74664 Doing Business in Kenya 2012 CO M PAR I N G R EG U LATIO N FO R DO MEST IC FIRMS IN 1 3 CIT IES AND WIT H 1 83 ECONOMI ES Doing Business in Kenya 2012 CO M PARI N G REGU L ATIO N FO R D O M ESTIC FIRMS IN 13 CITIES A ND WITH 183 ECONOMI E S A COPUBLICATION OF THE WORLD BANK AND THE INTERNATIONAL FINANCE CORPORATION © 2012 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, D.C. 20433 Telephone 202-473-1000 Internet www.worldbank.org All rights reserved. A copublication 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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Copies of the Doing Business global reports: Doing Business 2012: Doing Business in a More Transparent World; Doing Business 2011: Making a Difference for Entrepreneurs; 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; Doing Business in 2004: Understanding Regulations may be obtained at www.doingbusiness.org. Contents 1 Executive summary 7 About Doing Business and Doing Business in Kenya 2012 15 Starting a business 21 Dealing with construction permits 27 Registering property 32 Enforcing contracts 37 Data notes 45 City tables 48 Indicator tables List of procedures 51 Starting a business 60 Dealing with construction permits 70 Registering property 79 Acknowledgments Doing Business in Kenya 2012 is the second subna- Doing Business investigates the regulations that tional report of the Doing Business series in Kenya. enhance business activity and those that con- In 2009, Doing Business in Kenya 2010 analyzed strain it. Regulations affecting 4 stages of the life quantitative indicators on business regulations of a business are measured at the subnational for 11 cities: Eldoret, Garissa, Isiolo, Kilifi, Kisumu, level in Kenya: starting a business, dealing with Malaba, Mombasa, Nairobi, Narok, Nyeri, and construction permits, registering property, and Thika. This year, Doing Business in Kenya 2012 enforcing contracts. These indicators were se- documents improvements in the 11 cities previ- lected because they cover areas of local jurisdic- ously measured and expands the analysis to 2 tion or practice. The indicators are used to iden- new cities: Kakamega and Nakuru. The cities can tify business reforms and the extent to which be compared against each other, and with 183 these have been effective in simplifying the economies worldwide. procedures, saving time, and lowering the cost of doing business. The data in Doing Business in Comparisons with other economies are based Kenya 2012 are current as of March 2012. on Doing Business 2012—Doing business in a more transparent world—the ninth in a series of annual This project is the result of collaboration between reports published by the World Bank and Interna- the Global Indicators and Analysis Department tional Finance Corporation. The indicators in Doing and the Investment Climate Advisory Services of Business in Kenya 2012 are also comparable with the World Bank Group. It was produced with the almost 400 cities from more than 50 economies assistance of the Office of the Prime Minister and benchmarked in other subnational Doing Busi- the Office of the Deputy Prime Minister and Min- ness studies. All data and reports are available at istry of Local Government and with the financial www.doingbusiness.org/subnational. support of the Department for International De- velopment (UKaid), the European Union, and the Embassy of the Kingdom of the Netherlands in Nairobi. 1 Executive summary On August 27, 2010, tens of thousands of While the ratification of the constitution was beyond Nairobi. A good example is found Kenyans gathered in the capital Nairobi to in itself a major step towards transforming in the city of Isiolo: Doing Business in Kenya celebrate the ratification of the new consti- the institutional landscape of the country, 20102 identified the local transfer tax as the tution. This was an important milestone in specific operational measures need to be reason it was one of the most expensive Kenya’s ongoing path of political and eco- implemented—such as the creation of the 47 places in the world to transfer property. Local nomic reforms. Adopting the constitution counties—in order to make decentralization authorities slashed the transfer tax and today was also one of the guiding principles set a reality. At this time, entrepreneurs from transferring property costs just one-fourth in “Kenya Vision 2030”—the government’s across Kenya still need to travel to Nairobi the previous rate. Elsewhere, in the cities of development blueprint which identified to visit the Registrar of Companies. Nairobi Mombasa and Eldoret, major institutional macroeconomic stability, good governance is also the only city with a fully integrated de- overhauls made construction permitting and infrastructure as its 3 main pillars. partment that handles construction-permit more efficient. Furthermore, Nairobi is no development. The land records maintained in longer the only city with a specialized com- Despite several domestic and external the central land registry in Nairobi are more mercial court—a specialized commercial shocks—such as the post-election violence reliable than what is available in the local court has opened in Mombasa and plans are in 2007/08 and the global financial crisis of branches—which is why many people travel underway to establish one in Kisumu. 2008/09—the Kenyan economy has shown resilience and is steadily recovering with hundreds of miles to the capital. Besides the regulatory improvements taking place in WHAT DOES DOING BUSINESS IN real GDP growing over 5% in 2010 and 2011 the capital city and the legal and regulatory KENYA 2012 MEASURE? (estimated).1 Investments in infrastructure reforms affecting the country as a whole, Doing Business measures and tracks changes include roads, airport expansions, increases this report also documents the local reform in business regulations applying to small and in power supply and improved access to efforts that have resulted in cost and time medium-size domestic firms. A fundamental water. At the same time, the Kenyan govern- savings for local entrepreneurs in locations premise of Doing Business is that economic ment is keen on undertaking comprehensive structural reforms aimed at improving the investment climate. TABLE 1.1 Doing business in Kenya—where is it easiest? Creating the right environment for a country Ease of dealing Ease of Ease of Aggregate Ease of starting with construction registering enforcing to grow is not an easy task, especially in City rank a business permits property contracts today’s integrated global economy. Many Malaba 1 6 1 4 3 external factors are beyond government Narok 2 8 5 5 2 control. Take rising commodity prices, for Thika 3 1 7 3 7 instance. Or natural disasters, like the recent Garissa 4 12 3 8 1 East Africa drought that negatively impacted Eldoret 5 10 2 7 5 the agricultural sector in Kenya. But there are Mombasa 6 9 7 1 8 areas within the sphere of government juris- diction that can make a country’s economy Isiolo 7 2 4 13 4 more resilient. Business regulation reforms Kisumu 8 13 10 2 9 help create an investment climate conducive Kilifi 9 3 11 11 6 to starting and running a business, where Nyeri 10 10 6 10 10 complying with regulations brings more Kakamega 11 6 9 9 12 benefits than costs. They help create jobs Nakuru 12 4 13 6 11 and boost growth at a relatively low cost. Nairobi 13 5 11 12 13 They become even more relevant in times of Note: The aggregate rank is based on the 4 indicators measured. See the data notes for details. tight budgets and high unemployment. Source: Doing Business database. 2 DOING BUSINESS IN KENYA 2012 FIGURE 1.1 Tracking Kenya’s* progress over time in the areas measured by Doing Business 2006-2012: Distance to frontier Distance to the frontier (percentage points) HIGHEST PERFORMANCE GLOBALLY 0 DB2012 10 DB2006 20 KENYA RWANDA 30 40 50 60 70 80 90 100 LOWEST PERFORMANCE Starting a Dealing with Registering Getting Protecting Paying Trading Enforcing Resolving GLOBALLY business construction property credit investors taxes across contracts insolvency permits borders *Represented by Nairobi Note: The distance to frontier measure illustrates the distance between an economy’s current performance and a measure of best practice worldwide on 9 of the Doing Business indicators (it does not include employing workers and getting electricity). The vertical axis represents the distance to the frontier, and the horizontal line across at the top of the chart captures the most efficient regulatory environment. The data refer to the 174 economies included in Doing Business 2006. Additional economies were added in subsequent years. Source: Doing Business database. activity requires good rules that are trans- Business in Kenya 2010.3 Eldoret and Garissa property, respectively). This shows that for parent and accessible to all. Such regula- climbed in the aggregate ranking due to high the most part rankings do not necessarily tions should be efficient, striking a balance impact reforms. Mombasa also moved up in favor smaller cities where the demand for between safeguarding important aspects the ranking and was the city to introduce the business services is lower. It is rather a mat- of the business environment and avoiding highest number of business reforms. Other ter of how relevant agencies, whether central distortions that impose unreasonable costs cities like Kisumu or Nyeri dropped relative or local, handle the processes in each city. on businesses. Nairobi represents Kenya in to their peers.4 the annual Doing Business report, which com- KENYA FROM A GLOBAL pares regulatory practices in 183 economies Second, there is no single city that does PERSPECTIVE around the world. Yet within Kenya, entre- equally well on all indicators. Across Kenya, From a global comparative perspective, preneurs face local regulations and practices it is easiest to start a business in Thika, deal Kenya, represented by Nairobi, ranks 109 that vary from location to location. Doing with construction permits in Malaba, register out of 183 economies on the ease of do- Business in Kenya 2010 was the first report to property in Mombasa, and enforce a contract ing business according to Doing Business go beyond the capital city to capture these in Garissa. It is most burdensome to start a 2012: Doing Business in a More Transparent differences in 10 other Kenyan cities on 4 business in Kisumu, deal with construction World—ahead of the Arab Republic of Egypt Doing Business topics: starting a business, permits in Nakuru, register property in Isiolo, and enforce a contract in Nairobi. This shows and Ethiopia, but behind Rwanda and South dealing with construction permits, register- that no Kenyan city has a blueprint of good Africa. Yet Kenya is reforming—just not at ing property and enforcing contracts. This practices across all areas benchmarked. the same pace as some of its regional and report updates the information presented in Cities can share experiences and learn from global competitors. This is clearly illustrated Doing Business in Kenya 2010 and tracks prog- each other. by a newly introduced Doing Business metric ress in implementation of business reforms which measures how much a country has im- across Kenyan cities. It also expands the Third, city performance is not necessarily proved over time and how far it has come in analysis to 2 additional cities—Kakamega and Nakuru. The summary indicator results correlated with city size. There are smaller closing the gap with the regulatory systems and aggregate ranking are presented here cities that perform well in some indicators, in top-performing economies (figure 1.1). (table 1.1). such as Malaba (top ranked in dealing with Since 2006, Kenya has moved closer to the construction permits) or Narok (ranked 2 in economies with the most efficient practices Some trends emerge. First, consistent per- enforcing contracts). But there are also big- on several of the Doing Business indicators. formers stay at the top—Malaba, Narok and ger cities leading in other indicators, such as Most notably the time to start a business was Thika were already leading the list in Doing Mombasa and Kisumu (1 and 2 in registering reduced from 54 days in 2006 to 33 days in EXECUTIVE SUMMARY 3 TABLE 1.2 Compared to 2009, it is easier now to do business in all 13 Kenyan cities uncertainty regarding the processing order. Additionally, in 2009, a stamp duty office Dealing with Starting a business Registering property Enforcing contracts opened within the Registrar of Companies, City construction permits Business reforms National Local National Local National Local National Local making the assessment of the stamp duty Mombasa       more efficient. Following directives issued by the central government to encourage the Eldoret      use of information technology, local councils Isiolo      across Kenya have implemented the Local Garissa     Authority Integrated Financial Operations Kakamega     Management System (LAIFOMS). The sys- Kilifi     tem, aimed at restructuring the local public Malaba     sector and strengthening local accountabil- Nakuru     ity mechanisms, is used by councils for all financial management activities—including Narok     the billing and collection of local revenues, Thika     the payroll and all expenditure controls. Kisumu    Thanks to the computerization of services, Nairobi    including the Single Business Permit (SBP), Nyeri    the average time to obtain a permit across  Doing Business reforms making it easier to do business. the 13 cities measured decreased from 7 to 4  Doing Business reforms making it more difficult to do business. days since 2009. Note: The cities are ranked on the number and impact of reforms. At the top of the ranking are the cities where most reforms making it easier to do business were implemented between June 2009 and March 2012. Efforts to improve the construction permits Source: Doing Business database. area have persisted and should bear fruit, especially in the capital city. The City Council 2012. Significant improvements were also since 2009. These 3 cities were the only of Nairobi recently launched an online seen in the areas of getting credit and trad- ones that saw improvements in 3 out of 4 system for the approval of the architectural ing across borders. Other areas saw fewer areas measured. Mombasa saw the most plans. Once fully operational, it is expected or no improvements. In comparison, econo- Doing Business reforms at the local level. In to significantly cut the time to obtain the mies like Rwanda progressed more rapidly. addition to benefiting from national reforms provisional building permit, which now Rwanda is 1 of 2 economies that moved the in starting a business and contract enforce- takes 30 days. While the impact of reforms most towards the most efficient practices of ment, the construction-permitting process in Nairobi remains to be seen, Eldoret and the “frontier” over the last 6 years. in Mombasa was revamped making it more Mombasa have already reformed the build- efficient and a specialized court was intro- ing approval process with tangible results. AT THE SUBNATIONAL LEVEL, duced to deal with commercial cases. Eldoret Eldoret Municipal Council reduced the time TANGIBLE RESULTS ARE SEEN also improved construction permitting, while to obtain the building plan approvals from ACROSS THE COUNTRY ON ALL Isiolo reduced the costs to register property. 50 to 30 days. Mombasa Municipal Council 4 INDICATORS SINCE THE LAST These improvements resulted in significant now conducts all relevant building approvals REPORT time and cost savings for local entrepreneurs in-house and its technical committee in- In the recent past, the Kenyan government in all the 3 cities. creased the frequency of approval meetings has focused on comprehensive political re- from monthly to bi-weekly. In other cities— In the area of starting a business, all 13 cities such as Kilifi, Kisumu and Thika—changes in forms like the new constitution. At the same showed improvements. Reform efforts by the the structure of the management of water time, both national and local governments national and local governments have reduced companies reduced connection times. At have kept investment climate reforms high the average time to start a business by 22 the same time, the financial burden of on their agenda. Doing Business in Kenya 2010 identified good practices, pointed out bottle- days and the average cost by 5%. In 2010, the dealing with construction permits has risen necks and provided recommendations for Kenya Revenue Authority replaced multiple significantly in all cities. This is mostly due business reforms across 11 cities measured tax registrations with a single tax payer iden- to stricter enforcement of environmental in Kenya. Three years later, this report tracks tification number, which can now be applied controls and the costs associated with them, progress over time. The results are encour- for online.5 In January 2010, the Registrar which on average increased by over 100% of aging. All 13 cities show improvements in at of Companies finalized the digitization of income per capita. least 2 of the 4 areas measured (table 1.2). its records. New applications are now pro- cessed based on a serial number. Previously, In registering property, Isiolo made the Mombasa, Eldoret and Isiolo implemented applications were processed manually, process significantly cheaper. In 2010, an the highest number of business reforms which resulted in delays, loss of records and entrepreneur transferring property in Isiolo 4 DOING BUSINESS IN KENYA 2012 was paying 20% of property value as trans- varies from 32 days in Nairobi to 55 days in cost of preparing and obtaining the approval fer tax, on top of the nationally mandated Narok and Nyeri. The process is fastest in of the environmental project report accounts stamp duty of 4%. Back then, Isiolo was Nairobi, where the Registrar of Companies for the largest portion of the cost. Cost differ- one of the most expensive places to regis- is located. Post-incorporation steps include ences stem mainly from building permit fees, ter property in the world. Thanks to recent dealings with the local branches of national which constitute the second largest portion reform initiatives, its county council reduced agencies: the Kenya Revenue Authority, of the total cost. the transfer tax from 20% to 5%, cutting the the National Social Security Fund and cost required to complete a property transfer the National Hospital Insurance Fund. Registering property by more than 60%. In other cities, the imple- Additionally, entrepreneurs need to obtain a Registering property takes an average of mentation of the Local Authority Integrated business permit from the local authority and 9 procedures, 61 days and costs 4.6% Financial Operations Management System a company seal from a private authorized of property value across the 13 Kenyan (LAIFOMS) contributed positively to proper- dealer. Across Kenya, it takes between 2 cities measured. When compared to the ty transfer. The local council clerks can now and 8 days to get the single business permit. Sub-Saharan African regional average—6 simply enter the plot number in the LAIFOMS The process is more efficient in cities such procedures, 65 days and a cost of 9.4% of property rates module to obtain the amount as Mombasa, thanks to the computerization property value—Kenyan cities require, on of outstanding payments, speeding the issu- of services. The cost of starting a business average, more procedures but are cheaper ance of rate clearance certificate by 2 days, varies from 39.3% of income per capita and faster. All the 13 cities measured in on average. Efforts are currently underway to in Narok to 48.4% of income per capita in Kenya require 9 procedures to complete digitize land records. The Ministry of Lands Kisumu. Half of the total cost is spent on the legal transfer of a property between 2 set up a document conversion center and preparing the incorporation documents and local companies. Differing levels of efficiency procured equipment, such as scanners, to filing them with the Registrar of Companies. within local lands offices continues to be the transcribe the paper files to digital ones. But The business permit fee is the main source main reason for differing time requirements the process is cumbersome, because the of variation among cities. The fee depends in 1 location as compared to another—from records are often old or damaged. on the type of local authority6 and varies by 28 days in Mombasa to 93 days in Isiolo. business type, size, number of employees Despite efforts by the Ministry of Lands to In line with new constitutional provisions, and location. The Isiolo County Council and homogenize performance across local lands Kenya’s Civil Procedure Act was amended Malaba Town Council charge KES 3,500 offices, implementation and enforcement and new Civil Procedure Rules were passed and 4,000, respectively (about US$ 50). At remain major challenges. High registration into law. These legal changes did not have a the other end of the scale, the City Council volumes in fast-growing cities, the lack of direct impact on the average time, cost and of Nairobi and Kisumu Municipal Council institutional capacity and inadequate tech- number of procedure to enforce a contract charge KES 10,000 (US$ 130). nological support explain some of the ongo- across Kenya. Part of the reason is that the ing bottlenecks. On the other hand, variation recently adopted legal changes need time to Dealing with construction permits in efficiency at the city councils is smaller be implemented, particularly in light of the Requirements to obtain all the necessary than it was 2 years ago, thanks to the intro- simultaneous overhauls in every other legal approvals to build a simple commercial duction of the Local Authorities Integrated area that the adoption of the new constitu- warehouse and connect it to utilities vary Financial Operations Management System tion brings. In the meantime, a specialized significantly across Kenya. Dealing with (LAIFOMS), which have sped up property commercial court was set up in Mombasa construction permits takes 9 procedures in transfer procedures dealt by local authori- to exclusively handle commercial disputes Kisumu, Malaba, Mombasa, Nairobi and ties. In terms of cost, Isiolo remains the most in the city. Previously, the same judges were Thika, but 13 procedures in Garissa and expensive and the only city to charge a local handling both civil and commercial cases. Nakuru. The underlying difference is whether transfer tax. With the creation of the commercial court, a local authority has an integrated develop- ment department—where most approvals Enforcing contracts there will be 2 dedicated judges to handle only commercial cases. Mombasa becomes would be provided in-house—or if entrepre- The average time to enforce a contract is the second city in Kenya, after Nairobi, to neurs need to obtain approvals separately 429 days—almost a year and a half—and the have a specialized commercial court. from central government offices—such as average cost comes to 40.7% of the claim the Physical Planning Department or the value in the 13 cities measured in Kenya. This Public Health Department. Dealing with is 2 months faster and 10% cheaper than COMPARING BUSINESS construction permits can take as little as 2 the average East African Community city. It REGULATIONS ACROSS 13 CITIES months in Garissa and Malaba—faster than is also faster than the OECD high-income Starting a business in Jordan (70 days)—or as much as 140 days economies, which average 518 days. On the A shared national legislative framework in Nakuru—similar to Burundi (135 days). other hand, enforcing contracts in Kenya is regulates business registration across Kenya. The cost varies from 133.7% of income per twice as expensive relative to claim value: the The same 10 procedures are required in all capita in Malaba—which has fixed fees—to average cost to enforce a contract in OECD cities. The time it takes to open a business 272.0% of income per capita in Kisumu. The economies is just 19.7% of the claim value. EXECUTIVE SUMMARY 5 TABLE 1.3 Best practices in Kenya compared internationally Kenyan best practices Kenya’s performance in Doing Business Best practices within Kenya compared internationally Doing Business 2012* indicator (global rank) (global rank) Number of procedures to start a business 10 procedures (all cities) Days to start a business 32 days (Nairobi) Starting a business 123 132 Cost to start a business 39.3% of income per capita (Narok) Paid-in minimum capital requirement 0.0% of income per capita (all cities) Number of procedures to comply with 9 procedures (Kisumu, Malaba, Mombasa, formalities to build a warehouse Nairobi, Thika) Dealing with Days to comply with formalities to build a 64 days (Garissa, Malaba) 23 37 construction permits warehouse Cost to comply with formalities to build a 133.7% of income per capita (Malaba) warehouse Number of procedures to register property 9 procedures (all cities) Registering property Days to register property 28 days (Mombasa) 103 133 Cost to register property 4.1% of property value (Thika) Number of procedures to enforce a 40 procedures (Mombasa, Nairobi) contract Enforcing contracts 92 127 Days to enforce a contract 351 days (Garissa, Narok) Cost to enforce a contract 38.4% of claim value (Isiolo) Ease of doing business (Hypothetical city of “Kenyana”) 95 109 * Represented by Nairobi. Source: Doing Business database Although the laws and regulations relating to It has taken years to raise awareness that a governments have difficulties explaining why contract enforcement in Kenya are national, business permit issued by one local author- doing business in their city may be harder the ease of enforcing contracts varies among ity should be valid across the country. Even than in neighboring locations. The good news its cities. It is easiest in Garissa, where it today the rule is yet to be fully enforced.7 is that sharing a similar legal framework fa- takes 351 days, 41 procedures and costs 38.7 But, gradually, local authorities are endorsing cilitates the implementation of existing good % of claim value. It is most burdensome in peer-to-peer learning and the dissemination practices within a country. National govern- Nairobi, where it takes 465 days, 40 pro- of the central government’s reform initiatives. ments can also use Doing Business data to cedures and costs 47.1% of claim value. On Such events are also opportunities for local monitor how changes in national regulations average, trial and judgment account for more authorities to bring their own concerns to are implemented by local authorities. In a than 80% of the total time spent on enforc- the table. For instance, entrepreneurs across world where not only countries, but specific ing a contract. Litigation costs are regulated Kenya need to travel to Nairobi because locations compete against one another to at- at the national level and the variation among there is only 1 Registrar of Companies office tract investment, subnational Doing Business the 13 cities stems mainly from small differ- in the country. In a relatively large country data allow local governments to review the ences in court fees and enforcement costs. like Kenya, this puts entrepreneurs outside conditions entrepreneurs face in their cities Attorney fees are the biggest component of of Nairobi at a disadvantage. While it might from a comparative perspective. cost. They are the same in all cities, except be economically unfeasible to open registrar Nairobi where lawyers charge premiums branches in every city, local authorities can Reform-minded governments can use Doing due to higher demand. Despite guidelines use collaboration platforms centered on in- Business indicators to motivate and sustain at national level, court fees remain subject vestment climate reforms to push the central business reform efforts. There is no need to to arbitrary assessments by court registry government and relevant central agencies to reinvent the wheel: it is sufficient to start by officers. expand the Registrar of Companies’ pres- introducing business reforms successfully ence beyond the capital city. implemented in other places. In fact, cities in Kenya have a lot to gain from adopting the LEARNING FROM EACH OTHER Benchmarking exercises like Doing Business best regulations and practices that are work- Communication and the sharing of reform inspire governments to reform commercial ing elsewhere in the country. A hypothetical experiences may not always have been a regulations. They point out potential chal- city, “Kenyana,” adopting all the good prac- priority for local authorities when imple- lenges and identify where policy makers tices identified in this report would rank 95th menting a reform agenda. Take the example can look for good practices. Comparisons among 183 economies globally—14 places of the Single Business Permit (SBP), which between cities within a single economy higher than Kenya’s current Doing Business was introduced by the central government in are even stronger drivers of reforms, as rank (table 1.3). 1999/2000 and further reformed in 2008. 6 DOING BUSINESS IN KENYA 2012 If the best Kenyan practices were adopted, place regulatory reform committees, often 10. Society for International Development dealing with construction permits would reporting directly to the president or prime (SID). 2010. Kenya’s Vision 2030: An Audit from an Income and Gender Inequalities take 9 procedures and 64 days, as it does in minister—as in Colombia, Malaysia and Perspective. Nairobi, Kenya: SID Regional the cities of Garissa and Malaba or in New Rwanda. In Kenya, this initiative has been Office for Eastern Africa. Zealand. This would allow “Kenyana” to spearheaded by the Prime Minister’s office rank 23 globally on the ease of dealing with and the Ministry of Local Government. Lastly, construction permits. Transferring a property consistent reformers are inclusive, involving title would take 9 procedures over 4 weeks, all relevant actors and institutionalizing the as seen in the city of Mombasa or in Italy. reform effort. They also stay focused by set- Meanwhile, the country’s best practices for ting specific goals and regularly monitoring resolving a commercial dispute would require progress. In Kenya, inter-institutional col- 351 days—as seen in the cities of Garissa and laboration for successful reforms is vital. This Narok—much faster than the global average is especially important for areas like business of 610 days. In the area of starting a busi- entry or land transfers where competencies ness, the adoption of best practices would cut across various government institutions, result in a smaller improvement. But Kenyan both at central and local levels. cities can always look at regional or global peers who have successfully reformed this NOTES indicator. 1. IMF Country Report No. 21/10. 2012. Kenya: Property Strategy Paper—Progress Report. Payoffs from business reforms can be large. Washington, D.C.: International Monetary Saving time and money are often the im- Fund. mediate benefits for firms. For example, in 2. Doing Business in Kenya 2010 was published Mexico, local one-stop shops (SARE) cut the in October 2009. The data of the report were as of June 2009. time to start a business from 58 to 13 days. A 3. For detailed rankings see indicator tables on recent study reports the payoffs: the number page 48. For time series data see www of registered Mexican businesses rose by .doingbusiness.org/kenya. 5%, employment increased by 2.6%, and 4. Some of the changes can be attributed prices fell by nearly 1% because of the com- to the recent change of the Doing Business petition from new entrants.8 Such results methodology in the dealing with construc- tion permits indicator, the addition of 2 new would be important for Kenya, where popu- cities, and the improvements shown in other lation growth during the past decade has cities since 2010. Because getting electricity averaged 2.6%, significantly higher than the was incorporated as a separate indicator world average of 1.5%.9 The formal employ- in the ease of doing business index of the ment sector has not been able to match the Doing Business 2012 report, procedures, time and cost related to obtaining an electricity same level of growth in jobs pushing many connection were removed from the dealing people into seeking informal employment with construction permits indicators. See the opportunities with notably lower incomes.10 data notes for more details. 5. The KRA’s website is http://www.kra.go.ke. Steady reformers make business regula- 6. City, municipality, town or county. tion an imbedded part of their reform 7. International Finance Corporation; The World agenda. The world’s top-ranked economy Bank; Multilateral Investment Guarantee on the ease of doing business, Singapore, Agency. 2011. Avoiding the Fiscal Pitfalls of undertakes business reforms every year. Subnational Regulation: How to Optimize In other economies, dedicated agencies Local Regulatory Fees to Encourage Growth. Washington, D.C.: the World Bank Group. are created. Such is the Better Regulation 8. Bruhn, Miriam. 2008. “License to Sell: The Executive in the United Kingdom. Business Effect of Business Registration Reform on reforms with impact cut across a range of Entrepreneurial Activity in Mexico.” Policy topics. Cooperation across different parts of Research Working Paper 4538. Washington, the bureaucracy, at both local and national D.C.: World Bank. The results were obtained level, is necessary for wide-ranging reforms. after controlling for GDP per capita, number of economic establishments per capita, Political will and vision coming from a reform fixed assets per capita, and investments per champion—whether the prime minister, capita in the benchmarked municipalities. minister or mayor—is central to success. 9. The World Bank data: http://data.worldbank More than 2 dozen economies have put in .org/. 7 About Doing Business and Doing Business in Kenya 2012 A vibrant private sector—with firms making behavior of businesses will often start by score for more regulation, such as stricter investments, creating jobs and improving changing rules and regulations that affect disclosure requirements in related-party productivity—promotes growth and expands them. Doing Business goes beyond identifying transactions. Some give a higher score for opportunities for poor people. To foster a that a problem exists and points to specific a simplified way of implementing existing vibrant private sector, governments around regulations or regulatory procedures that regulation, such as completing business the world have implemented wide-ranging may lend themselves to reform. And its start-up formalities in a one-stop shop. reforms, including price liberalization and quantitative measures of business regulation macroeconomic stabilization programs. But enable research on how specific regulations Doing Business in Kenya 2012 encompasses 2 governments committed to the economic affect firm behavior and economic outcomes. types of data. The first come from readings health of their country and opportunities for of laws and regulations. The second are time its citizens focus on more than macroeco- The first Doing Business report, published and motion indicators that measure the effi- nomic conditions. They also pay attention in 2003, covered 5 indicator sets and 133 ciency and complexity in achieving a regula- to the laws, regulations and institutional economies. The latest report, Doing Business tory goal (such as granting the legal identity arrangements that shape daily economic 2012: Doing business in a more transparent of a business). Within the time and motion activity. world, covers 11 indicator sets and 183 econo- indicators, cost estimates are recorded from mies. Ten topics are included in the aggre- official fee schedules where applicable. A Until 10 years ago, however, there were gate ranking on the ease of doing business. regulatory process such as starting a busi- no globally available indicator sets for The project has benefited from feedback ness or registering property is broken down monitoring such microeconomic factors and from governments, academics, practitioners into clearly defined steps and procedures. analyzing their relevance. The first efforts, in and reviewers.1 The initial goal remains: to Here, Doing Business builds on Hernando de the 1980s, drew on perceptions data from provide an objective basis for understanding Soto’s pioneering work in applying the time expert or business surveys that capture often and improving the regulatory environment and motion approach first used by Frederick one-time experiences of businesses. Such for business. Taylor to revolutionize the production of the surveys can be useful gauges of economic Model T Ford. De Soto used the approach in and policy conditions. But few perception the 1980s to show the obstacles to setting WHAT DOING BUSINESS IN KENYA surveys provide indicators with a global up a garment factory on the outskirts of 2012 COVERS coverage that are updated annually. Lima, Peru.2 Doing Business in Kenya 2012 provides a The Doing Business project takes a different quantitative measure of the national and WHAT DOING BUSINESS IN KENYA approach from perception surveys. It looks at local regulations for 4 Doing Business indica- 2012 DOES NOT COVER domestic, primarily small and medium-size tors: starting a business, dealing with con- struction permits, registering property, and Just as important as knowing what Doing companies and measures the regulations ap- enforcing contracts—as they apply to do- Business in Kenya 2012 does is to know what it plying to them through their life cycle. Based mestic small and medium-size enterprises. does not do—to understand what limitations on standardized case studies, it presents must be kept in mind in interpreting the data. quantitative indicators on business regulation that can be compared across 183 economies A fundamental premise of Doing Business is that economic activity requires good rules. Limited in scope and over time. This approach complements These include rules that establish and clarify Doing Business in Kenya 2012 focuses on four the perception surveys in exploring the major property rights, and rules that increase the topics, with the specific aim of measuring constraints for businesses, as experienced predictability of economic interactions. The the regulation and red tape relevant to the by the businesses themselves and set out in objective: regulations designed to be ef- life cycle of a domestic small to medium-size the regulations that apply to them. ficient in their implementation, to be acces- firm. Accordingly: Rules and regulations are under the direct sible to all who need to use them and to be • Doing Business in Kenya 2012 does not mea- control of policy makers—and policy mak- simple in their implementation. Accordingly, sure all 11 indicators covered in the global ers intending to change the experience and some Doing Business indicators give a higher Doing Business report. The report covers 8 DOING BUSINESS IN KENYA 2012 only those 4 areas of business regulation This choice is in part empirical: private, limit- WHY THIS FOCUS that are either the provenance of the local ed liability companies are the most prevalent Doing Business functions as a kind of cho- governments or where local differences business form in most economies around the lesterol test for the regulatory environment exist—starting a business, dealing with world. The choice also reflects one focus of for domestic businesses. A cholesterol test construction permits, registering property, Doing Business: expanding opportunities for does not tell us everything about the state of and enforcing contracts. entrepreneurship. Investors are encouraged our health. But it does measure something • Doing Business in Kenya 2012 does not to venture into business when potential loss- important for our health. And it puts us on measure all aspects of the business es are limited to their capital participation. watch to change behaviors in ways that will environment that matter to firms or improve not only our cholesterol rating but investors—or all factors that affect com- Focused on the formal sector also our overall health. petitiveness. It does not, for example, In constructing the indicators, Doing Business measure security, macroeconomic sta- in Kenya 2012 assumes that entrepreneurs One way to test whether Doing Business bility, corruption, the labor skills of the are knowledgeable about all regulations in serves as a proxy for the broader business population, the underlying strength of place and comply with them. In practice, environment and for competitiveness is institutions or all aspects of the quality of entrepreneurs may spend considerable time to look at correlations between the Doing infrastructure. Nor does it focus on regula- finding out where to go and what documents Business rankings and other major economic tions specific to foreign investment. to submit. Or they may avoid legally required benchmarks. Closest to Doing Business in • Doing Business in Kenya 2012 does not cov- procedures altogether—by not registering what it measures is the set of indicators on er all regulations, or all regulatory goals, for social security, for example. product market regulation compiled by the in any city. As economies and technology Organization for Economic Co-operation and Where regulation is particularly onerous, Development (OECD). These indicators are advance, more areas of economic activ- levels of informality are higher. Informality designed to help assess the extent to which ity are being regulated. For example, the comes at a cost: firms in the informal sec- the regulatory environment promotes or European Union’s body of laws (acquis) tor typically grow more slowly, have poorer inhibits competition. They include measures has now grown to no fewer than 14,500 access to credit and employ fewer workers— of the extent of price controls, the licensing rule sets. Doing Business in Kenya 2012 and their workers remain outside the protec- and permit system, the degree of simplicity measures just 4 phases of a company’s tions of labor law.3 All this may be even more of rules and procedures, the administrative life cycle, through 4 specific indicators. so for female-owned businesses, according burdens and legal and regulatory barriers, The indicator sets also do not cover all as- to country-specific research.4 Firms in the the prevalence of discriminatory procedures, pects of regulation in the particular area. informal sector are also less likely to pay and the degree of government control over For example, the indicators on starting a taxes. Doing Business measures one set of business enterprises. The rankings on these business do not cover all aspects of com- factors that help explain the occurrence of indicators—for the 39 countries that are mercial legislation. informality and give policy makers insights covered, several of them large emerging into potential areas of reform. Gaining a fuller markets—are highly correlated with those on Based on standardized case understanding of the broader business envi- the ease of doing business (the correlation scenarios ronment, and a broader perspective on policy here is 0.72; figure 2.1). The indicators analyzed in Doing Business in challenges, requires combining insights from Kenya 2012 are based on standardized case Doing Business with data from other sources, Similarly, there is a high correlation (0.82) scenarios with specific assumptions, such such as the World Bank Enterprise Surveys.5 between the rankings on the ease of doing as that the business is located in one of the 13 cities in Kenya measured by the report. FIGURE 2.1 A strong correlation between Doing Business rankings and OECD rankings on product market Economic indicators commonly make limit- regulation Ranking on OECD product market regulation indicators ing assumptions of this kind. Inflation statis- tics, for example, are often based on prices 40 of consumer goods in a few urban areas. 35 Such assumptions allow global coverage and 30 25 enhance comparability, but they inevitably 20 come at the expense of generality. 15 10 In areas where regulation is complex and 5 0 highly differentiated, the standardized case 0 20 40 60 80 100 120 140 used to construct each Doing Business in Ranking on the ease of doing business Kenya 2012 indicator needs to be carefully defined. Where relevant, the standardized Note: Correlation is significant at the 5% level when controlling for income per capita. Source: Doing Business database; OECD data case assumes a limited liability company. ABOUT DOING BUSINESS 9 FIGURE 2.2 A similarly strong correlation between Doing Business rankings and World Economic Forum any city and in determining a sensible and rankings on global competitiveness politically feasible path for reform. Ranking on Global Competitiveness Index 140 Reviewing the Doing Business rankings in 120 isolation may show unexpected results. 100 Some cities may rank unexpectedly high on 80 some indicators. And some cities that have 60 40 had rapid growth or attracted a great deal of 20 investment may rank lower than others that 0 appear to be less dynamic. 0 20 40 60 80 100 120 140 160 180 Ranking on the ease of doing business But for reform-minded local governments, how much the regulatory environment for Note: Correlation is significant at the 5% level when controlling for income per capita. local entrepreneurs improves matters more Source: Doing Business database; WEF 2010 than their relative ranking. As cities develop, they strengthen and add to regulations business and those on the World Economic transparent rules and regulations affecting to protect investor and property rights. Forum’s Global Competitiveness Index, a their ability to compete, innovate and grow. Meanwhile, they find more efficient ways much broader measure capturing such fac- to implement existing regulations and cut tors as macroeconomic stability, aspects of Where regulation is burdensome and com- outdated ones. One finding of Doing Business: petition limited, success tends to depend dynamic and growing economies continually human capital, the soundness of public insti- more on whom you know than on what you reform and update their regulations and their tutions and the sophistication of the business can do. But where regulation is transparent, way of implementing them, while many poor community (figure 2.2). Economies that do efficient and implemented in a simple way, economies still work with regulatory systems well on the Doing Business indicators tend it becomes easier for any aspiring entrepre- to do well on the OECD market regulation dating to the late 1800s. neurs, regardless of their connections, to indicators and the Global Competitiveness operate within the rule of law and to benefit Index and vice versa.6 WHAT RESEARCH SHOWS ON from the opportunities and protections that the law provides. THE EFFECTS OF BUSINESS A bigger question is whether the issues on REGULATION which Doing Business focuses matter for de- In this sense Doing Business values good rules Nine years of Doing Business data, together velopment and poverty reduction. The World as a key to social inclusion. It also provides a with other data sets, have enabled a grow- Bank study Voices of the Poor asked 60,000 basis for studying effects of regulations and ing body of research on how specific areas poor people around the world how they their application. For example, Doing Business of business regulation—and regulatory thought they might escape poverty.7 The 2004 found that faster contract enforcement reforms in those areas—relate to social and answers were unequivocal: women and men was associated with perceptions of greater economic outcomes. Some 873 articles have alike pin their hopes above all on income judicial fairness—suggesting that justice been published in peer-reviewed academic from their own business or wages earned in delayed is justice denied.8 journals, and about 2,332 working papers are employment. Enabling growth—and ensur- ing that poor people can participate in its available through Google Scholar.9 DOING BUSINESS IN KENYA 2012 benefits—requires an environment where AS A BENCHMARKING EXERCISE Much attention has been given to exploring new entrants with drive and good ideas, re- Doing Business in Kenya 2012, in captur- links to microeconomic outcomes, such gardless of their gender or ethnic origin, can ing some key dimensions of regulatory as firm creation and employment. Recent get started in business and where good firms regimes, can be useful for benchmarking. research focuses on how business regula- can invest and grow, generating more jobs. Any benchmarking—for individuals, firms or tions affect the behavior of firms by creating economies—is necessarily partial: it is valid incentives (or disincentives) to register and Small and medium-size enterprises are and useful if it helps sharpen judgment, less operate formally, to create jobs, to innovate key drivers of competition, growth and job so if it substitutes for judgment. creation, particularly in developing coun- and to increase productivity.10 Many studies tries. But in these economies up to 80% of Doing Business in Kenya 2012 provides 2 takes have also looked at the role played by courts, economic activity takes place in the informal on the data it collects: it presents “absolute” credit bureaus, and insolvency and collateral sector. Firms may be prevented from entering indicators for each city for each of the 4 laws in providing incentives for creditors and the formal sector by excessive bureaucracy regulatory topics it addresses, and it provides investors to increase access to credit. The and regulation. Even firms operating in the rankings of cities by indicator. Judgment is