at the moment of inspection do not have an environmental impact assessment they may order the project be closed and erected objects demolished. Procedure 11. Obtain electricity connection Therefore, construction companies are now obtaining the environmental approval before the building is completed. Nevertheless, the legislation is not clear on which Time: 17 days categories of buildings this regulation would apply to. Cost: KES 121,000 (inclusive of 16% VAT) 52 DOING BUSINESS IN kENyA 2010 Comments: Connection is obtained only after the on-site inspector has indicated Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec- that the building fulfills all requirements for electricity installation. The cost ranges tricity form and submit it to the KPLC local office with the following documents: from KES 35,000 for a single-phase connection to KES 121,000 for a three-phase a. Copy of the national identity card of the person who is applying on BuildCo's connection. behalf (non-Kenyans will be required to provide a copy of a valid passport); b. Copy of the lease agreement or a title deed of the premises to be supplied with * This procedure can be completed simultaneously with previous procedures electricity or a signed letter of tenancy from the responsible landlord with a copy of his/her identify card; deaLIng wITh cOnSTrucTIOn PermITS c. Detailed route sketch of the premises (this should include roads and other salient features). Corporate customers are required to also provide a copy of their Kisumu personal identification number (PIN) certificate and certificate of incorporation. Procedures to build a warehouse Warehouse value: US$ 404,783 = KES 32,500,000 Procedure 8*. Apply and pay for telephone connection Data as of: June 2009 Time: 6 days Cost: KES 2,300 Procedure 1. Request and get approval of the architectural plans the Kisumu Municipal Council Comments: BuildCo applies for telephone connection at the local Telkom Kenya office where readily available forms can be immediately filled out and submitted. Time: 30 days To obtain a commercial connection, the applicant needs to submit, along with the Cost: KES 76,668 (KES 39,925 architectural fee, KES 26,743 structural submission fee, application, the following: KES 5,000 building inspection fee, and KES 5,000 Public Health Department fee) a. Proof of ownership of the business; Comments: The building permit is sought and obtained from the Kisumu Municipal b. Identification card. Council. BuildCo must submit, along with a site plan, the following: The same tariff and connection fee apply across the country. a. Proof of ownership of the plot; b. Receipt evidencing the purchase of land; Procedure 9*. Receive an on-site inspection by the local c. Physical Planning Act form (PPA1), which is then submitted to the Municipal Plan- electricity provider ner's Department for approval. Time: 1 day The Kisumu Municipal Council has a fully fledged Municipal planner's Department Cost: No cost that includes the Physical Planning Department and the Public Health Department. Comments: Connection is obtained only after the on-site inspector has indicated Everything is done in house, including approval of signatures for the PPA1 form. The that the building fulfills all requirements for electricity installation. building approval is valid for a period of one year within which BuildCo must com- mence the construction. The permit may be extended for the same period of time at a nominal cost. Procedure 10. Obtain electricity connection Time: 28 days Procedure 2. Notify the Kisumu Municipal Council of the Cost: KES 54,000 (inclusive of 16% VAT) commencement of building work and receive a routine on-site inspection * This procedure can be completed simultaneously with previous procedures Time: 1 day Cost: No cost deaLIng wITh cOnSTrucTIOn PermITS Comments: There are several inspections required by the municipal by-laws. How- Malaba ever, the common practice is that the inspectors only come for routine checks during the construction phase. They stop by the construction site while the construction Procedures to build a warehouse continues and check if everything is being built in accordance with the architectural Warehouse value: US$ 404,783 = KES 32,500,000 plans initially submitted. Data as of: June 2009 Procedure 3. Request an occupancy certificate and receive a final Procedure 1. Request approval of the architectural plans from on-site inspection by the municipal authority the Malaba Municipal Council Time: 10 days Time: 14 days Cost: No cost Cost: KES 6,400 Comments: BuildCo submits to the Malaba Municipal Council the following: Procedure 4. Obtain an occupancy certificate a. Building plans; Time: 7 days b. Title deed; Cost: KES 2,000 c. Proof of land ownership. Comments: Once the building has been inspected and found to be in compliance An officer from the Public Works Department will look at the plans and make recom- with inspection requirements, an occupancy certificate is issued. mendations. If the plans are in order, the company will pay the required fees for the permit. Afterwards, the plans are forwarded to the Municipal Planning Committee Procedure 5. Apply for water and sewerage connection for formalization. Time: 3 days Cost: KES 2,500 Procedure 2. Obtain approval from National Environment Management Authority Procedure 6. Pay water and sewerage installation costs and Time: 30 days obtain connection Cost: KES 16,250 Time: 20 days Comments: Following the enactment of a new Environmental Management and Cost: KES 8,500 (KES 2,500 for meter and KES 6,000 for deposit) Co-ordination Act on February 27, 2009, companies now have to obtain approval of Comments: The periurban areas of Kisumu do not have sewerage and water net- the project from the National Environment Management Authority. Projects of all works. The developer has to build a septic tank. risk categories are subject to approval and environmental impact assessment (EIA), including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES 32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value. Procedure 7*. Request electricity connection from the local electricity provider Time: 1 day Cost: No cost LIST OF PROCEDURES · DEALING WITH CONSTRUCTION PERmITS 53 The regulation regarding environmental impact assessment approval for Kenya has Cost: No cost been in place since 1999. However, in recent years NEMA has started enforcing the Comments: The inspection is done by KPLC personnel sent from Kisumu. rules more vigorously. NEMA conducts periodic inspections during the construction. If new projects at the moment of inspection do not have an environmental impact Procedure 10*. Apply and pay for telephone connection assessment they may order the project be closed and erected objects demolished. Therefore, construction companies are now obtaining the environmental approval Time: 7 days before the building is completed. Nevertheless, the legislation is not clear on which Cost: KES 2,300 categories of buildings this regulation would apply to. Comments: BuildCo applies for telephone connection at the local Telkom Kenya office where readily available forms can be immediately filled out and submitted. Procedure 3. Notify the Malaba Municipal Council of the To obtain a commercial connection, the applicant needs to submit, along with the commencement of building work and receive a routine on-site application, the following: inspection a. Proof of ownership of the business; Time: 2 days b. Identification card. Cost: No cost The same tariff and connection fee apply across the country. Comments: There are several inspections required by the municipal by-laws. How- ever, the common practice is that the inspectors only come for routine checks during Procedure 11. Obtain electricity connection the construction phase. They stop by the construction site while the construction Time: 50 days continues and check if everything is being built in accordance with the architectural Cost: KES 54,000 (inclusive of 16% VAT) plans submitted initially. The inspector sent by the Malaba Municipal Council could Comments: Malaba relies on KPLC personnel from neighboring towns of Kisumu, check, among other things, the building boundaries, accessibility to the power line, Busia and Bungoma town to do the electricity connection. This is the reason why sewerage, water, and telephone line, cement mixture, reinforcements, roofing, and the average time to obtain electricity connection is quite longer than in other towns site consolidation. across Kenya. Procedure 4. Request an occupancy certificate and receive a final on-site inspection by the municipal authority * This procedure can be completed simultaneously with previous procedures Time: 1 day deaLIng wITh cOnSTrucTIOn PermITS Cost: No cost Comments: The Malaba Municipal Council conducts an inspection to ensure that Mombasa the structure built complies with the building plans submitted and approved by the Procedures to build a warehouse Municipal Council before issuing any occupancy certificate. Warehouse value: US$ 404,783 = KES 32,500,000 Data as of: June 2009 Procedure 5. Obtain an occupancy certificate Time: 3 days Procedure 1. Request approval of the architectural plans and Cost: KES 1,500 get the Physical Planning Act 1 form (PPA1) from the Mombasa Comments: Once the building has been inspected, the occupancy certificate is Municipal Council issued by the Public Health Department. Time: 60 days Cost: KES 21,500 Procedure 6. Apply for water and sewerage connection Comments: BuildCo is required to submit the following documents: Time: 1 day a. Copy of the title deed; Cost: KES 1,500 (application fee) b. Clearance certificate; Procedure 7. Pay water and sewerage installation costs and c. Architectural