Are East Africa’s business laws scaring away potential investors?
Last week, Kenya ordered Africa’s largest soda ash manufacturer, Tata Chemicals Magadi Ltd, to shut down its depot in Kajiado County for alleged contravention of environmental laws by the firm, which has operated in the country for 107 years.
The rift between Tata Chemicals and the Kajiado County government is to blame for this outcome, after Tata said it could not pay a hefty Ksh17 billion ($170 million) in land rates.
The closure of the Magadi-based depot is expected to paralyse the firm’s operations as the trans-shipment facility is used as a packaging centre for soda ash and other raw materials in transit to Mombasa port.
“We cannot have a multinational that wants to choose which laws it will comply with. All our investors have been complying. We have no preferential treatment for anyone and must correct the impunity of the past,” said Joseph ole Lenku, Kajiado County Governor.
Last year, a British gold mining firm, Red Rock Resources Plc, announced it would resume production of gold estimated at more than Ksh100 billion ($1 billion) in Migori, western Kenya, after settling a court case with the Ministry of Mining, which had terminated its mining licence in May 2015.
“This settlement we hope will open the way for renewed progress towards our aim of having a productive gold mine. Our desire, and that of the authorities and local communities, is to see work towards this recommence without delay,” said Andrew Bell, Red Rock chairman.
Goldplat, another UK-based gold mining firm, last year applied for a renewal of its exploration permit amid a dispute over the government’s award of a gold prospecting licence to Chinese firm Bao Gold Hill (Kenya) Ltd in an area claimed by the UK firm.
Goldplat said it had the right to prospect for the precious metal in Block 91B covering 63.7 sq km, part of which was handed to Bao in August 2018.
“Tanzania’s requirement for locals to hold at least 30 per cent of controlling interest in insurance companies may slow down or repel foreign investments,” says USAid in its Investment Climate Assessment Report for Tanzania for the year 2018.
Kenya’s Investment Authority (KenInvest) says that regulatory reforms are key to removing the barriers to investment and continuous improvement of the business environment is important for countries seeking to benefit from increased trade and investment.
According to PwC, investors are finding it difficult to operate in Uganda due to the time and cost of accessing electricity, difficulties in obtaining construction permits, the relatively lengthy procedures needed to start a business compared to other countries and challenges of trading across borders with regards to the cost of importation.