literature has produced a range of findings. formal sector might not have equal access to required in interpreting these measures for 10 DOING BUSINESS IN KENYA 2012 Lower costs for business registration encour- • In Mexico one study found that a program study found that economies with more con- age entrepreneurship and enhance firm pro- that simplified municipal licensing led to a strained access to foreign markets benefit ductivity. Economies with efficient business 5% increase in the number of registered more from improvements in the investment registration have a higher entry rate by new businesses and a 2.2% increase in wage climate than those with easier access. firms as well as greater business density.11 employment, while competition from Economies where registering a new business new entrants lowered prices by 0.6% Research also shows that an economy’s and the income of incumbent businesses ability to enforce contracts is an important takes less time have seen more businesses by 3.2%.17 Other research found that the determinant of its comparative advantage register in industries where the potential for same licensing reform directly led to a in the global economy: among compa- growth is greatest, such as those that have 4% increase in new start-ups and that the rable economies, those with good contract experienced expansionary shifts in global program was more effective in munici- enforcement tend to produce and export demand or technology.12 Reforms making palities with less corruption and cheaper more customized products than those with it easier to start a business tend to have a additional registration procedures.18 poor contract enforcement.27 Another study significant positive effect on investment in shows that in many developing economies product market industries such as transport, • In India the progressive elimination of the production of high-quality output is a pre- communications and utilities, which are “license raj” led to a 6% increase in new condition for firms to become exporters: often sheltered from competition.13 There is firm registrations, and highly produc- institutional reforms that lower the cost of also evidence that more efficient business tive firms entering the market saw larger high-quality production increase the positive entry regulations improve firm productivity increases in real output than less produc- effect that trade facilitation can have on in- and macroeconomic performance.14 tive firms.19 Simpler entry regulation and come.28 Research shows that removing bar- labor market flexibility were found to be Simpler business registration translates riers to trade needs to be accompanied by complementary. States with more flexible other reforms, such as making labor markets into greater employment opportunities in employment regulations saw a 25% larger more flexible, to achieve higher productivity the formal sector. Reducing start-up costs decrease in informal firms and 17.8% and growth.29 for new firms was found to result in higher larger gains in real output than states with take-up rates for education, higher rates of less flexible labor regulations.20 The same Regulations and institutions that form part of job creation for high-skilled labor and higher licensing reform led to an aggregate pro- the financial market infrastructure—includ- average productivity because new firms ductivity improvement of around 22% for ing courts, credit information systems, and are often set up by high-skilled workers.15 firms affected by the reform.21 collateral, creditor and insolvency laws—play Lowering entry costs can boost legal cer- • In Colombia new firm registrations in- a role in easing access to credit. Enterprise tainty: businesses entering the formal sector creased by 5.2% after the creation of a surveys conducted by the World Bank show gain access to the legal system, to the benefit one-stop shop for businesses.22 that access to credit is a major constraint to of both themselves and their customers and • In Portugal the introduction of a one-stop businesses around the world.30 Good credit suppliers.16 shop for businesses led to a 17% increase information systems and strong collateral in new firm registrations and 7 new jobs laws can help alleviate financing constraints. Assessing the impact of policy reforms poses for every 100,000 inhabitants compared Analysis in 12 transition economies found challenges. While cross-country correlations with economies that did not implement that reforms strengthening collateral laws can appear strong, it is difficult to isolate the reform.23 increased the supply of bank loans by the effect of regulations given all the other 13.7% on average.31 Creditor rights and the potential factors that vary at the country A sound regulatory environment leads to existence of credit registries, whether public level. Generally, cross-country correlations stronger trade performance. Efforts to or private, are both associated with a higher do not show whether a specific outcome is streamline the institutional environment for ratio of private credit to GDP.32 And greater caused by a specific regulation or whether it trade (such as by increasing the efficiency information sharing through credit bureaus coincides with other factors, such as a more of customs) have been shown to have posi- is associated with higher bank profitability positive economic situation. So how do we tive effects on trade volumes.24 One study and lower bank risk.33 know whether things would have been dif- found that an inefficient trade environment ferent without a specific regulatory reform? was among the main factors in poor trade Country-specific research assessed the Some studies have been able to test this by performance in Sub-Saharan African coun- effect of efficient debt recovery and exit investigating variations within an economy tries.25 Similarly, another study identified processes in determining conditions of credit over time. Other studies have investigated the government’s ability to formulate and and in ensuring that less productive firms are policy changes that affected only certain implement sound policies and regulations either restructured or exit the market: firms or groups. Several country-specific that promote private sector development, • The establishment of specialized debt impact studies conclude that simpler entry customs efficiency, quality of infrastructure recovery tribunals in India sped up the regulations encourage the establishment of and access to finance as important factors resolution of debt recovery claims and more new firms: in improving trade performance.26 The same allowed lenders to seize more collateral ABOUT DOING BUSINESS 11 on defaulting loans. It also increased the businesses. Most reforms relating to Doing BOX 1 HOW ECONOMIES HAVE USED DOING BUSINESS IN REGULATORY REFORM probability of repayment by 28% and Business topics were nested in broader PROGRAMS lowered interest rates on loans by 1–2 per- programs of reform aimed at enhancing To ensure coordination of efforts across centage points.34 economic competitiveness. In structuring agencies, such economies as Colombia, their reform programs for the business • Following a broad bankruptcy reform in Rwanda and Sierra Leone have formed regu- Brazil in 2005 that, among other things, environment, governments use multiple latory reform committees reporting directly to improved the protection of creditors, the data sources and indicators. And reformers the president that use the Doing Business indi- cators as one input to inform their programs cost of debt fell by 22% and the aggregate respond to many stakeholders and interest for improving the business environment. level of credit rose by 39%.35 groups, all of whom bring important issues More than 20 other economies have formed and concerns into the reform debate. World • The introduction of improved insolvency such committees at the interministerial Bank Group dialogue with governments level. These include India, Malaysia, Taiwan regimes that streamlined mechanisms on the investment climate is designed to (China) and Vietnam in East and South Asia; for reorganization reduced the number the Arab Republic of Egypt, Morocco, Saudi encourage critical use of the data, sharp- of liquidations by 8.4% in Belgium and Arabia, the Syrian Arab Republic, the United ening judgment, avoiding a narrow focus by 13.6% in Colombia as more viable Arab Emirates and the Republic of Yemen in on improving Doing Business rankings and firms opted for reorganization instead.36 the Middle East and North Africa; Georgia, encouraging broad-based reforms that Kazakhstan, the Kyrgyz Republic, Moldova In Colombia the new law better distin- enhance the investment climate. The World and Tajikistan in Eastern Europe and Central guished viable from nonviable firms, Asia; Kenya, Liberia, Malawi and Zambia in Bank Group uses a vast range of indicators making survival more likely for financially Sub-Saharan Africa; and Guatemala, Mexico and analytics in this policy dialogue, includ- distressed but viable firms. and Peru in Latin America. Governments have ing its Global Poverty Monitoring Indicators, reported more than 300 regulatory reforms Logistics Performance Indicators and many that have been informed by Doing Business HOW GOVERNMENTS USE DOING others. With the open data initiative, all in- since 2003. BUSINESS dicators are available to the public at http:// Quantitative data and benchmarking can be data.worldbank.org. useful in stimulating debate about policy, both by exposing potential challenges, and METHODOLOGY AND DATA by identifying where policy makers might Doing Business in Kenya 2012 covers 13 cities. BOX 2 HOW A REGIONAL ECONOMIC look for lessons and good practices. For FORUM USES DOING BUSINESS The data are based on national and local laws governments, a common first reaction is to and regulations as well as administrative The Asia-Pacific Economic Cooperation doubt the quality and relevance of the Doing requirements. (For a detailed explanation of (APEC) organization uses Doing Business to Business data. Yet the debate typically pro- identify potential areas of regulatory reform, the Doing Business in Kenya 2012 methodol- ceeds to a deeper discussion exploring the to champion economies that can help oth- ogy, see the data notes). relevance of the data to the economy and ers improve and to set measurable targets. In 2009 APEC launched the Ease of Doing areas where reform might make sense. Information sources for the data Business Action Plan with the goal of making it 25% cheaper, faster and easier to do busi- Most reformers start out by seeking exam- Most of the indicators are based on laws ness in the region by 2015.1 The action plan ples, and Doing Business helps in this (boxes and regulations. In addition, most of the cost sets specific targets, such as making it 25% 2.1 and 2.2). For example, Saudi Arabia used indicators are backed by official fee sched- faster to start a business by reducing the av- ules. Doing Business respondents both fill out the company law of France as a model of for erage time by 1 week. written surveys and provide references to the revising its own. Many countries in Africa Drawing on a firm survey, planners identi- relevant laws, regulations and fee schedules, fied 5 priority areas: starting a business, get- look to Mauritius - the region’s strongest ting credit, enforcing contracts, trading across performer on Doing Business indicators - as a aiding data checking and quality assurance. borders and dealing with permits. APEC source of good practices for business regula- economies then selected 6 champion econo- For some indicators part of the cost compo- tion reform. In the words of Luis Guillermo mies for the priority areas: New Zealand and nent (where fee schedules are lacking) and Plata, the former minister of commerce, the United States (starting a business), Japan the time component are based on actual (getting credit), Korea (enforcing contracts), industry and tourism of Colombia, practice rather than the law on the books. Singapore (trading across borders) and Hong It’s not like baking a cake where you follow the This introduces a degree of subjectivity. Kong SAR, China (dealing with construction permits). In 2010 and 2011 several of the recipe. No. We are all different. But we can The Doing Business approach has therefore champion economies organized workshops take certain things, certain key lessons, and been to work with legal practitioners or to develop programs for building capacity in apply those lessons and see how they work in professionals who regularly undertake the their area of expertise. transactions involved. Following the stan- our environment. 1. APEC (Asia-Pacific Economic Cooperation). dard methodological approach for time and 2010. “APEC Ease of Doing Business Action Plan (2010-2015).” http://aimp.apec.org/ Over the past 9 years there has been motion studies, Doing Business breaks down much activity by governments in reforming each process or transaction, such as start- the regulatory environment for domestic ing and legally operating a business, into 12 DOING BUSINESS IN KENYA 2012 separate steps to ensure a better estimate only part of the minimum capital has to be Kaul Shah and Patti Petesh. 2000. Voices of of time. The time estimate for each step is paid up front. To reflect the actual potential the Poor: Crying Out for Change. Washington, DC: World Bank Group. given by practitioners with significant and barrier to entry, the paid-in minimum capital 8. World Bank. 2003. Doing Business in 2004: routine experience in the transaction. has been used since 2004. Understanding Regulation. Washington, DC: World Bank Group. The Doing Business approach to data col- This year’s report removes procedures relat- 9. According to searches on Google Scholar lection contrasts with that of enterprise or ed to getting an electricity connection from (http://scholar.google.com) and the Social firm surveys, which capture often one-time dealing with construction permits indicators. Science Citation Index. perceptions and experiences of businesses. This has been done to avoid double count- 10. Djankov, Simeon, Rafael La Porta, Florencio A corporate lawyer registering 100–150 ing as the Doing Business report includes an López-de-Silanes and Andrei Shleifer. businesses a year will be more familiar with 11th indicator this year - Getting Electricity.37 2002. “The Regulation of Entry.” Quarterly Doing Business in Kenya 2012 has reflected the Journal of Economics 117 (1): 1–37; Alesina, the process than an entrepreneur, who will Alberto, Silvia Ardagna, Giuseppe Nicoletti register a business only once or maybe removal of procedures related to getting an and Fabio Schiantarelli. 2005. “Regulation twice. A bankruptcy judge deciding dozens electricity connection from dealing with con- and Investment.” Journal of the European of cases a year will have more insight into struction permits to allow for international Economic Association 3 (4): 791–825; Perotti, bankruptcy than a company that may un- comparability. Enrico, and Paolo Volpin. 2005. “The Political Economy of Entry: Lobbying and dergo the process. Financial Development.” Paper presented All changes in methodology are explained in the data notes section of this report as well at the American Finance Association 2005 Development of the methodology Philadelphia Meetings; Klapper, Leora, Luc as on the Doing Business website. In addition, Laeven and Raghuram Rajan. 2006. “Entry The methodology for calculating each in- data time series for each indicator and city Regulation as a Barrier to Entrepreneurship.” dicator is transparent, objective and easily are available on the website. The website Journal of Financial Economics 82 (3): replicable. Leading academics collaborate 591–629; Fisman, Raymond, and Virginia also makes available all original data sets in the development of the indicators, ensur- Sarria-Allende. 2010. “Regulation of used for background papers. ing academic rigor. Eight of the background Entry and the Distortion of Industrial papers underlying the indicators have been Organization.” Journal of Applied Economics Information on data corrections is pro- 13 (1): 91–120; Antunes, Antonio, and Tiago published in leading economic journals. vided in the data notes and on the website. Cavalcanti. 2007. “Start Up Costs, Limited A transparent complaint procedure allows Enforcement, and the Hidden Economy.” Doing Business uses a simple averaging ap- anyone to challenge the data. If errors are European Economic Review 51 (1): 203–24; proach for weighting sub-indicators and confirmed after a data verification process, Barseghyan, Levon. 2008. “Entry Costs and calculating rankings. Other approaches were Cross-Country Differences in Productivity they are expeditiously corrected. explored, including using principal compo- and Output.” Journal of Economic Growth 13 (2): 145–67; Eifert, Benjamin. 2009. “Do nents and unobserved components. The Regulatory Reforms Stimulate Investment principal components and unobserved com- NOTES and Growth? Evidence from the Doing ponents approaches turn out to yield results 1. This has included a review by the World Business Data, 2003–07.” Working Paper nearly identical to those of simple averaging. Bank Independent Evaluation Group 159, Center for Global Development, (2008) as well as ongoing input from the Washington, DC; Klapper, Leora, Anat Lewin The tests show that each set of indicators International Tax Dialogue. and Juan Manuel Quesada Delgado. 2009. provide sufficiently broad coverage across “The Impact of the Business Environment 2. De Soto, Hernando. 2000. The Mystery of topics. Therefore, the simple averaging ap- Capital: Why Capitalism Triumphs in the West on the Business Creation Process.” Policy proach is used. and Fails Everywhere Else. New York: Basic Research Working Paper 4937, World Bank, Books. Washington, DC; Djankov, Simeon, Caroline Improvements to the methodology 3. Schneider, Friedrich. 2005. “The Informal Freund and Cong S. Pham. 2010. “Trading on Sector in 145 Countries.” Department of Time.” Review of Economics and Statistics 92 The methodology has undergone continual (1): 166–73; Klapper, Leora, and Inessa Love. Economics, University Linz. improvement over the years. Changes have 2011. “The Impact of Business Environment 4. Amin, Mohammad. 2011. “Labor been made mainly in response to country Reforms on New Firm Registration.” Policy Productivity, Firm-Size and Gender: The suggestions. In accordance with the Doing Research Working Paper 5493, World Bank, Case of Informal Firms in Argentina and Washington, DC; Chari, Anusha. 2011. Business methodology, these changes have Peru.” Enterprise Note 22, Enterprise “Identifying the Aggregate Productivity been incorporated into the Doing Business in Analysis Unit, World Bank Group, Effects of Entry and Size Restrictions: An Washington, DC. http://enterprisesurveys. Kenya 2012. Empirical Analysis of License Reform in org./ India.” American Economic Journal: Economic For starting a business, for example, the 5. http://www.enterprisesurveys.org Policy 3: 66–96; Bruhn, Miriam. 2011. minimum capital requirement can be an 6. The World Economic Forum’s Global “License to Sell: The Effect of Business Competitiveness Report uses part of the Registration Reform on Entrepreneurial obstacle for potential entrepreneurs. Initially, Activity in Mexico.” Review of Economics and Doing Business data sets on starting a Doing Business measured the required mini- business, employing workers, protecting Statistics 93 (1): 382–86. mum capital regardless of whether it had to investors and getting credit (legal rights). 11. Klapper, Lewin and Quesada Delgado 2009. be paid up front or not. In many economies 7. Narayan, Deepa, Robert Chambers, Meer Entry rate refers to newly registered firms ABOUT DOING BUSINESS 13 as a percentage of total registered firms. Aggregate Productivity Effects of Entry and 33. Ibid. Business density is defined as the total Size Restrictions: An Empirical Analysis of 34. Visaria, Sujata. 2009. “Legal Reform and number of businesses as a percentage of the License Reform in India.” American Economic Loan Repayment: The Microeconomic working-age population (ages 18-65). Journal: Economic Policy 3: 66–96. Impact of Debt Recovery Tribunals in India.” 12. Ciccone, Antonio, and Elias Papaioannou. 22. Cardenas, Mauricio, and Sandra Rozo. 2009. American Economic Journal: Applied Economics 2007. “Red Tape and Delayed Entry.” Journal “Firm Informality in Colombia: Problems 1 (3): 59–81. of the European Economic Association 5 and Solutions.” Desarrollo y Sociedad, no. 63: 35. Funchal, Bruno. 2008. “The Effects of (2-3):444-58. 211–43. the 2005 Bankruptcy Reform in Brazil.” 13. Alesina, Alberto, Silvia Ardagna, Giuseppe 23. Branstetter, Lee G., Francisco Lima, Lowell J. Economics Letters 101: 84–86. Nicoletti and Fabio Schiantarelli. 2005. Taylor and Ana Venâncio. 2010. “Do Entry 36. Dewaelheyns, Nico, and Cynthia Van Hulle. “Regulation and Investment.” Journal of Regulations Deter Entrepreneurship and Job 2008. “Legal Reform and Aggregate Small the European Economic Association 3 (4): Creation? Evidence from Recent Reforms and Micro Business Bankruptcy Rates: 791-825. in Portugal.” NBER Working Paper 16473, Evidence from the 1997 Belgian Bankruptcy 14. Loayza,Norman, Ana Maria Oviedo National Bureau of Economic Research, Code.” Small Business Economics 31 (4): and Luis Serven. 2005. “Regulation and Cambridge, MA. 409–24; Giné, Xavier, and Inessa Love. Macroeconomic Performance.” Policy 24. Djankov, Simeon, Caroline Freund and Cong 2010. “Do Reorganization Costs Matter Research Working Paper 3469, World Bank, S. Pham. 2010. “Trading on Time.” Review of for Efficiency? Evidence from a Bankruptcy Washington DC; Barseghyan, Levon. 2008. Economics and Statistics 92 (1): 166–73. Reform in Colombia.” Journal of Law and “Entry Costs and Cross-Country Differences 25. Iwanow, Thomasz, and Colin Kirkpatrick. Economics 53 (4): 833–64. in Productivity and Output.” Journal of 2009. “Trade Facilitation and Manufacturing 37. Previous years’ data on dealing with con- Economic Growth 13 (2): 145-67. Exports: Is Africa Different?” World struction permits are adjusted to reflect this 15. Dulleck, Uwe, Paul Frijters and R. Winter- Development 37 (6): 1039–50. change. They are made available on Doing Ebmer. 2006. “Reducing Start-up Costs 26. Seker, Murat. 2011. “Trade Policies, Business website under “historical data” for New Firms: The Double Dividend on Investment Climate, and Exports.” MPRA (http://www.doingbusiness.org). the Labor Market.” Scandinavian Journal of Paper 29905, University Library of Munich, Economics 108: 317–37; Calderon, César, Germany. Alberto Chong and Gianmarco Leon. 2007. 27. Nunn, Nathan. 2007. “Relationship- “Institutional Enforcement, Labor-Market Specificity, Incomplete Contracts, and Rigidities, and Economic Performance.” the Pattern of Trade.” Quarterly Journal of Emerging Markets Review 8 (1): 38–49; Economics 122 (2): 569–600. Micco, Alejandro, and Carmen Pagés. 2006. “The Economic Effects of Employment 28. Rauch, James. 2010. “Development through Protection: Evidence from International Synergistic Reforms.” Journal of Development Industry-Level Data.” IZA Discussion Paper Economics 93 (2): 153–61. 2433, Institute for the Study of Labor (IZA), 29. Chang, Roberto, Linda Kaltani and Bonn, Germany. Norman Loayza. 2009. “Openness Can 16. Masatlioglu, Yusufcan, and Jamele Rigolini. Be Good for Growth: The Role of Policy 2008. “Informality Traps.” B.E. Journal of Complementarities.” Journal of Development Economic Analysis & Policy 8 (1); Djankov, Economics 90: 33–49; Cunat, Alejandro, Simeon. 2009. “The Regulation of Entry: A and Marc J. Melitz. 2007. “Volatility, Survey.” World Bank Research Observer 24 Labor Market Flexibility, and the Pattern of (2): 183–203. Comparative Advantage.” NBER Working Paper 13062, National Bureau of Economic 17. Bruhn, Miriam. 2011. “License to Sell: The Research, Cambridge, MA. Effect of Business Registration Reform on Entrepreneurial Activity in Mexico.” Review 30. http://enterprisesurveys.org. of Economics and Statistics 93 (1): 382–86. 31. Haselmann, Rainer, Katharina Pistor and 18. Kaplan, David, Eduardo Piedra and Enrique Vikrant Vig. 2010. “How Law Affects Seira. 2007. “Entry Regulation and Business Lending.” Review of Financial Studies 23 Start-Ups: Evidence from Mexico.” Policy (2): 549–80. The countries studied were Research Working Paper 4322, World Bank, Bulgaria, Croatia, the Czech Republic, Washington, DC. Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic, Slovenia and 19. Aghion, Philippe, Robin Burgess, Stephen Ukraine. Redding and Fabrizio Zilibotti. 2008. “The Unequal Effects of Liberalization: Evidence 32. Djankov, Simeon, Caralee McLiesh and from Dismantling the License Raj in India.” Andrei Shleifer. 2007. “Private Credit in 129 American Economic Review 98 (4): 1397–412. Countries.” Journal of Financial Economics 84 (2): 299–329; Houston, Joel, Chen 20. Sharma, Siddharth. 