drawings; obtain connection d. Structural drawings. Time: 7 days Procedure 2*. Submit project plans and get approval from the Cost: KES 2,000 (connection fee) Building Department Comments: There are two water supply systems in Malaba, one provided by the Time: 1 day Municipal Council of Malaba and another provided by the Malaba Water and Sewer- age Company. Cost: No cost Comments: BuildCo has to send a representative to get approval signature on the Procedure 8*. Request electricity connection from the local PPA1 form from the Building Department since the Mombasa Municipal Council electricity provider lacks personnel to circulate the project plans to this department. Time: 2 days Procedure 3*. Submit project plans and get approval from the Cost: KES 400 (transportation cost) Municipal Planning Department Comments: There is no KPLC office in Malaba. Electricity connection requests can Time: 1 day be done either in Kisumu, Busia or in Bungoma town. The round-trip transportation cost is KES 400. Cost: No cost According to KPLC, BuildCo needs to fill an Enquiry for Supply of Electricity form and Comments: BuildCo has to send a representative to get approval signature on the submit it to the KPLC local office with the following documents: PPA1 form from the Municipal Planning Department since Mombasa Municipal Council lacks personnel to circulate the project plans to this department. a. Copy of the national identity card of the person who is applying on BuildCo's behalf (non-Kenyans will be required to provide a copy of a valid passport); Procedure 4*. Submit project plans and get approval from the b. Copy of the lease agreement or a title deed of the premises to be supplied with Valuation Department electricity or a signed letter of tenancy from the responsible landlord with a copy of his/her identify card; Time: 1 day c. Detailed route sketch to the premises (this should include roads and other Cost: No cost salient features). Corporate customers are required to also provide a copy of their Comments: BuildCo has to send a representative to get approval signature on the personal identification number (PIN) certificate and certificate of incorporation. PPA1 form from the Valuation Department since the Mombasa Municipal Council lacks personnel to circulate the project plans to this department. Procedure 9*. Receive an on-site inspection by the local electricity provider Time: 7 days 54 DOING BUSINESS IN kENyA 2010 Procedure 5*. Submit project plans and get approval from the Comments: BuildCo applies for telephone connection at the local Telkom Kenya Public Health Department office where readily available forms can be immediately filled out and submitted. To obtain a commercial connection, the applicant needs to submit, along with the Time: 3 days application, the following: Cost: No cost a. Proof of ownership of the business; Comments: BuildCo has to send a representative to get approval signature on the b. Identification card. PPA1 form from the Public Health Department since the Mombasa Municipal Council lacks personnel to circulate the project plans to this department. The same tariff and connection fee apply across the country. Procedure 6. Notify the Mombasa Municipal Council of the Procedure 13*. Receive an on-site inspection by the local commencement of building work and receive a routine on-site electricity provider inspection Time: 3 days Time: 2 days Cost: No cost Cost: No cost Procedure 14. Obtain electricity connection Comments: There are several inspections required by the municipal by-laws. How- ever, the common practice is that the inspectors only come for routine checks during Time: 7 days the construction phase. They stop by the construction site while the construction Cost: KES 49,940 (inclusive of 16% VAT) continues and check if everything is being built in accordance with the architectural Comments: There are standard fees for a three-phase connection. plans initially submitted. The inspector sent by the Municipal Council could check, among other things, the building boundaries, accessibility to the power line, sewer- age, water, and telephone line, cement mixture, reinforcements, roofing, and site * This procedure can be completed simultaneously with previous procedures consolidation. deaLIng wITh cOnSTrucTIOn PermITS Procedure 7. Request an occupancy certificate and receive a final Nairobi on-site inspection by the municipal authority Procedures to build a warehouse Time: 1 day Warehouse value: US$ 404,783 = KES 32,500,000 Cost: No cost Data as of: June 2009 Procedure 8. Obtain an occupancy certificate Procedure 1. Submit architectural plan for approval and obtain Time: 2 days provisional building permit Cost: KES 19,000 Time: 30 days Comments: Once the construction is completed and inspected, BuildCo submits an Cost: KES 64,303 application for an occupancy certificate, which is issued the next day. The Mombasa Comments: BuildCo would approach the City Development Department, of the Municipal Council conducts inspection to ensure that the structure built complies City Council of Nairobi (CCN) to get its architectural plans approved first. Before with the building plans submitted and approved by the Council. submitting the application, BuildCo needs to make payment of relevant fees. Once payment is made, BuildCo submits the receipt to the City Development Department. Procedure 9. Apply for water and sewerage connection The application must contain the architectural drawings and plans, land title, and a Time: 2 days copy of the main architect's license. The application then gets forwarded to various Cost: KES 1,000 departments: the Physical Planning Department, the Road Department, the Public Health Department, the Fire Department, the Water Authority, and the Electricity Comments: BuildCo needs to submit the following: Authority. Each department takes at least one week to clear the respective section a. Filled application form; of the plans, and grants separate permits for the plumbing, sewerage, and electrical b. Title deed; activities that BuildCo will be involved in during the construction of the warehouse. c. Certificate of registration; Thereafter, the application is forwarded for approval to the Technical Committee d. PIN number. that convenes twice a week and issues the approvals. As a result of the approval of architectural drawings, BuildCo will receive the building permit. Building permit is granted only provisionally, until the structural segment is approved. Procedure 10. Pay water and sewerage installation costs and obtain connection After the provisional building permit is obtained, BuildCo needs to submit its struc- tural project separately. Time: 20 days Since 2006, CCN has been reforming under the Rapid Results Initiative (RRI), trying to Cost: KES 6,500 (fixed fee) reduce the number of days and eliminate bottlenecks. Since 2008 the architectural project approval is done by the Technical Committee that convenes twice a week Procedure 11*. Request electricity connection from the local and issues the approvals. Previously, the approving body was the City Council electricity provider itself. However, due to its busy schedule and backlog, it was decided to transfer Time: 1 day the responsibility from the City Council to the Technical Committee. Because of Cost: No cost various reforms, now it takes on average 30 days to obtain this part of approval as opposed to 50 days before. However, approval time varies because it depends on the Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec- diligence of the architect. tricity form and submit it to the KPLC local office with the following documents: As of November 2008, occupancy certificate fee must be paid at this stage. a. Copy of the national identity card of the person who is applying on BuildCo's behalf (non-Kenyans will be required to provide a copy of a valid passport); According to the updated fee schedule of the City Council of Nairobi, as of October 31, 2009 in the Kenya Gazette, the following changes are introduced: b. Copy of the lease agreement or a title deed of the premises to be supplied with electricity or a signed letter of tenancy from the responsible landlord with a copy a. Design inspection fee for the first 930 square meters is KES 12,850; of his/her identify card; b. For every 93 square meters above the original 930 square meters the design c. Detailed route sketch of the premises (this should include roads and other inspection fee increases by KES 1,500; salient features). Corporate customers are required to also provide a copy of their c. The total design inspection fee for BuildCo is KES 18,850 for 1300.6 square meters; personal identification number (PIN) certificate and certificate of incorporation. d. construction sign board fee is KES 15,000; e. Application fee is KES 2,000; Procedure 12*. Apply and pay for telephone connection f. Infrastructure development levy fee is 0.5% of the estimated development cost of Time: 20 days the building, which comes down to KES 13,656.3; Cost: KES 2,300 LIST OF PROCEDURES · DEALING WITH CONSTRUCTION PERmITS 55 g. Occupancy fee for a warehouse of 930 square meters is KES 14,000 and for every Procedure 8*. Request electricity connection from local additional 93 square meters an additional KES 200 (for BuildCo's warehouse this comes down to KES 14,796.9). electricity provider Time: 1 day Procedure 2. Submit and obtain structural plan approval and Cost: KES 2,000 final building permit Comments: This procedure involves making an application to the electricity Time: 10 days provider attaching a copy of the certificate of incorporation, a clear map showing Cost: KES 7,476 the physical location of the warehouse, and a site plan of where the meter board (if using the meter system) will be installed. Comments: Once the architectural plans and drawings are approved and comments and changes are made, BuildCo has to incorporate them into the structural plans and The steps to follow to apply for electricity are: re-submit the application to the CCN for approval. This is done as common practice a. Complete the Enquiry For Supply of Electricity form; for submitting both plans together is impossible. One other reason why these two b. Attach a copy of PIN, certificate of incorporation of the company, title deed of the steps happen separately is because the architectural drawings and plans are checked premises and a detailed sketch of the premises indicating roads and other salient by the Structural Department at a stage when structural plans are approved. Con- features. struction works begin only after this approval. Kenya Power & Lighting Company (KPLC) is the body responsible for transmission Due to RRI program and internal processes of simplification in the CCN it takes now and distribution of electricity in Kenya and not KENGEN. KENGEN only generates the 10 days to obtain the structural approval compared to previous 25 days. electrical power and sells it to KPLC for transmission and distribution to consumers. BuildCo must have the following items approved: project plans, architectural draw- ings, location survey of property documents and others. Procedure 9*. Receive an on-site inspection by the local electricity provider Procedure 3. Obtain approval from the National Environment Time: 1 day Management Authority Cost: No cost Time: 30 days Cost: KES 16,250 Procedure 10*. Obtain electricity connection Comments: Following the enactment of a new Environmental Management and Time: 14 days Co-ordination Act on February 27, 2009, companies now have to obtain approval of Cost: No cost the project from the National Environment Management Authority. Projects of all Comments: After the inspection, KPLC will send a quotation to BuildCo on the risk categories are subject to approval and environmental impact assessment (EIA), amount of capital contribution plus the deposit to be paid. The capital contribution including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES includes the cost of labor, materials and the transport involved. This quotation is 32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value. valid for only 90 days. When the applicant pays the amount of the quotation, power The regulation regarding environmental impact assessment approval for Kenya has connection will be effected. been in place since 1999. However, in recent years NEMA has started enforcing the rules more vigorously. NEMA conducts periodic inspections during the construction. Procedure 11*. Apply and pay for telephone connection If new projects at the moment of inspection do not have an environmental impact assessment they may order the project be closed and erected objects demolished. Time: 5 days Therefore, construction companies are now obtaining the environmental approval Cost: KES 2,300 before the building is completed. Nevertheless, the legislation is not clear on which Comments: BuildCo applies for telephone connection at the local Telkom Kenya categories of buildings this regulation would apply to. office where readily available forms can be immediately filled out and submitted. To obtain a commercial connection, the applicant needs to submit, along with the Procedure 4. Receive on-site inspection by the municipal application, the following: authority after construction a. Proof of ownership of the business; Time: 5 days b. Identification card. Cost: KES 100 The same tariff and connection fee apply across the country. Comments: BuildCo must inform the municipality that the building has been completed in order to start the inspections. * This procedure can be completed simultaneously with previous procedures Procedure 5. Obtain an occupancy certificate deaLIng wITh cOnSTrucTIOn PermITS Time: 14 days Narok Cost: No cost Comments: Cost for this procedure is included in Procedure 1. Procedures to build a warehouse Warehouse value: US$ 404,783 = KES 32,500,000 Procedure 6. Apply for water and sewerage connection Data as of: June 2009 Time: 1 day Procedure 1. Request approval of architectural plans and get a Cost: KES 1,100 Physical Planning Act 1 form (PPA1) from the Narok Municipal Council Procedure 7. Pay water and sewerage installation costs and Time: 30 days obtain connection Cost: KES 20,000 (KES 16,000 to the Municipal Council, KES 1,000 for the Physical Time: 30 days Planning Act 1 form (PPA1) , and KES 3,000 for the District Planning Office) Cost: KES 6,000 Comments: The Narok Municipal Council will circulate the plans for approval to Comments: The applicant is required to submit an "application for water and sewer- various departments that are either in the same premises or in the vicinity of the age supply form" obtained from the Nairobi City Water and Sewerage Company. Municipal Council building. Thereafter, the applicant is required to pay KES 1,100 for a survey and estimates fees and attach the receipt of payment to the application form. The applicant is also Procedure 2. Submit project plans and get approval from the required to attach the company's certificate of registration and its PIN number. The District Public Health Office Nairobi Water Company may approve the application after all these documents have been submitted. After approval, applicant is required to pay KES 6,000. The applicant Time: 1 day is responsible for payment of all water, meter rent, sewer, conservancy, and refuse Cost: KES 5,000 collection charges. The process usually takes a month. 56 DOING BUSINESS IN kENyA 2010 Procedure 3. Notify the Narok Municipal Council of the Procedure 11. Obtain electricity connection commencement of building work and receive a routine on-site Time: 25 days inspection Cost: KES 48,720 (inclusive of 16% VAT) Time: 1 day Comments: KES 42,000 plus VAT is the schedule for a three-phase connection. Cost: No cost Comments: There are several inspections required by the municipal by-laws. How- * This procedure can be completed simultaneously with previous procedures ever, the common practice is that the inspectors only come for routine checks during the construction phase. They stop by the construction site while the construction deaLIng wITh cOnSTrucTIOn PermITS continues and check if everything is being built in accordance with the architectural plans initially submitted. The inspector sent by the Municipal Council could check, Nyeri among other things, the building boundaries, accessibility to the power line, sewer- Procedures to build a warehouse age, water, and telephone line, cement mixture, reinforcements, roofing, and site consolidation. Warehouse value: US$ 404,783 = KES 32,500,000 Data as of: June 2009 Procedure 4. Request an occupancy certificate and receive a final Procedure 1. Request approval of the architectural plans from on-site inspection by the municipal authority the Nyeri Municipal Council Time: 1 day Time: 40 days Cost: No cost Cost: KES 12,000 Procedure 5. Obtain an occupancy certificate Comments: BuildCo submits the application for approval to Nyeri Municipal Council and the Municipal Council then forwards the clearances to its various departments, Time: 5 days which include: Cost: KES 2,000 a. The Urban Planning Department; Comments: The occupancy certificate is issued only after the inspector has deter- b. The Engineering Department; mined that the building is in full compliance with the architectural plans submitted initially. c. The Development Department. Procedure 6. Apply for water and sewerage connection Procedure 2. Submit project plans and get approval from the Public Health Department Time: 1 day Time: 2 days Cost: KES 1,000 Cost: No cost Procedure 7. Pay water and sewerage installation costs and obtain connection Procedure 3. Notify the Nyeri Municipal Council of the commencement of building work and receive a routine on-site Time: 5 days inspection Cost: KES 5,000 Time: 2 days Comments: The Narok Water and Sewerage Company is a subsidiary of the Rift Valley Water and Sewerage Company and is co-owned by the Municipal Council of Cost: KES 100 Narok. It is required that all buildings provide a conservancy tank for sewerage and Comments: There are several inspections required by the municipal by-laws. How- foul water disposal. ever, the common practice is that the inspectors only come for routine checks during the construction phase. They stop by the construction site while the construction Procedure 8*. Request electricity connection from the local continues and check if everything is being built in accordance with the architectural electricity provider plans initially submitted. The inspector sent by the Municipal Council could check, among other things, the building boundaries, accessibility to the power line, sewer- Time: 1 day age, water, and telephone line, cement mixture, reinforcements, roofing, and site Cost: No cost consolidation. Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec- tricity form and submit it to the KPLC local office with the following documents: Procedure 4. Request an occupancy certificate and receive a final a. Copy of the national identity card of the person who is applying on BuildCo's on-site inspection by the municipal authority behalf (non-Kenyans will be required to provide a copy of a valid passport); Time: 1 day b. Copy of the lease agreement or a title deed of the premises to be supplied with Cost: KES 100 electricity or a signed letter of tenancy from the responsible landlord with a copy Comments: BuildCo informs the relevant departments at the Nyeri Municipal of his/her identify card; Council that the warehouse is completed. The Council sends its officers to inspect c. Detailed route sketch of the premises (this should include roads and other the building to find out if it conforms to the project plans, architectural plans and salient features). Corporate customers are required to also provide a copy of their structural design that the company had submitted for approval. personal identification number (PIN) certificate and certificate of incorporation. Procedure 5. Obtain an occupancy certificate Procedure 9*. Apply and pay for telephone connection Time: 1 day Time: 3 days Cost: KES 500 Cost: KES 2,300 Comments: The occupancy certificate is issued only after the inspection is finished Comments: BuildCo applies for telephone connection at the local Telkom Kenya and the inspectors determine that the necessary requirements are fulfilled. office where readily available forms can be immediately filled out and submitted. To obtain a commercial connection, the applicant needs to submit, along with the Procedure 6. Apply for water and sewerage connection application, the following: Time: 2 days a. Proof of ownership of the business; Cost: No cost b. Identification card. Comments: BuildCo is required to submit to the Nyeri Water and Sewerage Com- The same tariff and connection fee apply across the country. pany the following: a. Copy of the certificate of incorporation; Procedure 10*. Receive an on-site inspection by the local electricity provider b. Plot number; c. PIN number. Time: 1 day Cost: No cost LIST OF PROCEDURES · DEALING WITH CONSTRUCTION PERmITS 57 Procedure 7. Pay water and sewerage installation costs and Comments: Following the enactment of a new Environmental Management and obtain connection Co-ordination Act on February 27, 2009, companies now have to obtain approval of the project from the National Environment Management Authority. Projects of all Time: 7 days risk categories are subject to approval and environmental impact assessment (EIA), Cost: KES 5,000 including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES Comments: BuildCo is required to pay the connection fee before installation begins. 32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value. The regulation regarding environmental impact assessment approval for Kenya has Procedure 8*. Request electricity connection from the local been in place since 1999. However, in recent years NEMA has started enforcing the electricity provider rules more vigorously. NEMA conducts periodic inspections during the construction. Time: 1 day If new projects at the moment of inspection do not have an environmental impact assessment they may order the project be closed and erected objects demolished. Cost: KES 3,500 (application fee) Therefore, construction companies are now obtaining the environmental approval Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec- before the building is completed. Nevertheless, the legislation is not clear on which tricity form and submit it to the KPLC local office with the following documents: categories of buildings this regulation would apply to. a. Copy of the national identity card of the person who is applying on BuildCo's behalf (non-Kenyans will be required to provide a copy of a valid passport); Procedure 3. Notify the Thika Municipal Council of the b. Copy of the lease agreement or a title deed of the premises to be supplied with commencement of building work and receive a routine on-site electricity or a signed letter of tenancy from the responsible landlord with a copy inspection of his/her identify card; Time: 2 days c. Detailed route sketch of the premises (this should include roads and other Cost: No cost salient features). Corporate customers are required to also provide a copy of their personal identification number (PIN) certificate and certificate of incorporation. Comments: There are several inspections required by the municipal by-laws. How- ever, the common practice is that the inspectors only come for routine checks during the construction phase. They stop by the construction site while the construction Procedure 9*. Apply and pay for telephone connection continues and check if everything is being built in accordance with the architectural Time: 3 days plans initially submitted. The cost for this inspection is paid when the request for Cost: KES 2,300 approval of plans is made in procedure 1. Comments: BuildCo applies for telephone connection at the local Telkom Kenya office where readily available forms can be immediately filled out and submitted. Procedure 4. Request an occupancy certificate and receive a final To obtain a commercial connection, the applicant needs to submit, along with the on-site inspection by the municipal authority application, the following: Time: 4 days a. Proof of ownership of the business; Cost: No cost b. Identification card. Comments: The cost for the final on-site inspection is included in procedure 1. The same tariff and connection fee apply across the country. Procedure 5. Obtain an occupancy certificate Procedure 10*. Receive an on-site inspection by the local Time: 7 days electricity provider Cost: KES 10,000 Time: 28 days Comments: The occupancy certificate is issued once BuildCo has fulfilled all rel- Cost: No cost evant requirements issued in the PPA1 Form, as determined by the final inspection. Procedure 11. Obtain electricity connection Procedure 6. Apply for water and sewerage connection Time: 21 days Time: 1 day Cost: KES 58,000 (inclusive of 16% VAT) Cost: KES 200 Comments: KPLC sends their installation crew to the site so long as all dues have been paid. Procedure 7. Pay water and sewerage installation costs and obtain connection * This procedure can be completed simultaneously with previous procedures Time: 13 days Cost: KES 7,500 deaLIng wITh cOnSTrucTIOn PermITS Comments: The connection fee changed at the end of year 2008, from KES 6,000 to KES 7,500. Thika Procedures to build a warehouse Procedure 8*. Request electricity connection from the local Warehouse value: US$ 404,783 = KES 32,500,000 electricity provider Data as of: June 2009 Time: 1 day Procedure 1. Request approval of the architectural plans from Cost: KES 2,000 (application fee) the Thika Municipal Council Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec- tricity form and submit it to the KPLC local office with the following documents: Time: 45 days a. Copy of the national identity card of the person who is applying on BuildCo's Cost: KES 10,000 behalf (non-Kenyans will be required to provide a copy of a valid passport); Comments: There is a schedule of charges that depends on the size of the building b. Copy of the lease agreement or a title deed of the premises to be supplied with in square meters. The schedule of charges, published in the Daily Nation of Decem- electricity or a signed letter of tenancy from the responsible landlord with a copy ber 29, 2008, is as follows: of his/her identify card; a. For a building from 901 square meters to 1000 square meters ­ KES 7,000; c. Detailed route sketch of the premises (this should include roads and other b. For every 100 square meters above 1,000, the cost increases by KES 1,000. salient features). Corporate customers are required to also provide a copy of their Since BuildCo's warehouse is 1,300 square meters the total cost is KES 10,000. The personal identification number (PIN) certificate and certificate of incorporation. cost covers inspections and the occupancy certificate. Procedure 2. Obtain approval from National Environment Management Authority Time: 30 days Cost: KES 16,250 58 DOING BUSINESS IN kENyA 2010 Procedure 9*. Apply and pay for telephone connection Comments: While the draft transfer is being processed at the Lands Office, an inspector visits the site to verify the development and state of the property. Due to Time: 3 days lack of transport, in practice, the inspector often has to be picked up in person and Cost: KES 2,300 driven to the site. There are no prior appointments made and the actual inspection Comments: BuildCo applies for telephone connection at the local Telkom Kenya may happen within one day or, in the worst case, one month. office where readily available forms can be immediately filled out and submitted. To obtain a commercial connection, the applicant needs to submit, along with the Procedure 6*. Obtain valuation of the property application, the following: Time: 3 days a. Proof of ownership of the business; Cost: KES 2,000 b. Identification card. Comments: An application must be submitted to the Lands Office of the district. The same tariff and connection fee apply across the country. The valuer assesses the property and provides the estimate value or market rate on the valuation form. Procedure 10*. Receive an on-site inspection by the local electricity provider Procedure 7. Pay stamp duty at a commercial bank Time: 1 day Time: 4 days Cost: No cost Cost: KES 200 Comments: The applicant has to submit a copy of the sales agreement. Once the Procedure 11. Obtain electricity connection stamp duty is paid, a copy of the deposit slip has to be presented at the Lands Office. Time: 21 days Cost: KES 80,000 (inclusive of 16% VAT) Procedure 8. Lodge the completion documents with the Lands Comments: KPLC sends their installation crew to the site as long as all dues have Office for registration of the transfer been paid. Time: 4 days Cost: KES 250 * This procedure can be completed simultaneously with previous procedures Comments: Completion documents are lodged at the Lands Office of Eldoret. The applicant fills the application forms, pays the fees and lodges the documents for registration of the transfer. LIST OF PrOcedureS Registering property * This procedure can be completed simultaneously with