2009. “Entry Regulation, Lin, Ping Lin and Yue Ma. 2010. “Creditor Labor Laws and Informality: Evidence from Rights, Information Sharing, and Bank Risk India.” Enterprise Survey Working Paper, Taking.” Journal of Financial Economics 96 (3): Enterprise Analysis Unit, World Bank Group, 485–512. Washington, DC. 21. Chari, Anusha. 2011. “Identifying the 15 Starting a business Hadija loves baking. She always made cakes FIGURE 3.1 What are the time, cost, paid-in minimum capital and number of procedures to get a local for her family and friends in Mombasa. limited liability company up and running? Eventually, Hadija turned her baking passion Cost (% of income per capita) into an informal business and brought in her Formal son Feisal, who delivered the goods. Hadija operation had not thought of formalizing her activity because registering a business in Mombasa Paid-in $ Number of minimum procedures used to be a lengthy affair. Back in 2009, it capital took more than 2 and a half months to open a new business. This has changed. Thanks to several reforms, Hadija only needed 1 month Entrepreneur to register her business in March 2012. A Time (days) Preregistration Registration, Postregistration rare new addition to the Old Town scene, her incorporation bakery cooks up delicious cakes and muffins. It pays taxes and employs 3 people who were previously part of the informal economy. their own business. A recent study using HOW DOES STARTING A data collected from company registries in BUSINESS WORK IN KENYA? WHY DOES FORMAL BUSINESS 100 countries over 8 years found that simple Among the 13 Kenyan cities studied, starting REGISTRATION MATTER? business start-up is critical for fostering for- a business takes, on average, 10 procedures, 45 days and costs 43.4% of income per Formal incorporation has many benefits. Legal mal entrepreneurship. Countries with smart capita. It is 22 days faster and 5% cheaper entities outlive their founders. Resources business registration have a higher entry rate than what was measured 3 years ago.4 But can be pooled as several shareholders join as well as greater business density.3 starting a business in Kenya is still a relatively together. Limited liability companies limit burdensome process compared to other the financial liability of company owners to WHAT DOES STARTING A countries. In Rwanda, it takes 2 procedures, their investments, so personal assets are BUSINESS MEASURE? 3 days and 4.7% of income per capita, while not put at risk. And companies have access in Mauritius and Senegal, opening a busi- to services and institutions—from courts to Doing Business measures the procedures, ness can be accomplished in 6 and 5 days, banks—as well as to new customers and time, cost and paid-in minimum capital for respectively. A South African entrepreneur markets. Reforms that reduce informal- a small to medium-size company to start needs to pay only 0.3% of income per capita ity greatly benefit women, such as Hadija, up and operate formally (figure 3.1). These to start a business (figure 3.2). because they make up a larger share of the procedures include obtaining all neces- informal sector.1 Consider Uganda. Complex A shared national legislative framework reg- sary licenses and permits and completing start-up regulations there required frequent ulates business start-up across Kenya. The contact between entrepreneurs and public any required notifications, verifications or same 10 procedures are required in all cities. officials—and more chances for bribery. inscriptions for the company and employees The Registrar of Companies has only one Women were seen as easy targets: 43% of with relevant authorities. To make the data office in the entire country. Entrepreneurs female entrepreneurs reported harassment comparable across 183 economies, Doing from out-of-town must travel to Nairobi to from government officials, while only 25% Business uses a standardized business that register their companies. Since applicants of all entrepreneurs did. When reformers have to make the trip to Nairobi anyways, is 100% domestically owned, has a start-up simplified business start-up, business reg- they tend to also take care of the pre- capital equivalent to 10 times income per istrations shot up. The increase in first-time requisites of incorporation there—obtaining business owners was 33% higher for women capita, engages in general industrial or com- approval of the company name, stamping than men.2 Rich or poor, men and women mercial activities and employs between 10 the company incorporation documents, around the world seek to run and profit from and 50 people. paying the stamp duty at an authorized bank 16 DOING BUSINESS IN KENYA 2012 FIGURE 3.2 Some African countries have more efficient business registration processes Council charge KES 3,500 and 4,000, respectively (about US$ 50). At the other 148.9 ZIMBABWE KENYA 2010 12 end of the scale, the City Council of Nairobi 90 ZIMBABWE 13-city and Kisumu Municipal Council charge KES average 2012 81.2 SSA 10 EAC 10,000 (US$ 130). Another component of 9 ZIMBABWE 2010 67 the business start-up cost is the company 8 SSA 54.5 EAC seal, which costs approximately KES 3,000 2010 48.4 2012 45 2012 43.4 to KES 4,000. In some cities, where there 5 SOUTH AFRICA 37 SSA are no authorized dealers of company seals, 23 EAC entrepreneurs also need to pay for courier 2 RWANDA 19 SOUTH AFRICA services to deliver the seal. Registration for 3 RWANDA 4.7 RWANDA health and social security insurance is free 0.3 SOUTH AFRICA Procedures Time Cost of charge. However, entrepreneurs from (number) (days) (% of income Malaba, where there are no local branches of per capita) the Hospital Insurance Fund and the Social Note: EAC indicates the average for economies in the East African Community; SSA indicates the average for the Sub-Saharan Africa region. Security Fund, still need to travel to neigh- Source: Doing Business database. boring Bungoma to register. When a satellite and signing the declaration of compliance cities, such as Garissa and Thika, where a site office of the Hospital Insurance Fund opened before a Commissioner for Oath—even inspection, to confirm the details given by the in Isiolo in 2009, it eliminated the need to though some of these procedures could also applicant, is not a pre-requisite for issuing travel to Meru or Naniuki. But entrepreneurs be done at home. Post-incorporation steps the business permit. Instead, an inspection from Isiolo still need to travel out of town to include dealings with the local branches is subsequently made to confirm compliance register for social security. The same is true of national agencies: the Kenya Revenue with the permit. In Mombasa, the permit for Kilifi, where there is a local branch of the Authority, the National Social Security Fund, can also be obtained in 2 days only. The use Hospital Insurance Fund but not of the Social and the National Hospital Insurance Fund. of modern information technology enables Security Fund. Travel adds to the total cost of Additionally, entrepreneurs need to obtain a council clerks there to calculate the permit starting a business in these cities. business permit from the local authority and fee—which varies by type of business, a company seal from a private authorized number of employees, size and location of WHAT HAS IMPROVED SINCE dealer. Within the country, starting a busi- company’s premises—on the spot and print 2009? ness is easiest in Thika and most burden- the permit immediately after the payment is Doing Business in Kenya 2010 identified good some in Kisumu (table 3.1). made. Obtaining a company seal can take practices, pointed out bottlenecks and pro- from 2 to 7 days. In half of the cities mea- vided recommendations for business startup The time it takes to open a business varies sured, there are no authorized private deal- reforms beyond Nairobi. Three years later, from 32 days in Nairobi to 55 days in Narok ers for company seals. Entrepreneurs order this report tracks progress over time. The and Nyeri. The process is fastest in Nairobi, seals in Nairobi and have them delivered by results are impressive. All cities improved where the Registrar of Companies is located. courier. In the past 3 years, it became pos- business entry (table 3.2). Across Kenya, it takes between 2 and 8 days sible to purchase seals locally in a few more to get the Single Business Permit (SBP) from cities, such as Eldoret and Kilifi. Cities benefited from reforms implemented the local authorities. The process is faster in at the national level by the Kenya Revenue The cost of starting a business varies from Authority and at the Registrar of Companies. TABLE 3.1 Where is it easy to start a 39.3% of income per capita in Narok to In 2010, Kenya Revenue Authority adopted business—and where not? 48.4% of income per capita in Kisumu. Half the Personal Identification Number (PIN) RANK City RANK City of the total cost is spent on preparing the as the single tax payer identification num- 1 Thika 8 Narok incorporation documents and filing them ber and phased out the Value Added Tax. 2 Isiolo 9 Mombasa with the Registrar of Companies. For cities Applying for the tax payer number and 3 Kilifi 10 Eldoret outside of Nairobi, entrepreneurs also need pay-as-you-earn (PAYE)—a withholding tax to add transportation costs for incorporating on income payments to employees—can 4 Nakuru 10 Nyeri the company. The business permit fee is now be done simultaneously on the tax 5 Nairobi 12 Garissa the main source of variation among cities. authority website.6 As a result, 2 procedures 6 Kakamega 13 Kisumu The Local Government Act from November and 2 days were eliminated. This has also 6 Malaba 20085 specifies the range of fee schedules eliminated the need to travel to other cities Note: Rankings are based on the average city percentile rankings applicable to each type of local authority: for tax registration for entrepreneurs from on the procedures, time, cost and paid-in minimum capital to start a business. See the data notes for details. towns, counties, municipalities and cities. Isiolo, Kilifi and Malaba, where there are no Source: Doing Business database. The Isiolo County Council and Malaba Town tax authority offices. STARTING A BUSINESS 17 TABLE 3.2 It is easier to start a business now in all Kenyan cities benchmarked since 2009 Better communication Online registration between the Ministry of Local branch of the Use of information Reduction of Digitization of records at at the Revenue Lands and the Revenue Hospital Insurance technology by Local business permit the Registrar of Companies Authority Authority Fund opened in town Authorities fees Eldoret V V   Garissa V V   Isiolo V V V   Kakamega V V  Kilifi V V  Kisumu V V Malaba V V   Mombasa V V  Nairobi V V V Nakuru V V  Narok V V  Nyeri V V Thika V V  V National level  Local level Note: This table records all Doing Business reforms that occurred between June 2009 and March 2012. Source: Doing Business database. In January 2010, the Registrar of Companies Single Business Permit (SBP), the average the main source of information for business finalized the digitization of its records. New time to obtain a permit across the 13 cities licensing requirements and will improve applications are now processed based on measured decreased from 7 to 4 days since coordination and collaboration between a serial number, regardless of how many 2009. In Nairobi, the city council is taking various regulators and the public. times the entrepreneur follows up with staff additional steps to improve service delivery at the Registrar to check on his application. by introducing e-payment for all city council WHAT TO REFORM? Previously, applications were processed charges, including business permits. It also plans to open public information kiosks at Eliminate unnecessary steps manually, which resulted in delays, loss several spots in the city in order to facilitate Presumably, businesses that are formally reg- of records and uncertainty regarding the access to information. istering plan to operate in compliance with processing order. The electronic tracking of laws and regulations. Filling the proper regis- applications has thus reduced the time for These national and local efforts have paid off tration documents should be evidence itself filing the company deed and details with by reducing the time and cost burdens on that the entrepreneur is working to comply the Registrar of Companies by more than small and medium-size businesses across with the requirements of the law. Therefore, 6 days on average. Also, in 2009, a stamp Kenya (figure 3.3). a separate step to sign a Declaration of duty office opened within the Registrar of Companies, making the assessment of the Other reform initiatives are underway. A Compliance before a Commissioner of Oath stamp duty more efficient. bill to replace the current Companies Act is duplicative and places an unnecessary was introduced in parliament in December burden on entrepreneurs. This step could be A few years ago, the central government 2010. The bill, pending parliament approval, eliminated, shortening the overall registra- issued directives aimed at encouraging the includes proposals to allow for electronic tion process. use of information technology at the local submission of documents, to make company level. The initiative, now known as the “Local The registration process could also be short- seals optional, and to replace the multiple Authority Integrated Financial Operations documents required in the registration pro- ened by combining the name search with Management System” (LAIFOMS), aims cess with a single application form. The State the actual company registration. As a result, at restructuring the local public sector and Law Office7 is working towards a fully auto- the Registrar of Companies would instantly strengthening local accountability mecha- mated system for business incorporation; an register an applicant after the availability of nisms. It is used by councils for all financial online name search and reservation system the name is confirmed. This would reduce management activities—including the billing is currently being piloted at the Registrar the hassle for entrepreneurs, who would and collection of local revenues, the payroll of Companies. The government has estab- no longer need to go back and forth to the and all expenditure controls. Thanks to the lished an electronic searchable database of Registrar—which is especially burdensome computerization of services, including the laws and regulations,8 which will constitute for out-of-towners. 18 DOING BUSINESS IN KENYA 2012 FIGURE 3.3 Across Kenya, significant cuts in the time and cost to start a business since 2009 pick-up. Some countries also print the fee schedules directly on the application forms. DB KENYA DB KENYA 2012 2010 New Zealand, the world’s top performer Time (days) for starting a business, publishes a 10-page Nairobi 32 34 guidebook covering all issues regarding busi- Mombasa 37 72 ness registration and the steps needed to Nakuru 38 60 complete the process.9 Easier access to fee schedules and lower fees tend to go hand Thika 38 48 in hand. Regardless of income levels, incor- Kakamega 43 67 poration fees tend to be lower in economies Kilifi 44 66 where information on fee schedules is easily Malaba 45 70 accessible (figure 3.4). The cost to start a business averages 18% of income per capita Isiolo 46 62 in economies where fee schedules are easily Eldoret 50 74 accessible, 66% in economies where they Garissa 53 78 are not.10 Kisumu 53 74 Open branches of the Registrar of Narok 55 82 Companies outside Nairobi Nyeri 55 81 Company registration is now possible only in the capital. Entrepreneurs across Kenya cur- Cost (% of income per capita) rently have to travel to Nairobi to start their Narok 39.3 44.3 companies, increasing the time and cost to Isiolo 39.8 55.5 start a business. The government of Kenya Thika 41.0 42.0 could open regional offices in cities, such as Mombasa or Kisumu, to cut travel times Nyeri 41.4 42.2 for entrepreneurs outside of the capital. This Kilifi 42.6 56.9 could also reduce the backlog at the head- Malaba 43.1 59.5 quarters in Nairobi. In the longer term, online registration could replace the need to visit Eldoret 43.4 50.8 the Registrar of Companies altogether. Kakamega 43.4 43.0 Nakuru 44.3 44.6 Use technology to boost efficiency Garissa 44.7 52.4 Kenya is increasingly employing informa- tion technology to make starting a business Nairobi 36.5 45.1 more efficient. The country has established Mombasa 47.6 50.3 an effective legal framework for the legal Kisumu 48.4 51.7 recognition of electronic documents and full automation of business incorporation. The Source: Doing Business database. records of the Registrar of Companies were digitized in 2010. But not all necessary infra- structural and administrative arrangements Another step is already on its way out. Ensure transparency are yet in place to ensure full automation The new Companies Bill, which is pending Improving public access to information can of the Registrar of Companies’ operations. parliament approval, abolishes the require- greatly reduce the burden on entrepreneurs An online name-search system is still being ment to obtain a company seal. Making the and even the agencies that deal with them. piloted. The next steps would be to ensure creation of a company seal optional rather Easy access not only saves businesses time, online approvals and make standardized, than mandatory is a positive step. In the it also increases predictability in the ap- electronic articles of incorporation available past, a company seal symbolized the legal plication of regulations and fee schedules. for download. On the issue of automation, identity of a business and authenticated all In Kenya, the fees payable to the Registrar the tax authorities are ahead of the Registrar its contracts. Now most documents are sent of Companies for incorporation and to local of Companies: Kenya Revenue Authority electronically. Kenya has regulation allowing authorities for the business permit should has put in place the necessary infrastructure electronic signatures. These cost nothing be posted prominently in the offices and on for the online acquisition of the various tax and are more difficult to forge. websites and made available in leaflets for certificates required to start a business. At STARTING A BUSINESS 19 FIGURE 3.4 The cost to start a business is lower EUR 140 and paper registration EUR 2,004. respective agencies. Without it, delays will where information on the fees is In Estonia, documents filed electronically no continue as the documents travel to agency easily accessible longer have to be notarized. headquarters and back. In addition, duplicate processes at the other agencies must be Average cost to start a business 66 Implement one-stop shops for eliminated. Countries that fail to do this see (% of income per capita) business start-up their one-stop shop become “one more stop” Currently, entrepreneurs must interact with in the company registration process. 5 different national government agencies when starting their businesses: the Registrar The example of Rwanda is telling. In 2009, of Companies, the Ministry of Lands, the Rwanda consolidated the name-checking Kenya Revenue Authority, the National procedure at the main desk of its Commercial 18 Hospital Insurance Fund and the National Registration Department. It also combined Social Security Fund. Kenya could explore the services into a single point of interaction in possibility of establishing one-stop shops for 2 stages. First, the Rwanda Development Economies where Economies where fee schedules fee schedules are business start-up that would incorporate all Board, Rwanda Revenue Authority and are easily accessible not easily accessible Caisse Sociale du Rwanda agreed in services under a single roof: business regis- tration, registration for taxes, social security November 2008 to have representatives Note: Relationships are significant at the 5% level after controlling for income per capita. Fee schedules are considereed easily and health insurance. within the one-stop shop (at the Commercial accessible if they can be obtained through the website of a Registration Department) receive and pro- government agency or through public notices, without a need for an appointment with an official. The data sample includes 174 To set up a one-stop shop, representatives cess applications. At this stage, the applicant economies. from all of the agencies involved would be was still required to interact separately with Source: Doing Business database. placed under a single roof where they would representatives of the Revenue Authority the local level, information technology is receive and process applications. The ap- and Caisse Sociale. Second, in May 2009, mainly used as a financial management tool plications should consist of 1 consolidated the Commercial Registration Department to facilitate billing and payment. Its use could form that fulfills the requirements of all reorganized its procedures so that applicants be expanded to allow online applications and agencies involved. There should also be were no longer required to deal with repre- renewal of business permits. a single window, which would serve as a sentatives from the Revenue Authority and contact point for all of the agencies. This Caisse Sociale separately. By empowering Around the world, e-government initia- would allow an entrepreneur to complete the Registrar to process the applications tives range from data centers and shared company formation in 1 trip, significantly on the premises, as opposed to send the networks to government-wide information reducing the hassle and time involved. An al- applications to the separate agencies for infrastructure and unified service centers ternative is to identify 1 key agency to accept processing, the one-stop shop became fully for the public. When Mauritius introduced and process applications on behalf of other functional. a computerized system for all types of busi- agencies: this agency could be given access ness registrations in 2006, total registration to the registration database for the type of More than 70 economies around the world time fell by 80%.11 To encourage use, some information needed.12 The key to a success- have some kind of one-stop shop for busi- economies set lower fees for online registra- ful reform is giving officials at the one-stop ness start-up. While some one-stop shops tion. In Belgium, online registration costs shop decision-making power for their are solely for business registration, others carry out many integrated functions, such FIGURE 3.5 Economies with a one-stop shop make starting a business easier Procedures and time by type of one-stop shop 10 Average, Number of Average Average economies without Type of one-stop shop economies procedures days 40 one-stop shop 8 (111 economies) Commercial registry sharing site with other agencies 7 30 6 Commercial registry coordinating with other agencies 22 20 Average, Nonregistry 4 economies with 14 one-stop shop coordinating with other agencies 10 (72 economies) Integrated 2 12 registration function 0 0 Online registration facility 17 Procedures Time (number) (days) 0 5 10 15 20 25 Source: Doing Business 2011 database. 20 DOING BUSINESS IN KENYA 2012 as postregistration formalities. Some of Washington, DC: The World Bank Group. these are virtual; others are physical, with 1 11. World Bank. 2010. Doing Business 2011: or more windows. In the 72 economies that Making a Difference for Entrepreneurs. Washington, DC: The World Bank Group. have one-stop shops offering at least 1 ser- 12. Investment Climate Advisory Services, vice besides business registration, start-up is 2010. How Many Stops in a One-Stop more than twice as fast as in those without Shop? A Review of Recent Developments in such services (figure 3.5).13 Business Registration. Washington, DC: The World Bank Group. Any reforms that Kenya undertakes should 13. World Bank. 2010. Doing Business in the East be adequately communicated and moni- African Community 2011. Washington, DC: tored. Monitoring changes highlights the The World Bank Group. successes and the areas where further effort is needed. Publicity surrounding reforms ensures that changes are accepted and im- plemented by all the stakeholders involved. An effective communication strategy will in- crease the positive perceptions of domestic and foreigner investors about the business environment in Kenya, encourage invest- ment and job creation, and contribute to increase the standards of living of its citizens. NOTES 1. United Nations Research Institute for Social Development. UNRISD. 2010. “Gender Inequalities at Home and in the Market.” Assignment: Chapter 4 (pages 5-33). 2. World Bank. Doing Business: Women in Africa. Washington, D.C.: World Bank Group. 3. Klapper, Leora, Anat Lewin and Juan Manuel Quesada Delgado. 