previous procedures regISTerIng PrOPerTy Eldoret Garissa Property value: US$ 38,331 = KES 3,077,674 Property value: US$ 38,331 = KES 3,077,674 Data as of: June 2009 Data as of: June 2009 Procedure 1. Carry out search of title at the Lands Office Procedure 1. Carry out search of title at the Lands Office Time: 3 days Time: 5 days (time to carry out search: 3 days + roundtrip: 2 days) Cost: KES 250 Cost: KES 1,250 (search fee: KES 250 + transportation: KES 1,000) Comments: In respect of searches on property registered under the Registered Comments: This procedure is carried out in Nairobi as these services are not Land Act, a copy of the title document is required to be submitted at the time of ap- available in Garissa. The time to travel from Garissa to Nairobi is considered in this plying for the search. Also, one cannot carry out a personal search but must instead procedure. In respect of searches on property registered under the Registered Land apply for an official search. The applicant fills and submits the prescribed form and Act, a copy of the title document is required to be submitted at the time of applying pays KES 250. for the search. Also, one cannot carry out a personal search but must instead apply for an official search. The applicant fills and submits the prescribed form and pays KES 250. Procedure 2*. Obtain Rates Clearance Certificate Time: 5 days Procedure 2*. Obtain Rates Clearance Certificate Cost: KES 2,500 Time: 1 day Comments: The applicant gets a demand notice, pays and waits for the document Cost: KES 250 from the Eldoret municipal clerk. Comments: An application for the Rates Clearance Certificate is submitted along with the latest payment receipt. Procedure 3*. Obtain Land Rent Clearance Certificate Time: 19 days Procedure 3*. Obtain Land Rent Clearance Certificate Cost: KES 3,800 Time: 19 days Cost: KES 2,500 Procedure 4. File the transfer instrument at the Lands Office for assessment of stamp duty payable on the transfer Comments: An application for Land Rent Certificate along with the latest payment receipt. Time: 8 days Cost: KES 123,107 (4% of the property value) Procedure 4. File the transfer instrument at the Lands Office for Comments: This procedure is carried out at the Lands Office of Eldoret (Uasin Gishu assessment of stamp duty payable on the transfer District). The draft transfer is prepared by the buyer's lawyers and needs to be ap- Time: 10 days proved by the seller's counterpart. Cost: KES 123,107 (4% of the property value) Procedure 5*. Receive inspection by land officer Comments: The draft transfer is prepared by the buyer's lawyers and needs to be approved by the seller's counterpart. Time: 1 day Cost: No cost LIST PROCEDURES · · STARTING BUSINESS LIST OFOF PROCEDURESREGISTERINGAPROPERT y 59 Procedure 5*. Receive inspection by land officer Procedure 5*. Receive inspection by land officer Time: 1 day Time: 1 day Cost: No cost Cost: No cost Comments: While the draft transfer is being processed at the Lands Office, an Comments: While the draft transfer is being processed at the Lands Office, an inspector visits the site to verify the development and state of the property. Due to inspector visits the site to verify the development and state of the property. Due to lack of transport, in practice, the inspector often has to be picked up in person and lack of transport, in practice, the inspector often has to be picked up in person and driven to the site. There are no prior appointments made and the actual inspection driven to the site. There are no prior appointments made and the actual inspection may happen within one day or, in the worst case, one month. may happen within one day or, in the worst case, one month. However, note that this time is not limited and in some cases entrepreneurs may wait months for a Procedure 6*. Obtain valuation of the property valuation. Time: 30 days Procedure 6*. Obtain valuation of the property Cost: No cost Time: 20 days (time to obtain valuation: 20 days + roundtrip: 2 hours) Comments: The inspector visits the site to evaluate and verify the indicated purchase price of the property in order to ensure accurate tax payment. If the as- Cost: KES 400 (transportation) sessed value differs from the one indicated by the parties, an additional payment is Comments: There are no land valuers in Isiolo, thus the main registry has to request requested. a valuer in Meru to do the valuation in Isiolo and then forward it to Nairobi. Previously, such inspections were conducted on a random basis, but now every transaction requires such an inspection. The issues involved are similar to the in- Procedure 7. Pay stamp duty at a commercial bank spections by the land officer and, therefore, may happen within one day to over one Time: 4 days month. The evaluation report itself is completed within a few days of the inspection. Cost: KES 200 Both inspections are required before the completion documents can be lodged with the Lands Office. Comments: The original transfer is taken for assessment of the stamp duty payable in the Lands Office. After the assessment has taken place, the payment can be done at the designated banks (i.e. Kenya Commercial Bank or National Bank of Kenya). Procedure 7. Pay stamp duty at a commercial bank Time: 4 days Procedure 8. Lodge the completion documents with the Lands Cost: KES 200 Office for registration of the transfer Comments: The applicant obtains a banker's check after making the relevant pay- Time: 30 days ment. Cost: KES 250 Procedure 8. Lodge the completion documents with the Lands Comments: Completion documents are lodged at the Lands Office in Nairobi. Office for registration of the transfer Time: 30 days * This procedure can be completed simultaneously with previous procedures Cost: KES 250 regISTerIng PrOPerTy Comments: The transfer form duly filled and the original title document are lodged at the Lands Office by the buyer. Kilifi Property value: US$ 38,331 = KES 3,077,674 * This procedure can be completed simultaneously with previous procedures Data as of: June 2009 regISTerIng PrOPerTy Procedure 1. Carry out search of title at the Lands Office Time: 2 days Isiolo Cost: KES 750 Property value: US$ 38,331 = KES 3,077,674 Comments: After an application form is submitted along with a copy of PIN Data as of: June 2009 number and certificate of incorporation, a search certificate is issued confirming the registered owner of the property. For land registered under Cap 300, the search is Procedure 1. Carry out search of title at the Lands Office carried out at Kilifi Lands Office. For land registered under Cap 280, the search done Time: 5 days (time to carry out search: 3 days + roundtrip: 2 days) at Mombasa Lands Office. Cost: KES 2,250 (search fee: KES 250 + transportation: KES 2,000) Comments: This procedure is carried out in Nairobi as these services are not avail- Procedure 2*. Obtain Rates Clearance Certificate able in Isiolo. The time to travel from Isiolo to Nairobi is considered in this procedure. Time: 5 days In respect of searches on property registered under the Registered Land Act, a copy Cost: KES 3,000 of the title document is required to be submitted at the time of applying for the search. Also, one cannot carry out a personal search but must instead apply for an Comments: Rates Clearance Certificate is obtained at the Lands Office in Kilifi. official search. The applicant fills and submits the prescribed form and pays KES 250. Procedure 3*. Obtain Land Rent Clearance Certificate Procedure 2*. Obtain Rates Clearance Certificate Time: 30 days Time: 2 days Cost: No cost Cost: KES 617,135 Comments: An application is submitted along with a copy of PIN number of the applicant, receipts of payment for the rates payable, and receipt for payment of the Procedure 3*. Obtain Land Rent Clearance Certificate Clearance Certificate. Time: 19 days Procedure 4. File the transfer instrument at the Lands Office for Cost: KES 250 assessment of stamp duty payable on the transfer Procedure 4. File the transfer instrument at the Lands Office for Time: 8 days assessment of stamp duty payable on the transfer Cost: KES 123,107 (4% of the property value) Time: 10 days Comments: The draft transfer is prepared by the buyer's lawyers and needs to be approved by the seller's counterpart. Cost: KES 123,107 (4% of the property value) Comments: The draft transfer is prepared by the buyer's lawyers and needs to be Procedure 5*. Receive inspection by land officer approved by the seller's counterpart. Time: 30 days Cost: No cost 60 DOING BUSINESS IN kENyA 2010 Comments: While the draft transfer is being processed at the Lands Office, an Procedure 4. File the transfer instrument at the Lands Office for inspector visits the site to verify the development and state of the property. Due to assessment of stamp duty payable on the transfer lack of transport, in practice, the inspector often has to be picked up in person and Time: 1 day driven to the site. There are no prior appointments made and the actual inspection may happen within one day or, in the worst case, one month. However, note that Cost: KES 123,107 (4% of the property value) this time is not limited and in some cases entrepreneurs may wait months for a Comments: The draft transfer is prepared by the buyer's lawyers and needs to be valuation. approved by the seller's counterpart. Procedure 6*. Obtain valuation of the property Procedure 5*. Receive inspection by land officer Time: 30 days Time: 1 day Cost: No cost Cost: No cost Comments: The inspector visits the site to evaluate and verify the indicated Comments: While the draft transfer is being processed at the Lands Office, an purchase price of the property in order to ensure accurate tax payment. If the as- inspector visits