2009. “The Impact of Business Environment on the Business Creation Process.” Policy Research Working Paper 4937, World Bank, Washington, DC. Entry rate refers to newly registered firms as a percentage of total registered firms. Business density is defined as the number of businesses as a percentage of the working- age population (pages 18–65). 4. Doing Business in Kenya 2010 data is as of June 2009. 5. The Local Government Act no. 147. Kenya Gazette Supplement No.79, November 14, 2008. 6. KRA’s website is http://www.kra.go.ke. 7. The State Law Office is responsible for the provision of registration services with respect to the incorporation of companies and business names. These functions are carried out by the Registrar of Companies. 8. The website is http://www.businesslicense. go.ke. 9. Companies: A Guide for New Zealand Businesses. Ministry of Economic Development, The Companies Office, June 2010. 10. World Bank. 2011. Doing Business 2012: Doing Business in a More Transparent World. 21 Dealing with construction permits Doreen wants to expand her bookstore in FIGURE 4.1 What are the time, cost and number of procedures to comply with formalities Eldoret. She thought of building a ware- to build a warehouse? house to increase her stock capacity. She Cost (of income per capita) was pleasantly surprised to learn that she could obtain the necessary approvals to Completed warehouse build a commercial warehouse and connect it to utilities in two and a half months and Number of that the permit was cheaper than she had procedures anticipated. In fact, Kenya is among the fast- est and cheapest economies in Sub-Saharan A business in Africa for dealing with construction permits. the construction industry Time (days) WHY DOES DEALING WITH Before During After construction construction construction and utilities CONSTRUCTION PERMITS MATTER? The construction industry is important for the by 3 months in a 22-month project cycle HOW DOES DEALING WITH Kenyan economy: during the second quarter could increase construction spending by CONSTRUCTION PERMITS WORK of 2011 it accounted for 4% of Kenya’s GDP, 5.7% and property tax revenue by 16%.6 In IN KENYA? growing by 5.8% from the previous quarter.1 a survey of 218 companies in 19 Asia-Pacific Among the 13 Kenyan cities measured, Kenya’s urban population is expected to Economic Cooperation member economies dealing with construction permits takes, on grow at a 4.3% yearly rate the next decade, in 2009, respondents identified the time and average, 11 procedures, 95 days and costs and 70% of it lives in informal settlements.2 procedures in construction permitting as the 192.6% of income per capita—much easier Striking the right balance between overly biggest “regulatory impediment” to doing and cheaper than the Sub-Saharan Africa rigid regulations and efficient permit issuing business.7 regional average of 15 procedures, 211 days is a challenge for many governments. Good and 823.7% of income per capita (figure regulations ensure the safety standards that 4.2). The average Kenyan city would rank 41, WHAT DOES DEALING WITH protect the public while making the permit- ahead of Mauritius (53) but behind South CONSTRUCTION PERMITS ting process efficient, transparent and afford- MEASURE? able. If procedures are overly complicated TABLE 4.1 Where is it easy to deal with or costly, builders tend to proceed without Doing Business records the procedures, time construction permits—and where and cost required for a construction busi- not? a permit.3 According to the Architectural ness to obtain all the necessary approvals RANK City RANK City Association of Kenya, 6 out of 10 buildings in Nairobi do not have the necessary ap- to build a simple commercial warehouse 1 Malaba 7 Thika provals.4 The collapse of several buildings in and connect it water, sewerage and a fixed 2 Eldoret 9 Kakamega Nairobi in recent years has raised concerns telephone line (figure 4.1). The case study 3 Garissa 10 Kisumu about safety standards and supervision includes inspections and certificates needed 4 Isiolo 11 Kilifi mechanisms.5 before, during and after construction of the 5 Narok 11 Nairobi warehouse. To make the data comparable 6 Nyeri 13 Nakuru Economies that score well on Doing Business across 183 economies, the case study as- 7 Mombasa on the ease of dealing with construction per- sumes that the warehouse is located in the Note: The methodology for dealing with construction permits mits tend to have rigorous yet expeditious changed in 2011. Rankings are based on the average city and transparent permitting processes. Speed periurban area of the cities measured, is not percentile rankings on the procedures, time, and cost to deal in a special economic or industrial zone and with construction permits. See the data notes for details. matters. A recent study in the United States shows that accelerating permit approvals will be used for general storage activities. Source: Doing Business database. 22 DOING BUSINESS IN KENYA 2012 FIGURE 4.2 Dealing with construction permits in Kenya compared globally controlled under the Orange Kenya Telkom partnership with France Telecom. 22 BURUNDI 303 TANZANIA 4,065.7 BURUNDI The procedures to obtain the necessary ap- Range in Kenya 19 TANZANIA 1,170.1 TANZANIA provals to build a warehouse and connect it to utilities vary considerably across Kenya. The GARISSA, NAKURU 15 UGANDA, SSA 211 SSA 946.8 UGANDA main reason is that not all local authorities have Kenya 13 13 SOUTH AFRICA 823.7 SSA in-house technical staff to approve construc- 13-city 12 RWANDA 164 RWANDA average 11 135 BURUNDI tion permit applications. In Kisumu, Malaba, NAKURU 140 KISUMU, 9 127 SOUTH AFRICA Mombasa, Nairobi and Thika it only takes 9 MALABA, 125 UGANDA MOMBASA, 6 HONG KONG 95 procedures (figure 4.3)—the same number NAIROBI, SAR, CHINA GARISSA, 64 67 HONG KONG 312.0 RWANDA required in the United Kingdom—because THIKA KISUMU 272.0 MALABA SAR, CHINA 192.6 entrepreneurs can obtain all approvals from MALABA 133.7 21.2 SOUTH AFRICA 17.8 HONG KONG the same place.9 But in Garissa and Nakuru it Procedures Time Cost SAR, CHINA takes 13 procedures—4 more—in part because (number) (days) (% of income per capita) an entrepreneur also needs to visit both the Note: SSA indicates the average for the Sub-Saharan Africa region. local branches of the Ministry of Lands and Source: Doing Business database. the Ministry of Health to obtain clearances and pay the relevant fees. In Kilifi, the town council Africa (31). Hong Kong SAR, China, is the on the size of the population. Generally, forwards applications to these external offices top performer in dealing with construction the smaller the local authority, the more it on behalf of the applicants. However, entrepre- permits among the 183 economies ranked neurs still need to pay them separate visits in relies on central government agencies. Other by Doing Business globally. It takes only 6 order to pay the fees. agencies involved in construction licensing procedures, 67 days and a cost of 17.8% of and connection to utilities are the National The next step is to obtain an environ- income per capita to deal with construction Environment Management Authority (NEMA), mental approval. Kenya’s Environmental permits in Hong Kong. Management and Coordination Act, in with local branches in all districts, and local The basic legal framework for permitting is place since 1999, mandated all construc- water and sanitation companies. The tele- common to all Kenyan cities, but differing tion development proposals to prepare phone sector has seen some privatization in and obtain approval of an environmental institutional arrangements, implementa- tion and fees result in significant variations the past years, but landlines are still publicly project report.10 But these provisions among the 13 cities. Complying with for- malities to build a warehouse and connect FIGURE 4.3 Procedures to deal with construction permits in Kenya to utilities is easiest in Malaba—where it takes 9 procedures, 64 days, and 133.7% of income per capita (KES 81,045). Compared Before During After construction construction construction and connection to utilities globally, this city would rank 23 out of 183 economies, as measured by Doing Business. Kisumu 9 Total procedures Dealing with construction permits is most Malaba 9 difficult in Nakuru, where it takes 13 proce- Mombasa 9 dures, 140 days and 208.8% of income per Nairobi 9 capita (KES 126,545) (table 4.1). Thika 9 Most procedures related to construction Eldoret 11 permits in Kenya are managed locally. The Nyeri 11 Local Government Act (Cap 265) mandates local authorities to process developmental Isiolo 12 proposals and applications within their areas Kakamega 12 of jurisdiction.8 The institutional framework Kilifi 12 varies from one city to another, depending on Narok 12 the type of local authority. Only Nairobi has a city council, which has more technical staff Garissa 13 and higher competencies for development Nakuru 13 approvals. The rest of the cities have mu- nicipal, county or town councils, depending Source: Doing Business database. DEALING WITH CONSTRUCTION PERMITS 23 FIGURE 4.4 The time to obtain approval of the building plans varies widely across Kenyan cities Public Health Department, so approvals are Before During completed in-house. Also, the entrepreneur construction and after Connection does not need to wait for ratification from construction to utilities Total time the Town Planning Committee. Once the (days) town clerk notifies the entrepreneur that the Building plans Environmental approval approval plans are approved, construction can start. Garissa 64 Obtaining environmental approvals adds 25 Malaba 64 to 65 days. Although NEMA is a national Isiolo 71 agency, the capacity of its local branches Narok 72 varies from city to city. Garissa’s branch is Eldoret 77 not fully operational, so either the branch sends applications to Nairobi, or Garissa’s Nyeri 81 entrepreneurs must travel to submit them Kilifi 86 in the capital personally. NEMA’s approval Mombasa 93 takes the longest in Thika, 65 days—this is Kisumu 111 more than twice the time it took in 2009. Applications have increased substantially Kakamega 118 with stricter enforcement, while the capacity Nairobi 125 of the local branch has not. Thika 134 The cost varies from 133.7% of income per Nakuru 140 capita (KES 81,045) in Malaba to 272.0% of Source: Doing Business database. income per capita (KES 164,813) in Kisumu were not always enforced. New environ- obtain approvals in Malaba, where it takes 14 (figure 4.5). Compared to the Sub-Saharan mental regulations were enacted in 2003 days, and slowest in Nakuru, where it takes Africa regional average—823.7% of income and later amended in 2009. NEMA has 55 days. There are 2 main reasons why the per capita—Kenya fares well. Still, the made an effort to raise awareness among process is faster in Malaba. The town council average cost in Kenya is more than 4 times local authorities and the public in general in has a Physical Planning Department and a the OECD average of 45.7% of income order to increase compliance. While in 2009 enforcement varied across cities—only 7 of FIGURE 4.5 Building and environmental approvals account for the bulk of the cost to deal with the 13 cities measured applied it—today it is construction permits Before During standard procedure everywhere for all com- and after Connection construction mercial construction proposals. As a result, construction to utilities certified environmental experts prepare an Total cost (% of income per capita) environmental project report and have it ap- Building plans Environmental approval approval proved by NEMA. Malaba 133.7 After construction, the entrepreneur needs Garissa 161.5 to request a final inspection. This last in- spection is usually conducted by the head Eldoret 162.3 of section or a higher level officer. Once the Kakamega 163.4 inspection card is filled in, the entrepreneur Isiolo 164.6 can request the occupancy certificate and Narok 173.4 connect to utilities. Thika 179.3 Dealing with construction permits can be as Nyeri 199.8 fast as 2 months in Garissa and Malaba— Kilifi 206.5 faster than in Jordan (70 days). But it can take as long as 140 days in Nakuru—similar Nakuru 208.8 to Burundi (135 days) (figure 4.4). Longer Mombasa 228.0 times reflect the larger number of agencies Nairobi 251.1 involved, but also how efficiently they oper- ate. The main source of variation is the time Kisumu 272.0 to approve the building plans. It is fastest to Source: Doing Business database. 24 DOING BUSINESS IN KENYA 2012 TABLE 4.2 Business reforms improving the ease of dealing with construction permits of its meetings from monthly to bi-weekly to over the last 3 years approve development applications. Improved administrative efficiency (through better Streamlined Increased Improved connections to Eldoret reduced the time needed to obtain coordination, use of procedures fees water and sewerage the building plan approvals from 50 to 30 technology, and staff training) days. Before the reform, each department Eldoret   at this municipal council approved the plans Garissa  separately, after which the application was Isiolo  submitted to the Town Planning Committee Kakamega  for final approval. In 2010, Eldoret Municipal Council delegated approval to the town Kilifi   clerk.12 Today a technical committee with Kisumu   members from the relevant departments Malaba  approves the applications, which have to be Mombasa    signed off previously by registered profes- Nairobi  sionals. Once the town clerk signs the plans, Nakuru  the entrepreneur is notified and can start Narok  construction. Nyeri  In other cities—such as Kilifi, Kisumu and Thika   Thika—water companies have improved  Doing Business reforms making it easier to deal with construction permits efficiency and reduced connection delays.  Doing Business reforms making it more difficult to deal with construction permits Kenya’s 2002 Water Act recognized the role Note: This table records all Doing Business reforms that occurred between June 2009 and March 2012. Source: Doing Business database. of independent water service providers. Until then, water and sanitation were managed per capita. Complying with environmental approval processes with tangible results. The directly by local authorities.13 Local authori- requirements accounts for the largest Mombasa Municipal Council overhauled ties established water companies, which portion of the cost—109% of income per its approval process by merging 5 separate are publicly owned but gradually moving capita (KES 66,250).11 The reason is that the requirements into 1, thus cutting the time re- towards more independent management. environmental requirements include having quired by 30 days. In 2009, a local entrepre- Improvements vary from city to city. Kisumu an expert assessment, which costs approxi- neur had to submit the building plans for ap- improved the most: water and sewage con- mately KES 50,000. The variations in cost proval at the Mombasa Municipal Council, the nection time was cut from 23 to 13 days. across cities stem mainly from building per- Building Department, the Municipal Planning Kisumu Water and Sewerage Company mit fees, which constitute the second largest Department, the Valuation Department and (KIWASCO) restructured its management, portion of the total cost. Each local authority the Public Health Department. This munici- employed more technical staff on 3-year establishes its own rates for the approval of pal council now conducts all relevant approv- performance contracts, increased distribu- building plans. In Malaba entrepreneurs pay als in-house (figure 4.6). Also, the municipal tion capacity and expanded coverage from only 11% of income per capita (KES 6,400), technical committee increased the frequency around 40% to 60% of the municipality.14 given that fees are set at a fix rate—an international good practice. In Kisumu entre- FIGURE 4.6 Mombasa overhauled the building plans approval process preneurs must pay more than 10 times this amount, because fees are calculated based 2009 2011 on the total surface constructed, adding up Mombasa to 128% of income per capita (KES 77,668), Municipal Council on average. Building Department Builder/ Mombasa WHAT HAS IMPROVED SINCE Builder/ Municipal contractor Municipal contractor Planning Council 2009? Department Since the publication of Doing Business in Valuation Kenya 2010 efforts to improve the construc- Department tion permitting process have persisted Public Health Department (table 4.2). Eldoret and Mombasa have implemented reforms of their building Source: Doing Business database. DEALING WITH CONSTRUCTION PERMITS 25 Meanwhile, in Kilifi and Thika connection steps that contribute to the transparency of 3 months in some cities. Kenya’s Ministry times dropped by 31%, on average. local authorities. of Local Government allows councils to delegate approvals to technical officers. The City Council of Nairobi is currently WHAT TO REFORM? Eldoret and Malaba take advantage of this piloting a major reform. On September 29, prerogative to save entrepreneurs time. Introduce a risk-based system for 2011, it launched an online system for the Construction applications are eventually environmental approvals approval of architectural plans. Through endorsed by the council, but the constructor the online system, the evaluation and pre- In Kenya, all commercial constructions are can start working as soon as the technical liminary approval of architectural plans by subject to the same approvals and environ- officers approve the plans. Another measure 5 departments are consolidated. Approving mental project reports. This increases the to speed up the approval could be to increase burden on smaller businesses significantly. the frequency of the meetings of the review- officers from different departments can work But not all buildings have the same environ- ing committees, like in the city of Mombasa. simultaneously on the applications, receiving mental impacts. A hospital or skyscraper automatic alerts if they have not approved cannot be compared with a 2-story com- Consolidate preconstruction their sections after 3 days. Although the mercial warehouse. Efficient governments approvals City Council of Nairobi is digitizing its reg- have rigorous yet differentiated construction Entrepreneurs usually need to obtain istry, entrepreneurs still must submit a hard permitting processes to treat buildings ac- preconstruction approvals from the works copy of their plans for final approval, since cording to their risk level and location. department, physical planning department electronic documents are not legally bind- ing. Also, many entrepreneurs still prefer to or health department. In Kisumu, all required An international good practice is to submit plans in person. The City Council of departmental approvals are obtained at categorize buildings depending on their Nairobi plans to start an awareness-raising the same place because its council has the environmental impact and, according to campaign and is already offering assis- technical staff in-house needed for these these characteristics, adjust environmental approvals. But in other cities separate tance—in person or by phone—on how to requirements. Simple low-risk buildings visits to various agencies may be required. use the new platform. should have less rigorous requirements. Having approvals issued from a centralized Today 86 economies around the world have Kenya’s parliament recently enacted the location—a one-stop shop—would simplify risk-differentiated systems in place, and 13 of National Construction Authority Act to the process moving forward. One possibility those were established in the past 7 years.17 regulate the construction industry.15 There is is to work out a part-time system, whereby For example, in 2010 Armenia introduced a an ongoing effort to approve a new building representatives from various agencies work risk-based system. As a result of this reform, code. Before going to parliament, the draft at the one-stop shop regularly several times builders are no longer required to obtain an a week. For instance, delegated officers from bill is being discussed among key stakehold- ecological expertise approval for smaller the physical planning department, health ers. The Ministry of Housing organized a projects with total area of less than 1,500 department and other departments could national forum and the draft was submitted square meters, up from 1,000 square meters spend agreed-upon hours or days at the lo- to relevant professional bodies. The current a year before. This change resulted in time cal authority premises to review and approve code dates back to 1968, and is a replica of savings of 30 days for entrepreneurs with building plans. the British Building Regulations of 1948.16 projects that were previously above the size The new bill is to regulate the use of materi- threshold. Colombia introduced a risk-based Issue the completion certificate als and establish the National Planning and system in 2009. Now, “low to medium risk” with the final inspection Building Authority as the only regulatory structures undergo a fast-track approval pro- After construction is finished, an entre- body. cess. Builders no longer have to hire special preneur in Kenya needs to request a final consultants for environmental, fire safety Displaying information publicly makes it inspection to ensure that the building con- and traffic studies—saving both money and forms to regulations, in accordance with the more transparent for builders and gives time. At the same time, building authorities permit issued. Following the final inspection, them confidence in the construction permit can allocate resources based on project builders must go back to the municipal, town process. Since 2009, many local authorities complexity.18 Similar risk-based systems or county council to request the certificate have made an effort to improve public infor- could be used in Kenya. of occupancy. The whole process takes 2 mation about the approval process and fees. procedures and up to 24 days in the city of The City Council of Nairobi has a detailed Delegate approval of building plans Kakamega, for example. description of the steps and required docu- to technical committees ments for users. The Thika Municipal Council In some cities, like Nakuru, applications must In several other countries, a certificate of oc- and Kilifi County Council now publish local be endorsed by a political body which meets cupancy is issued on the spot along with the regulations and fee schedules through their in a plenary session. This can result in long final inspection. Canada is one such example: websites. Narok publicly displays the infor- delays considering that these meetings take If all required inspections have been carried mation on notice boards. These are positive place infrequently—as seldom as once every out and the building or structure is deemed 26 DOING BUSINESS IN KENYA 2012 substantially complete and fit for occupancy, relevant technical experts for constructions NOTES the completion certificate is issued—avoid- or urban developments of any kind. In the 1. Kenya National Bureau of Statistics. Gross ing any additional interactions for the builder. other 4 cities building permits as described Domestic Product Second Quarter 2011. in the Doing Business case study can be Singapore has an integrated online system Statistical Release. approved in-house. through which builders can request the 2. UN-HABITAT. Enhancing Urban Safety and Security — Global Report on Human 10. The main pieces of legislation that regulate final inspection and the occupancy permit Settlements 2007. http://www.unhabitat. Environmental Impact Assessments (EIAs) without delay. In Portugal the municipality org/downloads/docs/GRHS.2007.7.pdf; are the Environmental Management of Lisbon has developed a tracking system and Coordination Act (EMCA), and the United Nations Department of Economic that is automatically updated once the final and Social Affairs. Population division, Environmental Impact Assessment and inspection takes place, so the occupancy population estimates and projections Audit Regulations of 2003 (amended in permit can be obtained from the municipal- section. http://esa.un.org/unpd/wup/unup/ 2009). Art.58 of EMCA mandates that a ity on the same day. p2k0data.asp . Project Report has to be submitted for all 3. Moullier, Thomas. 