the site to verify the development and state of the property. Due to sessed value differs from the one indicated by the parties, an additional payment is lack of transport, in practice, the inspector often has to be picked up in person and requested. driven to the site. There are no prior appointments made and the actual inspection Previously, such inspections were conducted on a random basis, but now every may happen within one day or, in the worst case, one month. However, note that transaction requires such an inspection. The issues involved are similar to the in- this time is not limited and in some cases entrepreneurs may wait months for a spections by the land officer and, therefore, may happen within one day to over one valuation. month. The evaluation report itself is completed within a few days of the inspection. Both inspections are required before the completion documents can be lodged with Procedure 6*. Obtain valuation of the property the Lands Office. Time: 1 day Cost: No cost Procedure 7. Pay stamp duty at a commercial bank Comments: The inspector visits the site to evaluate and verify the indicated Time: 7 days purchase price of the property in order to ensure accurate tax payment. If the as- Cost: KES 200 sessed value differs from the one indicated by the parties, an additional payment is requested. Procedure 8. Lodge the completion documents with the Lands Previously, such inspections were conducted on a random basis, but now every Office for registration of the transfer transaction requires such an inspection. The issues involved are similar to the in- Time: 4 days spections by the land officer and, therefore, may happen within one day to over one month. The evaluation report itself is completed within a few days of the inspection. Cost: KES 375 Both inspections are required before the completion documents can be lodged with Comments: The completion documents are lodged for registration at the Lands the Lands Office. Office in Kilifi. These documents include: Procedure 7. Pay stamp duty at a commercial bank a. Original certificate of title; Time: 4 days b. Rates Clearance Certificate; Cost: KES 200 c. Land Rent Clearance Certificate; Comments: The applicant has to visit the authorized bank and make the relevant d. Consent to transfer; payment. Once the banker's check has been obtained, it is submitted to the Lands e. Valuation for stamp duty form. Office. If the land is registered under Cap 300, the certificate of the registered transfer is obtained at the Kilifi Lands Office. Procedure 8. Lodge the completion documents with Lands Office for registration of the transfer If the land is registered under Cap 280, the certificate of the registered transfer is obtained at the Mombasa Lands Office. Time: 14 days The Lands Office in Kilifi registers land in the districts of Kilifi, Kaloleni and Malindi. Cost: No cost Comments: The applicant submits to the Lands Office the following documents: * This procedure can be completed simultaneously with previous procedures a. Original certificate of title; b. Rates Clearance Certificate; regISTerIng PrOPerTy c. Land Rent Clearance Certificate; Kisumu d. Consent to transfer; e. Valuation of property; Property value: US$ 38,331 = KES 3,077,674 f. Application for registration of transfer. Data as of: June 2009 Procedure 1. Carry out search of title at the Lands Office * This procedure can be completed simultaneously with previous procedures Time: 1 day Cost: KES 250 regISTerIng PrOPerTy Comments: After the form RL 26 is submitted, the Lands Office issues a certificate Malaba confirming the registered owner of the land. Property value: US$ 38,331 = KES 3,077,674 Procedure 2*. Obtain Rates Clearance Certificate Data as of: June 2009 Time: 3 days Procedure 1. Carry out search of title at the Lands Office Cost: KES 3,000 Time: 5 days Cost: KES 750 Procedure 3*. Obtain Land Rent Clearance Certificate Comments: In order to collect the official search results, the applicant has to submit Time: 7 days the application form and pay the prescribed fee to the Busia District Lands Office. Cost: No cost Comments: The Land Rent Clearance Certificate is obtained at the Municipal Procedure 2*. Obtain Rates Clearance Certificate Council of Kisumu. Time: 2 days Cost: KES 1,500 LIST PROCEDURES · · STARTING BUSINESS LIST OFOF PROCEDURESREGISTERINGAPROPERT y 61 Procedure 3*. Obtain Land Rent Clearance Certificate Procedure 3*. Obtain Land Rent Clearance Certificate Time: 5 days Time: 8 days Cost: KES 2,500 Cost: KES 250 Comments: The seller obtains the Clearance Certificate himself upon payment of Comments: The Land Rent Certificate is obtained at the Municipal Council. clearance fees to the Municipal Council. Procedure 4. File the transfer instrument at the Lands Office for Procedure 4. File the transfer instrument at the Lands Office for assessment of stamp duty payable on the transfer assessment of stamp duty payable on the transfer Time: 8 days Time: 8 days Cost: KES 123,107 (4% of the property value) Cost: KES 123,107 (4% of the property value) Comments: The draft transfer is submitted for approval and assessment at the Comments: The draft transfer is prepared by the buyer's lawyers and needs to be Lands Office. After the assessment has taken place, the stamp duty is paid at the approved by the seller's counterpart. designated banks (i.e. National Bank of Kenya and Cooperative Bank). Procedure 5*. Receive inspection by lands officer Procedure 5*. Receive inspection by land officer Time: 8 days Time: 1 day Cost: No cost Cost: No cost Comments: While the draft transfer is being processed at the Lands Office, an Comments: While the draft transfer is being processed at the Lands Office, an inspector visits the site to verify the development and state of the property. Due to inspector visits the site to verify the development and state of the property. Due to lack of transport, in practice, the inspector often has to be picked up in person and lack of transport, in practice, the inspector often has to be picked up in person and driven to the site. There are no prior appointments made and the actual inspection driven to the site. There are no prior appointments made and the actual inspection may happen within one day or, in the worst case, one month. However, note that may happen within one day or, in the worst case, one month. However, note that this time is not limited and in some cases entrepreneurs may wait months for a this time is not limited and in some cases entrepreneurs may wait months for a valuation. valuation. Procedure 6*. Obtain valuation of the property Procedure 6*. Obtain valuation of the property Time: 3 days Time: 7 days Cost: No cost Cost: No cost Comments: The government valuer assesses the value of the land using the Zonal Comments: The valuer visits the land to carry out the valuation in order to assess Values available at the District Registry. When such operation is not possible, the the true value of the property and prepares a report. valuer inspects the property physically. Procedure 7. Pay stamp duty at a commercial bank Procedure 7. Pay stamp duty at a commercial bank Time: 3 days Time: 5 days Cost: KES 100 Cost: KES 200 Procedure 8. Lodge the completion documents with the Lands Procedure 8. Lodge the completion documents with the Lands Office for registration of the transfer Office for registration of the transfer Time: 1 day Time: 8 days Cost: KES 250 Cost: KES 250 Comments: The applicant lodges all the documents including the transfer and Comments: The applicant submits to the Lands Office the following documents: original title at the Lands Office in Mombasa. a. Original certificate of title; b. Rates Clearance Certificate; * This procedure can be completed simultaneously with previous procedures c. Land Rent Clearance Certificate; d. Consent to transfer; regISTerIng PrOPerTy e. Valuation of property; Nairobi f. Application for registration of transfer. Property value: US$ 38,331 = KES 3,077,674 Data as of: June 2009 * This procedure can be completed simultaneously with previous procedures Procedure 1. Carry out search of title at the Lands Office regISTerIng PrOPerTy Time: 3 days Cost: KES 250 Mombasa Comments: In respect of searches on property registered under the Registered Property value: US$ 38,331 = KES 3,077,674 Land Act, a copy of the title document is required to be submitted at the time of ap- Data as of: June 2009 plying for the search. Also, one cannot carry out a personal search but must instead apply for an official search. Procedure 1. Carry out search of title at the Lands Office Time: 3 days Procedure 2*. Obtain Land Rent Clearance Certificate from the Cost: KES 250 Commissioner of Lands Comments: In order to collect the official search results, the applicant has to submit Time: 19 days the application form and pay the prescribed fee at the Mombasa Lands Office. Cost: No cost Comments: Seller's lawyer obtains the Land Rent Clearance Certificate from the Procedure 2*. Obtain Rates Clearance Certificate Commissioner of Lands at no cost. Time: 4 days Cost: KES 3,450 Procedure 3*. Obtain Rates Clearance Certificate from the Nairobi Comments: This Rates Clearance Certificate is obtained at the Lands Office of City Council Mombasa. Time: 5 days Cost: KES 5,000 62 DOING BUSINESS IN kENyA 2010 regISTerIng PrOPerTy Comments: Seller's lawyer obtain the Rates Clearance Certificate from the Nairobi City Council. This certificate is important proof that there are no outstanding fees to Narok be paid to the municipality. Lawyers are not required to be involved in the registra- Property value: US$ 38,331 = KES 3,077,674 tion process. Lawyers' fees are calculated based on a fixed scale depending on the Data as of: June 2009 value of