2009. “Reforming construction development proposals. The Introduce a modern building code Building Permits: Why Is It Important and Project Report has to be prepared by a certi- What Can IFC Really Do?” International fied environment expert, stating the likely Building codes establish common standards Finance Corporation, Washington, DC. environmental effects of the construction. for public health and safety, fire protection, 4. Architecture Kenya. October 4, 2011. NEMA will assess if a full EIA is required. structural efficiency and environmental “Six out of ten buildings in Nairobi don’t Schedule 2 of the EMCA establishes which integrity. Building codes are important for have the necessary approvals.” http:// projects are subject to an EIA. It is an ex- ensuring a level playing field and legal cer- architecturekenya.com/2011/10/04/ tensive list related to special industries and six-out-of-ten-buildings-in-nairobi-dont- tainty for building practitioners and develop- areas of particular environmental interest. In have-the-necessary-approvals/. ers. When regulations are not organized and practice there is little difference between the 5. Architecture Kenya. August 2, 2011. “Kenya applied coherently, builders and authorities loses Sh1.4 billion on collapsed buildings.” Project Report and the EIA: all construction may become confused about how to pro- http://architecturekenya.com/2011/08/02/ development proposals need to present a ceed. This often leads to delays, uncertainty, kenya-loses-sh1-4-billion-on-collapsed- report prepared by a certified expert and buildings/ . they need to pay the same fees to NEMA. and disputes. However, if provisions are too precise, it is more difficult to keep regula- 6. PricewaterhouseCoopers. 2005. 11. NEMA fees are established by law at 0.05% “Economic Impact of Accelerating Permit of the total project cost, which applies in tions up-to-date. In transitional economies, Processes on Local Development and all cities equally. The 2009 amendment updates may be a particular challenge. Government Revenues.” Report prepared lowered the applicable fee for EIA approvals for the American Institute of Architects, from 0.1% to 0.05% of the total cost. Kenya’s building code of 1968 was an adap- Washington, DC. 12. In 2002, the Ministry of Local Government tation of British legislation. There have been 7. Singapore Business Federation. 2009. issued a circular allowing local authorities to repeated initiatives to redraft the building “Key Findings from ABAC ‘Ease of Doing delegate the approvals to technical officers, code, but the process has yet to see results. Business’ (EoDB) Survey.” Presentation at Singapore Business Federation “Removing instead of waiting for the endorsement of The experience of best-practice countries— the relevant committees, which are usually Barriers for Business Growth in APEC” such as the United Kingdom, Canada, New dialogue session, Singapore, July 9. political bodies that meet less often. Zealand, Singapore and Australia—suggest 8. See: “Assessment of the Development 13. Sammy, Wambua. Global Issue Papers, No. that it takes 10 to 15 years to carry out a sig- Permissions Process in the City Council of 8: Water Privatization in Kenya. Heinrich Böll nificant overhaul of construction-permitting Nairobi, Kenya”. January 2011. Investment Foundation 2004. systems and develop new building codes. Climate Advisory Services. Washington, 14. Kisumu Water and Sewerage Company Globally, 43 economies have adopted uni- D.C.: World Bank Group. The building Technical Manager. permitting process is bound by the national form construction rules.19 The best-practice legal and regulatory framework comprising 15. Law Number 41 of 2011. codes encourage innovation and speed up of (a) Building Code, the Local Government 16. Kimani, Mary and Titus Musungu. 2010. the process of design reviews by the relevant (Adoptive By-Laws) (Building) Order 1968, “Reforming and Restructuring the Planning authorities. These were important drivers in The Local Government (Adoptive By-Laws) and Building Laws and Regulations in Australia and New Zealand’s building permit (Grade II Building) Order 1968, which provides Kenya for Sustainable Development.” 46th basic standards and norms for construction; ISOCARP Congress. reforms, which developed “performance” (b) The Physical Planning Act, Chapter 286, and “objective-based” codes. The new Revised Edition 1996, establishes general 17. World Bank. 2011. Doing Business in 2012: codes’ requirements specify the desired principles for territorial development of the Doing Business in a More Transparent World. technical outcome rather than the specific country, (c) The Public Health Act, Chapter 2011. Washington, D.C.: The World Bank 242, Revised Edition 1986 (1972) for sanita- Group. way this outcome should be achieved. Kenya tion; (d) The Environmental Management and 18. World Bank. 2010. Doing Business in the can learn from these experiences as it mod- Coordination Act, 2009, guides use of urban Philippines 2011. Washington, D.C.: The ernizes its building code. space from the environmental perspective, World Bank Group. inter alia, in construction. 19. World Bank. 2010. Doing Business in 9. Only Nairobi City Council has a fully fledged 2011: Making a Difference for Entrepreneurs. planning department, staffed with all the Washington, D.C.: World Bank Group. 27 Registering property Winley from Isiolo has been manufacturing FIGURE 5.1 What are the time, cost and number of procedures required to transfer property between kanga and kikoi, a traditional East African sa- 2 local companies? rong, for 12 years. When her business started Cost in 2000, Winley was just selling the sarong, (% of property value) but a year later she also started designing Buyer can use the property, and making garments and accessories from resell it or use it as collateral the fabrics, which are sold both locally and abroad. She now has dozens of employees. Procedures Winley needed more space to accommo- Land & 2-story warehouse date her growing business, so she decided Seller with property to purchase a place on the outskirts of the registered and no title disputes city, taking advantage of the recent cut in Time the local property transfer tax—from 20% of Preregistration Registration Postregistration (days) property value to just 5%. But to her surprise, such as cadastres and survey maps, can be Mauritania, Mauritius, Niger and Seychelles, Winley just discovered that in Nyeri, only 135 used in city planning, to avoid or mitigate it takes only 4 procedures; in Sudan, it takes kilometers away, no local tax at all is levied the effects of environmental or climate- 9 days; in Ghana, it costs just 0.7% of the on property transfers. Winley wished she related risks on urban populations. property value to transfer the property from were living in Nyeri. one domestic private company to another. WHAT DOES REGISTERING WHY DOES PROPERTY Registering property in Kenya takes an aver- PROPERTY MEASURE? REGISTRATION MATTER? age of 9 procedures, 61 days and costs 4.6% Doing Business records the procedures nec- Registered property rights are necessary of property value across the 13 cities mea- essary for a business to purchase a property to support investment, productivity and sured. When compared to the Sub-Saharan from another business and to transfer the growth.1 With land and buildings account- Africa regional average—6 procedures, 65 property title to the buyer’s name (figure ing for between half and three-quarters of days and 9.4% of property value—Kenyan 5.1). The process starts with obtaining the the wealth in most economies, having an cities require, on average, more procedures necessary documents, such as a copy of the up-to-date land information system clearly but at a lower cost and over fewer days. seller’s title, and conducting due diligence matters.2 Entrepreneurs with formal land The cost to register property in the average if required. The transaction is considered titles have a better chance of getting credit complete when it is opposable to third par- when using their property as collateral. In TABLE 5.1 Where is it easy to register ties and when the buyer can use the prop- property—and where not? Zambia 95% of commercial bank loans to erty as collateral for a bank loan or resell it. RANK City RANK City businesses are secured by land; in Indonesia 80%, and in Uganda 75%.3 In addition, ef- 1 Mombasa 8 Garissa ficient property registration systems benefit HOW DOES REGISTERING 2 Kisumu 9 Kakamega governments through higher tax revenues. PROPERTY WORK IN KENYA? 3 Thika 10 Nyeri Up-to-date land information also allows The ease of registering property varies 4 Malaba 11 Kilifi governments to map out the different needs greatly among economies around the 5 Narok 12 Nairobi in their cities and to strategically plan the world. It is easiest to register property in Saudi Arabia, where the entire process 6 Nakuru 13 Isiolo provision of services and infrastructure in the areas where they are most needed.4 Land can be completed with just 2 procedures, 7 Eldoret information is vital in planning the expansion in 2 days, at no cost. Some economies in Note: Rankings are based on the average city percentile rankings on the procedures, time and cost to register property. See the data of urban areas. This is especially important the Sub-Saharan Africa region are not far notes for details. in territories prone to natural disasters. Tools, behind. In Benin, Burkina Faso, Comoros, Source: Doing Business database. 28 DOING BUSINESS IN KENYA 2012 FIGURE 5.2 Registering property in Kenya compared regionally deliver key services such as the registration of documents (4 days), land valuation (21 days) and assessment of stamp duty (15 13 UGANDA ISIOLO 93 94 BURUNDI ISIOLO 9.1 minutes).5 The difference in efficiency across local lands offices continues to be the main Kenya 73 TANZANIA 6.3 RWANDA reason for variations in time among cities to Kenya all 13-city 13 cities 9 9 TANZANIA 5.6 BURUNDI average 61 complete property transfer transactions— 4.6 THIKA 4.1 4.4 TANZANIA from 28 days in Mombasa to 93 days in 48 UGANDA Isiolo (figure 5.3). For example, obtaining a 5 BURUNDI, RWANDA land rent clearance certificate takes 3 days in MOMBASA 28 2.9 UGANDA 25 RWANDA Malaba and 5 days in Mombasa, but as long as 21 days in Kilifi and 23 days in Nyeri. A high volume of registrations in fast-growing Procedures Time Cost cities, the lack of institutional capacity and (number) (days) (% of property value) inadequate technological support explain Source: Doing Business database. some of these bottlenecks. Kenyan city is close to the East African 2010 shows that cost has been reduced by The Local Authorities Integrated Financial Community (EAC) economies’ average 1.1% of property value and time by 1 day. Operations Management System (LAIFOMS) (figure 5.2). The Kenyan city average is has been extended to more than 90 local In all the 13 cities, there are 9 requirements negatively affected by Isiolo’s local transfer councils. The council clerks can now simply to complete the legal transfer of a property tax—currently at 5% of property value—for enter the plot number in the LAIFOMS between 2 companies, involving the lands property transfer transactions. Without property rates module to obtain the amount office, the local authorities and the Kenya this outlier, the average cost to transfer of outstanding payments, speeding the is- Revenue Authority, as well as 1 of the property in Kenyan cities would be 4.2%— suance of the rate clearance certificate by 2 payment-designated commercial banks above Uganda, but cheaper than fellow EAC days, on average—from 5 days in 2009 to 3 (National Bank of Kenya, Kenya Commercial economies Burundi, Rwanda and Tanzania. days now. It only takes 1 day to obtain a rate Bank or Co-operative Bank of Kenya). clearance certificate in Garissa, Mombasa Comparing Doing Business in Kenya 2010 According to the Ministry of Lands, the and Nyeri, while the same activity can take to the current report, Mombasa and Isiolo registry should be accessible from the 5 days in Nairobi. remain the easiest and most difficult places provincial and district lands offices across Registering property continues to be to transfer property, respectively (table Kenya. Nevertheless, businesses maintain expensive in Kenya compared to other Sub- 5.1). Meanwhile, the 2 newly added cities— that they sometimes have to travel to Saharan Africa economies—with an average Kakamega and Nakuru—rank 9 and 6 on the Nairobi to obtain reliable information. The cost amounting to 4.6% of the property ease of property transfer, respectively, out service charter of the Ministry of Lands sets value (figure 5.2). In Ethiopia, Ghana, Sudan of 13. A comparison with Kenya averages in a maximum time ceiling for lands offices to and Uganda property transfers cost between FIGURE 5.3 Registering property is fastest in Mombasa and least expensive in Thika 0.7% and 3.0% of the property value. In Kenya, the main component of the cost is the Cost Time stamp duty (4% of property value), which is Mombasa 4.2 28 (% of property value) (days) paid to the national government. Thika is Malaba 4.2 32 the least expensive Kenyan city at 4.1% of Eldoret 4.3 44 the property value, while Isiolo is the most Kisumu 4.2 45 expensive at 9.1% (figure 5.3). Narok 4.2 53 Nyeri 4.4 56 Other minor cost variations stem from dif- 13-city average 4.6 61 ferent fee schedules. Obtaining a land rent Thika 4.1 63 clearance certificate is free of charge in Nakuru 4.2 71 Kakamega, Kilifi, Kisumu, Nairobi, Nakuru Kakamega 4.2 71 and Thika. In Eldoret and Nyeri, it costs as Nairobi 4.3 73 much as KES 3,800 (US$ 49). The Municipal Kilifi 4.2 76 Council of Garissa charges only KES 250 Garissa (US$ 3) for a rate clearance certificate 4.2 86 Isiolo whereas the rest of the cities charge more 9.1 93 than KES 1,000 (US$ 13). Source: Doing Business database. REGISTERING PROPERTY 29 WHAT HAS IMPROVED SINCE 2009? limits or expedited procedures, reducing time ceiling, entrepreneurs know they need In the past 7 years Doing Business recorded taxes or fees, streamlining procedures and to follow up. Even though the service charter computerizing cadastres and registries. of the Ministry of Lands sets a maximum 169 reforms in 107 economies increas- time for lands offices to deliver key services, ing the efficiency of transferring property Doing Business in Kenya 2010 identified Isiolo they are routinely ignored. Entrepreneurs (figure 5.4). Fifty-six economies lowered as one of the most expensive places to regis- state that sometimes they cannot get a transfer taxes and government fees, reduc- ter property in the world. Since then, thanks service unless they do more than what is ing the cost by 4% of the property value, to recent reform initiatives, the County on the books—such as following up with on average. Burundi cut the transfer cost by Council of Isiolo has cut out three-quarters acquaintances within lands offices or even 10% of property value over 3 years, by first of its onerous transfer tax—moving it from paying a bribe. abolishing the 7% registration fee and then 20% to 5% of property value. The reduced reducing the transfer tax rate from 6% of transfer tax on top of a 4% of property value Time ceilings work only when an agency has property value to 3%. Burkina Faso reduced paid for stamp duty, however, still makes the tools necessary to comply with them. its transfer tax rate by 7% over 4 years—first Isiolo the most expensive place in Kenya. If Fifty-four economies worldwide set legal cutting the rate from 15% to 10% and then compared to the 183 economies measured time limits for property registration. Globally, to 8%. Others made big cuts all at once. in Doing Business, Isiolo would rank 142 out 3 of 4 economies with statutory time limits Mozambique reduced its transfer tax rate of 183 economies on the cost component in- comply with them.6 Eastern Europe and from 10% to 2.4% in 2005/06. In 2010/11 dicator, and in Sub-Saharan Africa, 26 out of Central Asia, OECD high-income economies Angola cut its transfer tax rate by 8% of 46 economies. Compared with 3 years ago, and Latin America and the Caribbean are the widely applied LAIFOMS has expedited the regional groups that stand out for the property value, and the Central African the issuance of the rate clearance certificate highest compliance with their time limits. In Republic by 7.5%. In 2010/11, 20 econo- by 2 days, on average. Sub-Saharan Africa only 5 of 46 economies mies made it easier for local businesses to register property by reducing the time, cost have statutory time limits. These range from WHAT TO REFORM? 7 days in Botswana to 30 in Cape Verde and or number of procedures required. Serbia Comply with time limits Seychelles and are widely respected. improved the most in the ranking on the ease of registering property by introducing a Time limits give entrepreneurs a reference for The Kenyan government needs to strengthen fast-track option for registrations. The most how long they may need to wait. If a require- institutional capacity and provide adequate common measures were introducing time ment is not completed within a specified human capital and technological support in order to ensure compliance. Entrepreneurs FIGURE 5.4 Sub-Saharan Africa keeps up its fast pace in property registration reforms need to have incentives for self-compliance. Number of Doing Business reforms making it easier to register property by Doing Business report year When it comes to finding inspiration to Total Number of encourage compliance with time limits, Region Name DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Reforms good practices can be found internationally. Sub-Saharan Spain, for example, has an innovative way Africa 49 (46 economies) to ensure compliance: the registry’s fees are Eastern Europe cut by 30% if registration takes more than & Central Asia 34 15 days and there is no objective reason for (24 economies) the delay. The Kenyan Ministry of Lands may OECD high income 30 also consider adopting ethical standards (31 economies) and codes of conduct for public officials and Latin America professionals in the real estate industry. & Caribbean 24 (32 economies) Set low fixed fees Middle East & North Africa 12 The Kenyan local governance system is com- (18 economies) posed of 4 tiers of local authorities, namely: East Asia cities, municipalities, towns and county & Pacific 11 (24 economies) councils. Local authorities face a number of South Asia governance challenges, one of which is to 9 (8 economies) service important responsibilities—including to establish and maintain schools and educa- Q 1-5 reforms per DB year Q 6-10 reforms per DB year Q 11-15 reforms per DB year Q 16-20 reforms per DB year tional institutions, provide housing services, Note: An economy can be considered to have only 1 Doing Business reform per topic and year. The data sample for DB2006 (2005) maintain roads and streets, carry out public includes 174 economies. The sample for DB2012 (2011) also includes The Bahamas, Bahrain, Brunei Darussalam, Cyprus, Kosovo, Liberia, Luxembourg, Montenegro and Qatar, for a total of 183 economies. health schemes and provide social welfare. Source: Doing Business database. One important source of revenue for Isiolo 30 DOING BUSINESS IN KENYA 2012 Municipal Council is a transfer tax of 5% of tied to political or judicial decisions. Kenya Efforts are currently underway in Kenya but property value. This is on top of a stamp duty requires approval for every leasehold trans- are proceeding with delays. The Ministry of levied nationwide on land transfer transac- action, in addition to registration, and this Lands has set up a document conversion cen- tions—currently at 4% of property value. step adds 1 procedure and 5 to 9 days to the ter and procured equipment, such as heavy- process. duty scanners, to convert the paper files into But when transfer fees and taxes are too digital ones. The process is slow, because the burdensome, even registered property The Ministry of Lands could examine the records are often old or damaged. Methods might quickly become informal if subse- roles in the property transfer process, identify for restoring old or damaged records must be quent transactions are not registered. This the added value of each one, and eliminate improved and the process expedited. not only weakens the protection of property or combine redundant checks and approvals. rights, it also reduces potential revenue from For example, it is possible that the procedure Fully implementing computerization and property taxes. for obtaining the Commissioner of Land’s electronic filing can take decades and cost approval could be either eliminated or com- millions of dollars, depending on the amount Over the past 7 years, 56 economies lowered bined with the registration at the lands office. of surveying and cadastre work involved. At transfer taxes. Twenty-three of them are in the local level, some local officials are reluc- Sub-Saharan Africa, where costs have been Worldwide 32 economies streamlined pro- tant to give up manual searches, especially the highest. The Democratic Republic of cedures and linked or improved agencies’ those that use such searches as opportuni- Congo cut its transfer tax rate from 6% of systems to simplify property registration in ties for personal financial gains. What is the property value to 3%, Mali from 15% to the past 7 years. These measures reduced more, a recent report found that digitization 7%, and São Tomé and Príncipe from 10% to interactions between entrepreneurs and itself creates opportunities for corruption. 8%. In Benin and Guinea-Bissau, reducing agencies—saving between 1 and 2 pro- There are cases where officials claim that the registration or transfer tax was in part cedures, on average—while maintaining a particular record cannot be accessed be- motivated by the desire of these countries to security and controls. cause it is being digitized but they can help pass the Millennium Challenge Corporation find it for an additional fee.8 The government (MCC) eligibility threshold. In the medium term, Kenya may also con- must address these counterproductive in- sider setting up a one-stop shop to minimize centives while implementing the digitization Businesses in Kenya view the stamp duty interactions between agencies and entrepre- and automation process. The records should and transfer tax as a major hindrance to the neurs. Ghana did this under the roof of its be in order before consolidating or comput- efficient transfer of land titles. Respondents Lands Commission. But not all economies erizing them. Once an old record is entered suggested that it should be made more af- can afford to bring all agencies involved into the new system, the record should be fordable. These expenses need to be reduced in property transfer under one roof. Even clear and free of disputes. further to encourage registration and accu- so, many have been able to coordinate the rate price reporting. The introduction of flat functions or records of at least 2 institutions Make land and building valuations rates instead of fees expressed as a percent- involved in the property transfer process. In more transparent age of property value has proven beneficial most cases this coordination has linked a Some municipalities request on-site inspec- for both entrepreneurs and the government land registry to the tax agency or valuation tions for assessing the value of the land and in many countries, as it reduces the incentive agency. One way to do this is to have a rep- building. Instead of time-consuming and for property owners to either undervalue their resentative of one of the institutions present costly physical inspections, district lands of- plots or not register their property altogether. at the other—as in Burundi and Ethiopia. fices may consider introducing standardized Flat fees can translate into more revenue for Another is to link agencies electronically—as schedules of property values, based on the the government. In 2007, the Arab Republic in Denmark, Latvia, Lithuania, Peru and location, size, and/or level of development of of Egypt introduced a low fixed stamp duty Portugal. properties. Furthermore, some Kenyan law- fee, replacing the 3% registration fee. This Digitize land records yers that deal with property transfers state led to a boom of property registrations that that in some cases different property valuation increased government revenues by 39% 6 The lack of reliable title registries is a major methodologies lead to conflicting valuation months after the reform.7 hindrance for Kenyan businesses. The appli- reports—especially between government and cation fee for a title search is KES 500 (US$ Streamline procedures private sector valuers. Entrepreneurs who rely 6). But when people do not trust the valid- on government valuers often must facilitate To transfer a leasehold property in Kenya, the ity of records in local registries and travel the process by providing private transporta- head lessor must apply for consent to trans- to Nairobi to verify records in the central tion and maintaining good personal relation- fer from the Commissioner of Lands for the registry, transportation can require much ship to avoid overvaluation. It is important, ease of government’s record. This can be a more time and cost. Digitization of property therefore, to enforce a common methodology useful short-term measure, but the question records and automation of title searches is to ensure uniformity and consistency in the is: What is the added value or necessity of much needed to strengthen property rights valuation practice. this procedure? Normally the property trans- protection and restore such trust. fer process is an administrative process, not REGISTERING PROPERTY 31 NOTES 1. Deininger, Klaus. 2003. Land Policies for Growth and Poverty Reduction. World Bank Policy Research Report. New York: Oxford University Press. 2. World Bank. 1989. World Development Report 1989. New York: Oxford University Press. 3. Data are from World Bank Enterprise Surveys conducted in 2006/07 (http:// www.enterprisesurveys.org). 4. Property information held in cadastres and land registries is part of the land information available to governments. Land information also includes other geographic, environ- mental and socioeconomic data related to land that are useful for urban planning and development. 5. Republic of Kenya. Ministry of Lands Service Charter. 6. Doing Business database. 7. World Bank. 2007. Doing Business in Egypt 2008. Washington, DC: World Bank Group. 8. Center for International Private Enterprise and Institute of Economic Affairs. 2011. Kenya Property Markets Scorecard: Conditions for Small Businesses. 32 Enforcing contracts Wanjiku is a litigation lawyer from Isiolo FIGURE 6.1 What are the time, cost and number of procedures to resolve a commercial dispute who mainly handles commercial cases. through the courts? He spends considerable amounts of time Court in court proceedings, as hearings are frequently cancelled and rescheduled. As Time a result, many of Wanjiku’s clients end up Cost wondering whether it is really worth going Number of procedures to court. They may turn to Wanjiku to ask Company A Company B COMMERCIAL COMMERCI E ERCI COMME IAL DISPUTE RCIAL DISPUTE SPUTE DIS him why a case involving a simple breach of (seller & plaintiff) ( (buyer & defendant) contract can take a whole year in trial before a judgment is reached. Wanjiku explains Filing of Trial & court case judgment Enforcement that the hearings are delayed by seemingly endless notices of preliminary objections. Furthermore, the judges must write all the evidence down as the hearings proceed. The relatively large, credit is less widely available, HOW DOES COMMERCIAL backlog increases and subsequent cases the average interest rate is higher, and the DISPUTE RESOLUTION WORK IN have to wait longer. He finds it frustrating, default rate is higher.3 In other research, an KENYA? too. Wanjiku and his clients’ sentiments analysis of 98 developing economies sug- Although the laws and regulations relating are shared by attorneys and clients in other gests that foreign direct investment tends Kenyan cities. Many people in Kenya turn to to contract enforcement are the same across to be greater where the cost of contract informal institutions or traditional dispute the country,5 the ease of enforcing contracts enforcement in debt collection and property resolution methods—such as the elders varies from city to city. It is easiest in Garissa, eviction cases is lower, particularly when the or community leaders—to settle disputed where it takes 351 days and costs 38.7% of host economy is more indebted.4 contracts and seek justice.1 the claim value. It is most burdensome in Nairobi, where it takes 465 days and costs WHY DOES COMMERCIAL WHAT DOES ENFORCING 47.1% of the claim value (table 6.1). The av- DISPUTE RESOLUTION MATTER? CONTRACTS MEASURE? erage time to enforce a contract in Kenya is An effective dispute resolution system and Doing Business measures the time, cost a well-functioning judiciary are essential for and procedural complexity of resolving a TABLE 6.1 Where is it easy to enforce a sustaining a healthy and stable economy. In commercial lawsuit between 2 domestic contract—and where not? their absence firms undertake fewer invest- businesses. The dispute involves the breach RANK City RANK City ments and business transactions. Weak of a sales contract worth twice the income 1 Garissa 8 Mombasa judicial and dispute resolution systems can per capita of the economy. The case study undermine commercial trust, because firms 2 Narok 9 Kisumu assumes that the court hears arguments and people tend to prefer to interact only 3 Malaba 10 Nyeri on the merits and that an expert provides with those whose trust they have gained 4 Isiolo 11 Nakuru an opinion on the quality of the goods in through past interactions, thus reducing the 5 Eldoret 12 Kakamega scope of commercial activity. A recent study dispute. This distinguishes the case from 6 Kilifi 13 Nairobi found that efficient contract enforcement is simple debt enforcement. The time, cost 7 Thika associated with greater access to credit for and procedures are measured from the Note: Rankings are based on the average of city percentile firms.2 Another study of 27 judicial districts perspective of an entrepreneur (the plaintiff) rankings on the procedures, time, and cost to resolve a commercial dispute through the courts. See the data notes for details. in Italy found that, all other things being pursuing the standardized case through local Source: Doing Business database. equal, where the backlog of pending trials is courts (figure 6.1). ENFORCING CONTRACTS 33 FIGURE 6.2 How do Kenyan cities compare globally? is not matched by an appropriate number of MOST DIFFICULT 1,285 TIMOR LESTE 163.2 TIMOR LESTE magistrates; at the moment, there are only 3 magistrates handling cases instead of the 655 SSA allocated 6. In Nairobi, Nakuru and Thika the court diary for the entire year is full by the end of the first quarter. If parties are ready to Kenya 50.0 SSA apply for a hearing date in July, the earliest Nairobi 47.1 44.7 EAC date they will typically obtain is January of 518 OECD HIGH INCOME 13-city average 40.7 Kenya 496 EAC Isiolo 38.4 the following year. In Garissa, parties can Nairobi 465 typically get a date within 2 to 3 months 13-city average 429 after all relevant documents have been exchanged between the opposing parties. 19.7 OECD HIGH INCOME Courts in Mombasa have a unique closed- Garissa, Narok 351 diary system, in which the court diary is open EASIEST 321 LUXEMBOURG 9.7 LUXEMBOURG quarterly. When the diary is open, cases can Time Cost be scheduled for the following 3 months. For (days) (% of claim) cities with high caseload, this can make the Note: EAC indicates the average for economies in the East African Community; SSA indicates the average for the Sub-Saharan Africa region. fixing of hearing dates faster. Source: Doing Business database. Adjournments can slow the trial significantly. 429 days—about 14 months—and the cost there are places like Ghana, where the same Many times judges are overburdened by their comes to 40.7% of the claim value. process takes only 1 week.7 own trial schedule and grant adjournments rather easily. Lawyers may take advantage With the increase of cross-border trade After the process is served, the lawyers of this latitude to delay the trial by raising among the East African Community (EAC) review and exchange all relevant court docu- preliminary objections and seeking injunc- member countries, an efficient and speedy ments—such as statements of evidence tions. Currently, the number of interlocutory contract enforcement mechanism through or statements of claims—before getting a objections or injunctions that a party may the courts is becoming an important pillar hearing date. Fixing the hearing date requires be given is not limited. This is because the of regional integration. On average, courts in the consent of both parties and depends Civil Procedure Act and the Civil Procedure Kenyan cities are more than 2 months faster upon the relevant court’s diary, caseload and Rules enacted in 2010 have not been fully and 4% cheaper than the average EAC city. the number of magistrates staffed in that implemented. Once implemented, they are Kenya’s average is also faster than the OECD court. The process is most burdensome in expected to restrict adjournments through high-income economies’ average of 518 Kakamega due to a heavy caseload, which eliminating adjournments without hearing days, but much more costly: the average cost FIGURE 6.3 Time to enforce a contract across cities in Kenya to enforce a contract in OECD economies is less than half of that in Kenya (figure 6.2). Filing and Trial and Enforcement service judgment of judgment There are 3 stages of litigation in the Doing Garissa 351 Total days Business case study: filing and service of the Narok 351 claim, trial and judgment, and finally enforce- ment of judgment. The filing and service Malaba 395 period starts from the moment the plaintiff Kilifi 425 decides to file a claim up to the point when Kisumu 425 the defendant is officially notified. In Kenya, Eldoret 435 the upper time limits for filing and service are Isiolo 455 set at 30 days by the 2010 Civil Procedure Mombasa 455 Rules.6 Most of the cities are barely meeting these limits because the parties are always Nakuru 455 served at the last moment. In Nairobi this Nyeri 455 stage takes 40 days, due to court case back- Thika 455 log. In Garissa and Narok, on the other hand, Kakamega 460 filing and service is faster (21 days) because Nairobi 465 their courts’ caseload is lighter with many people using traditional dispute resolution 13-city average methods (figure 6.3). Still, outside of Kenya Source: Doing Business database. 429 34 DOING BUSINESS IN KENYA 2012 FIGURE 6.4 Cost of enforcing a contract across cities in Kenya registry to get an assessment of the fees by Court officers at the court registry. Although regu- Attorney Enforcement fees fees costs lated nationally, case filings and administra- 38.4 Total cost tive costs are subject to arbitrary assess- Isiolo (% of claim) ment by court registry officers. For example, Garissa 38.7 a consent order, which parties may enter into Narok 38.9 in the course of proceedings, is assessed at Eldoret 39.0 KES 150 (US$ 2) in Eldoret (the mandated Malaba 39.2 amount by national regulation9), while the Thika 39.5 same costs KES 300 (US$ 5) in Kakamega. Kilifi 39.8 Enforcement costs include the cost of ex- Mombasa 39.9 tracting a decree, organizing the public sale Nyeri 40.3 of goods, and other incidental costs, such Kisumu 41.2 as storage costs. The cost of extracting a Nakuru 43.3 decree (KES 150) is regulated and standard- ized under the law (Guide to Assessment Kakamega 43.5 Court Fees). However, auctioneers have a Nairobi 47.1 high degree of discretion regarding what to 13-city charge as enforcement fees, hence the varia- average tion among cities. The enforcement costs are 40.7% Source: Doing Business database. highest in Nairobi and Nakuru—amounting to 6.7 % of the claim value—and lowest dates. Further, an injunction should lapse af- Litigation costs are regulated at the national in Isiolo—amounting to 4.2% of the claim ter 12 months if the claim is not prosecuted. level by court rules and the reported varia- value. The average enforcement cost among tions among the 13 cities are not significant. the cities measured comes to 5.3% of the The trial and judgment phase accounts, on Differences stem mostly from the court fees claim value—much higher than in Tanzania average, for over 80% of the time to enforce and the enforcement cost. Isiolo is the cheap- where no fees are charged or Botswana a contract in Kenya. In Garissa—the city est city to enforce a contract with 38.4% of where enforcement costs only 1.5% of the where enforcing a contract is the easiest in the claim value, while Nairobi stands out claim value. Kenya—the trial and judgment period takes as the most expensive with 47.1%, which 300 days, which is 6 months longer than in is three times the cost in Tanzania (14.3%) WHAT HAS IMPROVED SINCE Rwanda. In most other cities, the trial and (figure 6.4). As in most other economies 2009? judgment period takes about a year. This is in the world, attorney fees constitute the largest portion of costs—on average almost Improving the court system is not an about 2 months longer than the EAC average 60%. easy task both from legal and institutional and 9 months longer than in the Republic of perspectives; reforms pose a continuous Korea—one of the fastest economies in the Attorney fees are uniformly regulated challenge to even the most industrialized world for enforcing contracts. under the Advocates Act (Chapter 16) and countries. Since the publication of Doing The final phase is the enforcement of the specific guidelines set in the Advocates Business in Kenya 2010, there have been judgment—including the sale of the attached (Remuneration) Order of 2009. These 2 major judicial reforms spearheaded by goods by public auction. Enforcement pro- regulations set minimum fees chargeable in the new constitution, which was enacted cedures are regulated by the Auctioneers’ order to prevent undercutting by attorneys.8 in August 2010 (box 6.1). In line with new The regulations also allow a winning party constitutional provisions, the Civil Procedure Act and the Civil Procedure Rules of 2010. to recover the costs of the trial—including Act was amended and new Civil Procedure Enforcing a judgment is most efficient in attorney’s fees, court costs and enforcement Rules were passed into law in 2010. Garissa, Kisumu and Kilifi, where it takes 1 costs. The average estimates for attorney month from the time the plaintiff initiates The Civil Procedure Rules institute a pretrial fees are the same in 12 of the 13 Kenyan cit- enforcement to the time of public sale. In conference procedure in order to expedite ies (23.7% of the claim value). The exception most of the remaining cities in Kenya— the disposal of cases. At the case confer- is Nairobi, where lawyers charge a premium Eldoret being the exception with 40 days—it ence, parties are mandated to come up with due to higher demand. takes twice as long (2 months). Delays in a timetable of proceedings. The introduction enforcement frequently result from having Court fees include case filing fees and of case management in courts requires that to go through several ‘mention’ proceedings, other administrative costs. The filing fees are pre-trial case conferencing be administered which are required to obtain confirmation of regulated by the Judicature Act (Chapter 8). by case managers.12 Case managers are the judgment before an auction can proceed. Lawyers submit the claim papers to the court also required to ensure that parties frame ENFORCING CONTRACTS 35 TABLE 6.2 Kenyan cities are benefiting from BOX 6.1 THE NEW CONSTITUTION OF KENYA: A STRONG FOUNDATION FOR JUDICIAL REFORMS national legal reforms The new constitution of Kenya, along with subsequent legislations, is expected to affect the Introduction structure of the court systems and the course of dispute resolution. The constitution expressly en- Introduction of of specialized case management courages alternative dispute resolution10—including arbitration, reconciliation, mediation and tra- systems commercial ditional dispute resolution mechanisms. In addition, specific guidelines are set for courts regarding courts timely justice and exercising justice without undue regard to procedural technicalities. The constitu- Eldoret  tion also decentralizes judicial authority, with a supreme court and court of appeals having their own Garissa  presidents and each high court having a principal judge as its head. Besides the establishment of a supreme court, the new constitution mandates an increase in the number of court of appeal judges. Isiolo  Subsequently, the Kenyan parliament enacted the Judicial Service Act increasing the number of Kakamega  court of appeal judges from 14 to 30. Kilifi  The constitution mandates that the sitting judges and magistrates re-apply for their jobs and that a vetting process take place. A legislation known as the Vetting of Judges and Magistrates Act Kisumu  was passed for this sole purpose. The various divisions of the high court under the new constitu- Malaba  tion have been reorganized and reconstituted to divisions of Commercial and Admiralty, Judicial Mombasa   Review, Constitution and Human Rights, and Land and Environment. The creation of a Commercial and Admiralty division within the high court was followed by the establishment of new high courts Nairobi  in 2 cities (Machakos and Garissa) and the specialized commercial court within the high court in Nakuru  Mombasa. The judiciary plans to establish a high court station in each of the 47 newly created Narok  counties of Kenya. Each high court is envisioned to have a specialized commercial court. Plans are underway to open such a court in Kisumu and other cities are to follow. Nyeri  Following the enactment of the constitution, the office of the Ombudsman has been created and Thika  mandated to receive complaints both from the staff within the judiciary and the public relating to Note: This table records all Doing Business reforms that occurred issues arising from the administration of justice. In the last 3 months, the office has received over between June 2009 and March 2012. 700 complaints of various categories, out of which 229 have been settled and 275 are presently Source: Doing Business database. being processed.11 and agree on the issues in dispute. This is 120 and the court of appeal judges are 30 Denmark introduced special rules for cases intended to reduce prolonged preliminary at any time. In addition, in order to expe- below US$ 8,600 in 2006. That reduced the objections and applications that may delay dite the delivery of judgments, the Judicial number of cases before the general courts in the trial process. Service Commission has advertised for 129 Copenhagen by 38%.13 Similar reforms have researchers—each judge is to be allocated a been undertaken in South Africa, Zambia, While all cities will benefit from the legal researcher to assist him in legal research and Botswana and Mauritius as an additional reforms at the national level—including the writing. This is aimed at freeing some time layer to the magistrates’ courts. introduction of case management—1 city from the judges’ schedule so that they are where administrative reforms have shown Relieve judges from administrative able to deliver judgments faster. results locally is Mombasa (table 6.2). In duties and regulate transfers from October 2011, a new specialized commercial one location to the other WHAT TO REFORM? court was established to handle all com- The workload of the judges and magistrates mercial disputes. Prior to the establishment Operationalize small claims court is increased by the administrative functions of this court, all cases and claims, whether The Civil Procedure Act and the Civil they perform. These administrative functions commercial or non-commercial in nature, Procedure Rules of 2010 envisage the take time away from other important court were adjudicated on by the same judge. existence of small claims courts. Such tasks, resulting in delays in the disposal of Now, there are 2 dedicated judges—1 newly courts could be regulated under simplified cases. In order to free judges to do what they appointed and 1 transferred from the civil procedural rules so that parties can file and are primarily mandated to do—hearing and court—only for commercial cases. handle claims without the requirement of deciding cases—the judicial function of judg- lawyers, as this would reduce time and cost es and magistrates must be separated from Across the country, the judiciary has associated with enforcing such claims. This the administrative function. Currently some embarked on recruiting new judges and new legislation classifies a claim as small if of the administrative functions include sitting magistrates in order to reduce case backlog. the claim value does not exceed KES 49,999 on procurement and tender committees and Twenty eight additional high court judges (around US$ 650) and has either undisputed acting as registrars and deputy registrars in were hired, bringing the total number to 80 facts or involves relatively few parties. If a administrative taxation matters. Relieving nationally. An additional 7 court of appeal claim fulfills these conditions, it is allowed judges from the above functions would free judges and another 160 magistrates have to go through a fast track option in a small time for judges and magistrates and expedite also been hired. The Judicature Act (Cap 8) claims court. While mandated by law, there the hearing process as a result. Transfer of has been amended in order to ensure the have not yet been any small claim courts judges and magistrates from one city to number of high court judges is not below established in Kenya. Elsewhere in the world, another also results in delays, especially for 36 DOING BUSINESS IN KENYA 2012 incomplete trials. The judiciary should adopt up a specialized court or a court division is NOTES a transfer policy that ensures judges and justified. 1. Wojkowska, Ewa. 2006. “Doing Justice: How magistrates are in stations for specific periods Informal Justice Systems Can Contribute.” of time leaving no gaps in between. Specialized commercial courts allow re- Oslo, Norway: Oslo Governance Centre, sources, both in terms of personnel and United Nations Development Program. Introduce a fully-fledged electronic infrastructure, to be targeted for specific 2. Bae, Kee-Hong, and Vidhan K. Goyal. 2009. case management system backlog reduction programs. Setting up spe- “Creditor Rights, Enforcement, and Bank cialized courts may also result in improved Loans.” Journal of Finance 64 (2): 823-60. In the long run, introducing a fully-fledged efficiency in general courts, as they find 3. Jappelli, Tullio, Marco Pagano and Magda electronic case management system and au- Bianco. 2005. “Courts and Banks: Effects tomated court process can further improve themselves relieved of a substantial case- of Judicial Enforcement on Credit Markets.” contract enforcement. If the courts are com- load. Finally, allowing judges to focus their Journal of Money, Credit, and Banking 37 (2): puterized, support functions like electronic expertise on commercial matters may speed 223–44. filing, case tracking, document management, up commercial contract enforcement—as 4. Ahlquist, John S., and Aseem Prakash. 2010. deadline reminders and scheduling of hear- they grow accustomed to the specific issues “FDI and the Costs of Contract Enforcement and terminology of commercial cases, case in Developing Countries.” Policy Sciences 43 ings are performed automatically. Electronic (2): 181–200. case management can also help with court management and decision-making become 5. The process of resolving commercial statistics that measure the efficiency of the swifter. disputes in Kenya is regulated by the Civil performance of the court. These statistics Procedure Act, together with the Civil In the past 8 years, 23 economies glob- would track the time it takes for cases to Procedure Rules 2010, the Advocates ally made it easier to enforce contracts by Act (Chapter 16) and the Advocates move through the court process and assess introducing or expanding specialized courts Remuneration Order, and the Judicature Act what needs to be reformed. (Chapter 8). The Civil Procedure Act and the to deal with commercial cases. These include countries like Malaysia, Nepal and Civil Procedure Rules are new legislations Ethiopian courts now use a computerized that were promulgated in 2010, whose aim case management system that allows them Sierra Leone. Seven African economies that is to simplify the old Civil Procedure Act not only to measure delays, but also to introduced commercial courts or commer- (Chapter 21). There are a number of other compare performances between judges, cial sections within courts—Burkina Faso, rules and regulations, which play a part the Democratic Republic of Congo, Ghana, in resolving commercial dispute in Kenya. chambers and courts. Reports are avail- Mauritania, Mozambique, Nigeria and These include the Evidence Act (Chapter able in real time and oversight by the court 80), the Law of Contract Act (Chapter 23) administration ensures continuous perfor- Rwanda—saw their average time to resolve a and the Auctioneers’ Act, Act No. 5 of 1996. mance evaluations. These reports, together commercial dispute decrease from 600 days 6. Civil Procedure Rules, Order 5, Issue and with a backlog reduction program providing in 2004 to 476 in 2011.15 Service of Summons, Rule 1, Sub-rule 6. additional court sessions during vacation, 7. Doing Business database. Make court fee schedules readily have been successful in reducing the time 8. Undercutting by advocates is considered available in public domains an offence under the Advocates Act needed to enforce a contract by 10%.14 (Part 8, Section 36), while the minimum Many lawyers in Kenya complain that they fees chargeable are set by the Advocates Continue introducing specialized do not have access to court fees schedules. (Remuneration) Order. commercial courts or divisions in As a result, the process of assessing court 9. High Court of Kenya. 