the property. Procedure 1. Carry out search of title at the Lands Office Procedure 4. File the transfer instrument at the Lands Office for Time: 1 day assessment of stamp duty payable on the transfer Cost: KES 100 Time: 8 days Comments: Once the application and the receipt of payment are submitted, the ap- Cost: KES 123,107 (4% of the property value) plicant obtains a search certificate signed and sealed by the District Land Registrar. Comments: The draft transfer is prepared by the buyer's lawyers and needs to be approved by the seller's counterpart. Procedure 2*. Obtain Rates Clearance Certificate Time: 2 days Procedure 5*. Pick up banker's check to pay stamp duty Cost: KES 1,000 Time: 2 days Comments: The Rates Clearance Certificate is obtained at the County Council of Cost: KES 600 Narok. Comments: It is mandatory to pay the above-mentioned stamp duty with a banker's check. The payment is made through commercial banks and the approved Procedure 3*. Obtain Land Rent Clearance Certificate banks include the Kenya Commercial Bank and The National Bank of Kenya. Payment Time: 15 days is made to the Commissioner of Domestic Taxes on behalf of the Commissioner of Lands. Cost: KES 1,500 Comments: The Land Rent Clearance Certificate is obtained at the Regional Lands Procedure 6. Receive inspection by land officer Office. Time: 30 days Procedure 4. File the transfer instrument at the Lands Office for Cost: No cost assessment of stamp duty payable on the transfer Comments: Once the draft transfer has been filed at the Lands Office, an inspector visits the site to assess the state of the property. Due to lack of transport, in practice, Time: 3 days the inspector often has to be picked up in person and driven to the site. There are no Cost: KES 123,107 (4% of the property value) prior appointments made and the actual inspection may happen within one day or, Comments: The draft transfer is prepared by the buyer's lawyers and needs to be in the worst case, one month. However, note that this time is not limited and in some approved by the seller's counterpart. cases entrepreneurs may wait months for a valuation. Procedure 5*. Receive inspection by land officer Procedure 7*. Obtain valuation of the property Time: 21 days Time: 7 days Cost: No cost Cost: No cost Comments: The inspector visits the site to evaluate and verify the indicated Procedure 6*. Obtain valuation of the property purchase price of the property in order to ensure accurate tax payment. If the as- Time: 3 days sessed value differs from the one indicated by the parties, an additional payment is Cost: No cost requested. Comments: The inspector visits the site to evaluate and verify the indicated Previously, such inspections were conducted on a random basis, but now every purchase price of the property in order to ensure accurate tax payment. If the as- transaction requires such an inspection. The issues involved are similar to the sessed value differs from the one indicated by the parties, an additional payment is inspections by the land officer and, therefore, may happen within one day to up to requested. over one month. The evaluation report itself is completed within a few days of the inspection. Both inspections are required before the completion documents can be Previously, such inspections were conducted on a random basis, but now every lodged with the Lands Office. transaction requires such an inspection. The issues involved are similar to the in- spections by the land officer and, therefore, may happen within one day to over one Procedure 8. Lodge the completion documents with Lands Office month. The evaluation report itself is completed within a few days of the inspection. Both inspections are required before the completion documents can be lodged with for registration of the transfer the Lands Office. Time: 6 days Cost: KES 250 Procedure 7. Pay stamp duty at a commercial bank Comments: The completion documents are lodged for registration at the Lands Time: 4 days Office. Cost: KES 200 The following documents are generally obtained from the seller's lawyers: a. Original certificate of title; Procedure 8. Lodge the completion documents with the Lands b. Rates Clearance Certificate; Office for registration of the transfer c. Land Rent Clearance Certificate; Time: 3 days d. Consent to transfer. Cost: KES 625 The seller's lawyers need to be informed of the registration and pay balance of the Comments: The applicant submits to the Lands Office the following documents: purchase price. a. Original certificate of title; The certificate of the registered transfer is collected at the Lands Office. b. Rates Clearance Certificate; c. Land Rent Clearance Certificate; * This procedure can be completed simultaneously with previous procedures d. Consent to transfer; e. Valuation of property; f. Application for registration of transfer. * This procedure can be completed simultaneously with previous procedures LIST PROCEDURES · · STARTING BUSINESS LIST OFOF PROCEDURESREGISTERINGAPROPERT y 63 regISTerIng PrOPerTy regISTerIng PrOPerTy Nyeri Thika Property value: US$ 38,331 = KES 3,077,674 Property value: US$ 38,331 = KES 3,077,674 Data as of: June 2009 Data as of: June 2009 Procedure 1. Carry out search of title at the Lands Office Procedure 1. Carry out search of title at the Lands Office Time: 3 days Time: 2 days Cost: KES 250 Cost: KES 105 Comments: Once the application and the receipt of payment are submitted, the Comments: The applicant fills and submits the prescribed form and pays KES 105. applicant obtains a search certificate signed and sealed by the Nyeri District Lands Office. Procedure 2*. Obtain Rates Clearance Certificate Time: 7 days Procedure 2*. Obtain Rates Clearance Certificate Cost: KES 2,500 Time: 2 days (time to obtain rates: 1 day + roundtrip: 1 day) Comments: The Rates Clearance Certificate is obtained at the Thika Municipal Cost: KES 2,000 (transportation) Council. Comments: The Rates Clearance Certificate has to be obtained in Nairobi. Procedure 3*. Obtain Land Rent Clearance Certificate Procedure 3*. Obtain Land Rent Clearance Certificate Time: 7 days Time: 30 days Cost: No cost Cost: KES 3,800 Comments: The Land Rent Clearance Certificate is obtained at the Nyeri Municipal Procedure 4. File the transfer instrument at the Lands Office for Council. assessment of stamp duty payable on the transfer Time: 14 days Procedure 4. File the transfer instrument at the Lands Office for Cost: KES 123,107 (4% of the property value) assessment of stamp duty payable on the transfer Comments: The draft transfer is prepared by the buyer's lawyers and needs to be Time: 8 days approved by the seller's counterpart. Cost: KES 123,107 (4% of the property value) Comments: The draft transfer is prepared by the buyer's lawyers and needs to be Procedure 5*. Receive inspection by land officer approved by the seller's counterpart. Time: 1 day Cost: No cost Procedure 5*. Receive inspection by land officer Comments: While the draft transfer is being processed at the Lands Office, an in- Time: 1 day spector visits the site to verify the development and state of the property. Due to lack Cost: No cost of transport, in practice, the inspector often has to be picked up in person and driven Comments: While the draft transfer is being processed at the Lands Office, an to the site. There are no prior appointments made and the actual inspection may inspector visits the site to verify the development and state of the property. Due to happen within one day or, in the worst case, one month. However, note that this time lack of transport, in practice, the inspector often has to be picked up in person and is not limited and in some cases entrepreneurs may wait months for a valuation. driven to the site. There are no prior appointments made and the actual inspection may happen within one day or, in the worst case, one month. However, note that Procedure 6*. Obtain valuation of the property this time is not limited and in some cases entrepreneurs may wait months for a Time: 30 days valuation. Cost: No cost Comments: The inspector visits the site to evaluate and verify the indicated Procedure 6*. Obtain valuation of the property purchase price of the property in order to ensure accurate tax payment. If the as- Time: 7 days sessed value differs from the one indicated by the parties, an additional payment is Cost: No cost requested. Previously, such inspections were conducted on a random basis, but now every Procedure 7. Pay stamp duty at a commercial bank transaction requires such an inspection. The issues involved are similar to the in- Time: 4 days spections by the land officer and, therefore, may happen within one day to over one Cost: KES 100 month. The evaluation report itself is completed within a few days of the inspection. Both inspections are required before the completion documents can be lodged with Comments: The applicant presents the duly filled in Stamp Duty Declaration as well the Lands Office. as the assessment and payment form, usually in triplicate, to the designated bank and pays the amounts indicated thereon. The bank stamps the form and issues a Procedure 7. Pay stamp duty at a commercial bank deposit slip. The applicant keeps one copy and leaves two copies at the bank. Within the next 3 to 5 days, the bank submits one copy to the Lands Office. Time: 4 days Cost: KES 200 Procedure 8. Lodge the completion documents with the Lands Office for registration of the transfer Procedure 8. Lodge the completion documents with Lands Office Time: 8 days for registration of the transfer Cost: KES 375 Time: 15 days Comments: The applicant submits to the Lands Office the following documents: Cost: No cost a. Original certificate of title; Comments: The applicant submits to the Lands Office the following documents: b. Rates Clearance Certificate; a. Original certificate of title; c. Land Rent Clearance Certificate; b. Rates Clearance Certificate; d. Consent to transfer; c. Land Rent Clearance Certificate; e. Valuation of property; d. Consent to transfer; f. Application for registration of transfer. e. Valuation of the property; f. Application for the registration of the transfer. * This procedure can be completed simultaneously with previous procedures * This procedure can be completed simultaneously with previous procedures 64 Doing Business 2009 Acknowledgments Doing Business in Kenya 2010 was pro- Special thanks to Permanent Secre- duced by the Subnational Doing Business tary Sammy Kirui and Angeline Hongo team led by Luis Aldo Sánchez-Ortega. from the Office of the Deputy Prime The team comprised Diego Borrero, Ga- Minister and Ministry of Local Govern- briela Enrigue, Trimor Mici, and Caro- ment, and Emmanuel Lubembe from line Otonglo. The report was prepared the Office of the Prime Minister, for their under the general direction of Mierta Ca- support and leadership on the project. paul and in collaboration with the Kenya Doing Business in Kenya 2010 was made Investment Climate Program team: Lars possible thanks to the support of Sarah Grava in Washington, D.C.; Fred Zake, Ochieng and Soraiya Shariff from the Contact details for local partners Ismail Chejmor, and Rosemary Makotsi Office of the Prime Minister; Josephine are available on the subnational in the International Finance Corporation Kanyi, Denis Muganga, and Kennedy Doing Business website at http:// Nairobi Office; Musabi Muteshi in the Nanga from Treasury; Micah Kilonzo World Bank Nairobi Office; and the Busi- and Robinson Otundo from the Ministry subnational.doingbusiness.org ness Operations and Regulatory Gover- of Local Government; Raphael Mwai and nance team led by Peter Ladegaard. Romana Kimende from the Private Sector Claudia Contreras, Zenaida Hernan- Development Strategy Secretariat; David dez-Uriz, Iva Ilieva Hamel, Rebecca Ong, Mugambi from KenInvest; Moses Njenga Jamile Ramadan, and Alessio Zanelli from the Kenya Institute of Public Policy provided assistance at various stages of Research and Analysis; and Doris Olu- the project. Lars Grava, Melissa Johns, tende and Njonjo Itotia from the Kenya Musabi Muteshi, and Ana María Oviedo Private Sector Alliance. reviewed the full text. Peer-review com- More than one hundred and fifteen ments were received from Teymour Abdel business consultants, lawyers, property Aziz, Penelope Fidas, Manuel García- experts, architects, engineers, utility pro- Huitrón, Aida Kimemia, Aikaterini Leris, viders, and public officials and magis- Jana Malinska, Andrei Mikhnev, Mad- trates contributed to Doing Business in alina Papahagi, and Brice Richard. Valu- Kenya 2010. Data collection from the pri- able assistance was received from the vate experts was coordinated by Benja- Doing Business team, especially Svetlana min Musau, Morris Kimuli, Felix Kioko, Bagaudinova, Karim Belayachi, Frederic and Josephat Maweu from the law firm B Bustelo, Karen Sarah Cuttaree, Marie De- M Musau & Co., Advocates. lion, Alejandro Espinosa-Wang, Sabine The team wants to extend its spe- Hertveldt, Oliver Lorenz, Dana Omran, cial gratitude to all the national and Yara Salem, and Umar Shavurov. local government officials and magis- The report website (http://www. trates who participated in the project and doingbusiness.org/Kenya) was devel- who made valuable comments during oped by Graeme Littler, Felipe Iturralde, the consultation and data-review period. Hashim Zia, and Preeti Endlaw. The re- Their names are listed on the following port was edited by Grace Morsberger pages. and designed by G. Quinn Information Design. AcknowleDgments 65 P r i vat E P rof E s siona l s P u b l i c of f i c ia l s Allocas Associates Kilifi Water and Sewerage E l d or E t i si ol o K i su m u Alex Kasewe Co. Joseph Kenga Allan Mabuka Abdulrahman Guyo Boaz Nathan Olao B M Musau & Co. Treasurer, Municipal Engineer, Municipal Chief Magistrate, Kenya Advocates Kisumu Water and Council of Eldoret Council of Isiolo Judiciary Benjamin Musau Sewerage Co. E.K. Tonui Chrispin Otieno Charles Kagema Felix Kioko James Wesa Enforcement Officer, Resident Magistrate, District Physical Planner, Justus Mutia National Social Security Kenya Judiciary Ministry of Lands Morris Kimuli Madzayo Mrima & Fund (NSSF) Company Guyo Buke Churchill Otieno Nicholas Malonza Francis Nalika Licensing Officer, Property Engineer, Kenya Stephen Musau Mbaluka & Co. Advocates Municipal Council of Municipal Council of Revenue Authority Joshua Mutinda Eldoret Isiolo Ben Ochieng & Co. Duncan Ogango Advocates James Ochieng Owade Victor Ndereba Legal Clerk, Municipal Mombasa Water and Municipal Engineer, Physical Planner, Council of Kisumu Benedict Okore Ochieng Sewerage Co. Municipal Council of Municipal Council of Dennis Sibiya Eldoret Isiolo Everlyne Otieno C K Nzili & Co. Advocates Deputy Planner, Municipal Chritopher Nzili Kyania Jones Lutta Council of Kisumu Muteithia Nderitu & Co. Municipal Council of Kilifi Advocates Leggy Kimaiga Caroline B Omolo & Co. Eldoret Harrison Musumiah Advocates Rosemary Nderitu Revenue Officer, Joseph M. Nalyanya Land Registrar, County Municipal Council of Caroline Omolo Ragot Ndung'u Mwaura & Co. Council of Kilifi Assistant Commissioner, Kisumu Advocates Kenya Revenue Authority Henry I. Mitsanze Chabeda & Co. Advocates Lynette Musani Maureen Litunda Karen Kandie Revenue Officer Philip K M Chabeda Revenue Officer, Inspector, National County Council of Kilifi Municipal Council of Nyokabi Waiganjo & Co. Eldoret Water and Advocates Hospital Insurance Fund Jacinta T. Ismail Kisumu Sewerage Co. (ELDOWAS) (NHIF) Treasurer, County Council Magdalene Nyokabi Waiganjo Patrick Adolwa Ruben Tuwei Robert J. Simiyu of Kilifi Rural Service Delivery Odongo Awino & Co. Ministry of Lands James Musee Nduna Advisor, Municipal GA Ndeda & Co. Advocates Advocates Council of Kisumu James Simpson Macharia Stanislas Ondimu Senior Resident Gideon Odongo Owino Town Clerk, Municipal Magistrate, Kenya Patrick Mahulo Gichure & Co. Advocates Council of Eldoret Judiciary Municipal Council of Olel, Onyango, Inguatiah Kisumu Joseph Mwangi & Co. Advocates Stephen Riechi Julius Kiplimo Charles Onyango Chief Magistrate, Kenya Public Works Officer, Patrick Nyamita Ipapu P. Jackah & Co. Judiciary County Council of Kilifi Director of Housing, Advocates Omondi Waweru & Co. Municipal Council of Kenneth C. Kazungu Ipapu Philip Jackah Advocates Garissa Public Works Officer, Kisumu Samuel Okal Edward Wabwoto County Council of Kilifi Peter Kayila Joan Korir Abdi Gedi J M Maritim & Co. Mary Muthoni Mwangi Revenue Officer, Public Works Officer, Municipal Council of Advocates Rioba Oboto & Co. Municipal Council of Senior Administrative Officer, County Council Kisumu Juliet Maritim Advocates Garissa Samson Ngetich of Kilifi Richard Sang David Rioba Omboto Abdullahi Hakar Mutua Treasurer, Municipal Surveyor, Municipal Council of Kisumu Jokan-tec construction Sichangi & Co. Advocates Council of Garissa District Land Officer, Co. County Council of Kilifi Hannah Wamuyu Charles Ndambo Joseph Ndolo Town Clerk, Municipal Simon Leboo Ole Morintat Telkom Kenya County Clerk, County Kenya Power & Lighting Council of Garissa Co. (KPLC) Elizabeth Rono Council of Kilifi Adan Maalim Mohamud Santur Christopher Omwenga Treasurer, Municipal Emannuel Safari Council of Garissa Peter Imboyoka Tom S. M. Thuku Evans Amunga Accountant, Municipal Kamau Simon Council of Garissa Njiraini Mary 66 Doing Business 2010 P u b l ic of f ic ia l s m a l a ba Michael Kizito Oduor na i rob i thiKa Senior Resident Crescent Saja Adewa Magistrate, Kenya David Montent Antony Kimani Kaniaru Municipal Council of Judiciary City Council of Nairobi Principal Magistrate, Malaba Kenya Judiciary Mwangi Karimi Mwangi John K Barreh Francis Kyambia Senior Resident City Council of Nairobi David Njenga Resident Magistrate, Magistrate, Kenya Deputy Treasurer, Kenya Judiciary Judiciary Nixon Othieno Municipal Council of City Council of Nairobi Thika Julius K. Ng'arng'ar Renson Ingonga Senior Resident Registrar, Ministry of na roK Duncan G. Mwaniki Magistrate, Kenya Lands Branch Manager, National Judiciary Johnson Palmeris Ntete Social Security Fund Richard Kirui (NSSF) Margaret Wambani Administrative Officer, Kenya Judiciary County Council of Narok Senior Resident Elias Mwaniki Magistrate Rose Munupe Walter Chanua Accountant, Municipal Surveyor, Municipal Accountant, County Council of Thika Kenya Judiciary Council of Mombasa Council of Narok James Ndugu Pamela Achieng' Samson Kazungu Municipal Planner, Resident Magistrate, Revenue Officer, nyEri Municipal Council of Kenya Judiciary Municipal Council of Thika Mombasa Charles Mugambi Samuel Oseko Ombui Computer Programmer, Mainai Mohhamed Treasurer, Municipal Tito Gesora Municipal Council of Nyeri Municipal Council of Council of Malaba Senior Resident Thika Magistrate, Kenya Geoffrey W. Mungai Susan Shitubi Deputy Municipal Wamai Johnson Judiciary Principal Magistrate, Treasurer, Municipal Officer, National Hospital Kenya Judiciary Tubman Otieno Council of Nyeri Insurance Fund (NHIF) Town Clerk, Municipal m om bas a Council of Mombasa Rehema M. Salim Revenue Officer, Catherine Mwangi Victor Otieno Olonde Municipal Council of Nyeri Chief Magistrate, Kenya Valuer, Ministry of Lands Judiciary Wilfred Kihara Fred Kaplaigiya Building Inspector, Branch Manager, National Municipal Council of Social Security Fund Mombasa (NSSF) H.B. Yator Resident Magistrate, Kenya Judiciary Investment Climate Advisory Services of the World Bank Group THE WORLD BANK HT TP://SUBNATIONAL.DOINGBUSINESS.ORG