1995. Guide to other cities fees is highly discretionary. If the schedules Assessment of Court fees (Revised Edition). Specialized commercial courts have been Nairobi: Kenya Judiciary. are published in either hard copies or on- established in Nairobi and most recently in 10. The Constitution of Kenya, Article 159(2) line, lawyers would have access to the fees (C). Mombasa. Like in Nairobi, the specialized schedules and this would save both money 11. Dr. Mutunga, Willy, Chief Justice/President commercial court in Mombasa, introduced in and time. In addition, having the fee sched- Supreme Court of Kenya. Progress Report on August 2011, will have dedicated judges that ules publicly available would make it harder the Transformation of the Judiciary. October, will only handle commercial cases. In other for court registry officers to give arbitrary 2011. Nairobi, Kenya. cities, specific days are allocated to civil or fee assessments. Having the fees posted in 12. Order 11 of the Civil Procedure Rules. criminal matters. This considerably slows each court building is a good first step. They 13. World Bank. 2008. Doing Business 2009. down adjudication of commercial disputes. should be displayed in prominent places Washington, DC: The World Bank Group. The introduction of specialized commercial where the payments are made. In the long 14. World Bank. 2009. Doing Business courts or divisions at the magistrate level run, publishing all these fees online should 2010: Reforming through Difficult Times. would increase efficiency for commercial Washington, DC: World Bank Group. be the way forward. This would be cheaper 15. World Bank. 2011. Doing Business in 2012: cases. This recommendation is valid for cit- for the courts and provide easier access to Doing Business in a More Transparent World. ies with an important commercial caseload. the public. Washington, DC: The World Bank Group. Each judiciary should analyze its caseload to determine whether the cost of setting 37 Data notes The indicators presented and analyzed in Doing tests for robustness, which lead to revisions Business in Kenya 2012 measure business regula- or expansions of the information collected. ECONOMY CHARACTERISTICS tion and the protection of property rights—and For example, the preliminary findings are Gross national income (GNI) per their effect on businesses, especially small and presented to the local governments through capita medium-size domestic firms. The indicators Doing Business in Kenya 2012 reports consultations with administrators and other 2010 income per capita as published in document the degree of regulation, such as the local government officials. the World Bank’s World Development number of procedures to start a business or Indicators 2011. Income is calculated us- to register and transfer commercial property. The Doing Business methodology offers several ing the Atlas method (current US$). For They also gauge the time and cost of achieving advantages. It is transparent, using factual cost indicators expressed as a percent- information about what laws and regulations age of income per capita, 2010 GNI in a regulatory goal or complying with regulation, U.S. dollars is used as the denominator. such as the time and cost to enforce a contract. say and allowing multiple interactions with Kenya’s GNI per capita in 2010 = US$ local respondents to clarify potential misinter- 780. In this report, Doing Business indicators have pretations of questions. Having representative been created for 13 cities in Kenya, 11 of which samples of respondents is not an issue: Doing Exchange rate were benchmarked in Doing Business in Kenya Business is not a statistical survey, and the The exchange rate used in this report is: 1 2010. The data for all sets of indicators in texts of relevant laws and regulations are US$ = 77.69 KES (Kenyan Shillings). Doing Business in Kenya 2012 are current as of collected and answers checked for accuracy. March 2012. The data for all sets of indicators The methodology is inexpensive and easily Region and income group taken from Doing Business 2012 are current as replicable, so data can be collected in a large Doing Business uses the World Bank re- of June 2011. sample of economies. Because standard gional and income group classifications available at http://www.worldbank.org/ assumptions are used in the data collection, data/countryclass. METHODOLOGY comparisons and benchmarks are valid across The Doing Business in Kenya 2012 data are economies. Finally, the data not only highlight collected in a standardized way. To start, the the extent of specific regulatory obstacles to Doing Business team, with academic advisers, doing business but also identify their source designs a questionnaire. The questionnaire uses and point to what might be reformed. a simple business case to ensure comparability across countries and over time—with assump- LIMITS TO WHAT IS MEASURED tions about the legal form of the business, its The Doing Business methodology has 4 size, its location and the nature of its operations. limitations that should be considered when Then the questionnaire is customized to the interpreting the data. First, the data often focus particular case of Indonesia. on a specific business form—a limited liability Questionnaires are administered through company of a specified size—and may not more than 240 local experts, including be representative of the regulation on other lawyers, construction firms, engineers, local businesses, for example, sole proprietorships. and national-level government officials and Second, transactions described in a standard- other professionals routinely administering or ized case study refer to a specific set of issues advising on legal and regulatory requirements. and may not represent the full set of issues a These experts have several rounds of interaction business encounters. Third, the measures of with the Doing Business in Kenya 2012 team, time involve an element of judgment by the through face-to-face interviews, conference expert respondents. When sources indicate calls and written correspondence. The data different estimates, the time indicators reported from questionnaires are subjected to numerous in Doing Business represent the median values of 38 DOING BUSINESS IN KENYA 2012 several responses given under the assumptions lawyers, notaries and government officials company founders or company officers and of the standardized case. complete and verify the data. employees are not counted as procedures. Procedures that must be completed in the Finally, the methodology assumes that a busi- Information is also collected on the sequence same building but in different offices are ness has full information on what is required in which procedures are to be completed counted as separate procedures. If founders and does not waste time when completing and whether procedures may be carried out have to visit the same office several times procedures. In practice, completing a pro- simultaneously. It is assumed that any required for different sequential procedures, each is cedure may take longer if the business lacks information is readily available and that all counted separately. The founders are assumed information or is unable to follow up promptly. agencies involved in the start-up process to complete all procedures themselves, without Alternatively, the business may choose to function without corruption. If answers by middlemen, facilitators, accountants or lawyers, disregard some burdensome procedures. local experts differ, inquiries continue until unless the use of such a third party is mandated For both reasons the time delays reported in the data are reconciled. by law. If the services of professionals are Doing Business in Kenya 2012 would differ from required, procedures conducted by such the perceptions of entrepreneurs reported in To make the data comparable across countries, professionals on behalf of the company are the World Bank Enterprise Surveys or other several assumptions about the business and counted separately. Each electronic procedure perception surveys. the procedures are used. is counted separately. If 2 procedures can be Assumptions about the business completed through the same website but CHANGES IN WHAT IS MEASURED require separate filings, they are counted as 2 The business: The methodology for the dealing with construc- procedures. Both pre- and post incorporation • Is a limited liability company. If there is tion permits indicator was updated this year. procedures that are officially required for an more than one type of limited liability The global Doing Business report now includes entrepreneur to formally operate a business company in the country, the limited liabil- getting electricity indicators in its overall ity form most popular among domestic are recorded (table 7.1). analysis of the ease of doing business. For this firms is chosen. Information on the most reason, the procedures, time and cost related Procedures required for official correspondence popular form is obtained from incorpora- to obtaining an electricity connection were tion lawyers or the statistical office. or transactions with public agencies are also removed from the dealing with construction included. For example, if a company seal or • Operates in the commercial district of the permits indicator. In line with Doing Business stamp is required on official documents, such selected city. methodology and to allow for international as tax declarations, obtaining the seal or stamp • Is 100% domestically owned and has 5 and subnational comparability, Doing Business is counted. Similarly, if a company must open owners, none of whom is a legal entity. in Kenya 2012 has also removed procedures, a bank account before registering for sales tax • Has start-up capital of 10 times income time, and cost related to getting an electricity or value added tax, this transaction is included per capita at the end of 2010, paid in cash. connection from the dealing with construction as a procedure. Shortcuts are counted only if • Performs general commercial activities, permits indicator. they fulfill 4 criteria: they are legal, they are such as the production or sale of products available to the general public, they are used or services to the public. The business does not perform foreign trade activities by the majority of companies, and avoiding STARTING A BUSINESS and does not handle products subject to a them causes substantial delays. Doing Business in Kenya 2012 records all special tax regime, for example, liquor or tobacco. It is not using heavily polluting FIGURE 7.1 Starting a business: getting a procedures that are officially required for production processes. local limited liability company up an entrepreneur to start up and formally and running • Leases the commercial plant and offices operate a commercial business. These include Rankings are based on 4 indicators and is not a proprietor of real estate. obtaining all necessary licenses and permits and completing any required notifications, • Does not qualify for investment incentives Preregistration, As % of income or any special benefits. registration and per capita, no verifications or inscriptions for the company postregistration bribes included and employees with relevant authorities. The • Has at least 10 and up to 50 employees 1 (in calendar days) month after the commencement of opera- ranking on the ease of starting a business is tions, all of them nationals. the simple average of the percentile rankings • Has a turnover of at least 100 times in- 25% 25% on its component indicators (figure 7.1). Time Cost come per capita. After a study of laws, regulations and publicly • Has a company deed 10 pages long. 25% 25% Procedures Paid-in available information on business entry, a minimum Procedures capital detailed list of procedures is developed, along with the time and cost of complying with each A procedure is defined as any interaction of Procedure is Funds deposited in a bank or procedure under normal circumstances and the company founder with external parties completed when with a notary before registration final document and up to three months the paid-in minimum capital requirements if (for example, government agencies, lawyers, is received following registration, as % of applicable. Subsequently, local incorporation auditors or notaries). Interactions between income per capita DATA NOTES 39 TABLE 7.1 What do the starting a business and their sequence from the beginning but has licenses, permits and certificates; completing indicators measure? had no prior contact with any of the officials. all required notifications; and receiving all Procedures to legally start and operate a company necessary inspections. Doing Business in Kenya (number) Cost 2012 also records procedures for obtaining Preregistration (for example, name verification or Cost is recorded as a percentage of the reservation, notarization) connections for water, sewerage, and a fixed economy’s income per capita. It includes all telephone landline. Procedures necessary to Registration in the city measured official fees and fees for legal or professional register the property so that it can be used as Postregistration (for example, social security registra- tion, company seal) services if such services are required by law. collateral or transferred to another entity are Time required to complete each procedure Fees for purchasing and legalizing company also counted. The survey divides the process of (calendar days) books are included if these transactions are building a warehouse into distinct procedures Does not include time spent gathering information required by law. The company law, the com- and calculates the time and cost of completing Each procedure starts on a separate day mercial code and specific regulations and fee each procedure. The ranking on the ease Procedure completed once final document is received schedules are used as sources for calculating of dealing with construction permits is the No prior contact with officials costs. In the absence of fee schedules, a simple average of the percentile rankings on Cost required to complete each procedure government officer’s estimate is taken as an (% of income per capita) its component indicators (figure 7.2). official source. In the absence of a government Official costs only, no bribes officer’s estimate, estimates of incorporation Information is collected from experts in No professional fees unless services required by law lawyers are used. If several incorporation construction licensing, including architects, Paid-in minimum capital (% of income per capita) lawyers provide different estimates, the median construction lawyers, construction firms, utility Funds deposited in a bank or with a notary before reported value is applied. In all cases the cost registration (or within 3 months) service providers and public officials who deal excludes bribes. with building regulations, including approvals and inspections. To make the data comparable Only procedures required of all businesses Paid-in minimum capital across economies, several assumptions about are covered. Industry-specific procedures are The paid-in minimum capital requirement the business, the warehouse project and the excluded. For example, procedures to comply reflects the amount that the entrepreneur utility connections are used. with environmental regulations are included needs to deposit in a bank or with a notary only when they apply to all businesses conduct- before registration and up to 3 months following Assumptions about the ing general commercial or industrial activities. incorporation and is recorded as a percentage of construction company Procedures that the company undergoes to the economy’s income per capita. The amount The business (BuildCo): connect to electricity, water, gas and waste is typically specified in the commercial code or the company law. Many countries have • Is a limited liability company. disposal services are not included. a minimum capital requirement but allow • Operates in the selected city. Time businesses to pay only a part of it before • Is 100% domestically and privately owned. registration, with the rest to be paid after the • Has 5 owners, none of whom is a legal Time is recorded in calendar days. The measure first year of operation. entity. captures the median duration that incorporation lawyers indicate is necessary to complete • Is fully licensed and insured to carry out The data details on starting a business can be found a procedure with minimum follow-up with construction projects, such as building for each economy at http://www.doingbusiness.org warehouses. government agencies and no extra payments. It by selecting the economy in the drop-down list. This is assumed that the minimum time required for • Has 60 builders and other employees, methodology was developed in Djankov, Simeon, each procedure is 1 day. Although procedures all of them nationals with the technical Rafael la Porta, Florencio López-de-Silanes and expertise and professional experience nec- may take place simultaneously, they cannot Andrei Schleifer. 2002. ¨The Regulation of Entry.¨ essary to obtain construction permits and start on the same day (that is, simultaneous Quarterly Journal of Economics 117(1):1-37, and approvals. procedures start on consecutive days). A is adopted here with minor changes. • Has at least 1 employee who is a licensed procedure is considered completed once the architect and registered with the local as- company has received the final document, such sociation of architects. as the company registration certificate or tax DEALING WITH CONSTRUCTION PERMITS • Has paid all taxes and taken out all neces- number. If a procedure can be accelerated for an sary insurance applicable to its general additional cost, the fastest procedure is chosen. Doing Business in Kenya 2012 records all business activity (for example, accidental It is assumed that the entrepreneur does not procedures required for a business in the insurance for construction workers and waste time and commits to completing each construction industry to build a standardized third-person liability insurance). remaining procedure without delay. The time warehouse. These procedures include submit- • Owns the land on which the warehouse is that the entrepreneur spends on gathering ting all relevant project-specific documents (for built. information is ignored. It is assumed that the example, building plans and site maps) to the entrepreneur is aware of all entry regulations authorities; obtaining all necessary clearances, 40 DOING BUSINESS IN KENYA 2012 FIGURE 7.2 Dealing with construction permits: warehouses are met by building in an area services are included. All procedures that are complying with formalities to build a where similar warehouses can be found. legally or in practice required for building a warehouse • Is located on a land plot of 10,000 square warehouse are counted, even if they may be Rankings are based on 3 indicators feet (929 square meters) that is 100% avoided in exceptional cases (table 7.2). Days to build a As % of income warehouse in per capita, no owned by BuildCo and is registered in the main city bribes included cadastre and land registry. Time • Is a new construction (there was no previ- Time is recorded in calendar days. The measure 33.3% 33.3% ous construction on the land). Time Cost captures the median duration that local experts • Has complete architectural and technical indicate is necessary to complete the procedure plans prepared by a licensed architect. in practice. It is assumed that the minimum time 33.3% • Will include all technical equipment required required for each procedure is 1 day. Although Procedures to make the warehouse fully operational. procedures may take place simultaneously, • Will take 30 weeks to construct (excluding they cannot start on the same day (that is, Procedure is completed when final document is all delays due to administrative and regula- simultaneous procedures start on consecutive received; construction permits, inspections and utility connections included tory requirements). days). If a procedure can be accelerated legally for an additional cost, the fastest procedure is Assumptions about the warehouse Assumptions about the utility chosen. It is assumed that BuildCo does not The warehouse: connections waste time and commits to completing each • Will be used for general storage activities, The water and sewerage connection: remaining procedure without delay. The time such as storage of books or stationery. The • Is 32 feet 10 inches (10 meters) from the that BuildCo spends on gathering information warehouse will not be used for any goods existing water source and sewer tap. is ignored. It is assumed that BuildCo is aware requiring special conditions, such as food, • Does not require water for fire protection of all building requirements and their sequence chemicals or pharmaceuticals. reasons; a fire extinguishing system (dry from the beginning. • Has 2 stories, both above ground, with system) will be used instead. If a wet fire a total surface of approximately 14,000 protection system is required by law, it is Cost square feet (1,300.6 square meters). Each assumed that the water demand specified Cost is recorded as a percentage of the floor is 9 feet, 10 inches (3 meters) high. below also covers the water needed for fire economy’s income per capita. Only official • Has road access and is located in the peri- protection. costs are recorded. All the fees associated with urban area of the selected city (that is, on • Has an average water use of 662 liters (175 completing the procedures to legally build a the fringes of the city but still within its gallons) a day and an average wastewater warehouse are recorded, including those as- official limits). flow of 568 liters (150 gallons) a day. sociated with obtaining land use approvals and • Is not located in a special economic or in- • Has a peak water use of 1,325 liters (350 preconstruction design clearances; receiving dustrial zone. The zoning requirements for gallons) a day and a peak wastewater flow inspection before, during and after construction; of 1,136 liters (300 gallons) a day. getting utility connections; and registering • Will have a constant level of water demand the warehouse property. Nonrecurring taxes TABLE 7.2 What do the dealing with and wastewater flow throughout the year. required for the completion of the warehouse construction permits indicators measure? project are also recorded. The building code, The telephone connection: Procedures to legally build a warehouse (number) information from local experts and specific • Is 32 feet, 10 inches (10 meters) from the Submitting all relevant documents and obtain- regulations and fee schedules are used as ing all necessary clearances, licenses, permits and main telephone network. sources for costs. If several local partners certificates • Is a fixed telephone landline. provide different estimates, the median reported Completing all required notifications and receiving all necessary inspections value is used. Procedures Obtaining utility connections for water, sewerage and a fixed telephone landline A procedure is any interaction of the company’s The data details on dealing with construction Registering the warehouse after its completion (if employees or managers with external parties, permits can be found for each economy at http:// required for use as collateral or for transfer of the including government agencies, notaries, the www.doingbusiness.org by selecting the economy warehouse) land registry, the cadastre, utility companies, in the drop-down list. Time required to complete each procedure (calendar days) public and private inspectors and technical Does not include time spent gathering information experts apart from in-house architects and Each procedure starts on a separate day engineers. Interactions between company REGISTERING PROPERTY Procedure completed once final document is received employees, such as development of the ware- Doing Business in Kenya 2012 records the house plans and inspections conducted by full sequence of procedures necessary for a No prior contact with officials employees, are not counted as procedures. business (Buyer) to purchase a property from Cost required to complete each procedure (% of income per capita) Procedures that the company undergoes to another business (Seller) and to transfer the Official costs only, no bribes connect to water, sewerage and telephone property title to the buyer’s name so that the DATA NOTES 41 FIGURE 7.3 Registering property: transfer of Assumptions about the property TABLE 7.3 What do the registering property property between 2 local companies The property: indicators measure? Rankings are based on 3 indicators Procedures to legally transfer title on immovable • Has a value of 50 times income per capita. property (number) Days to transfer As % of property The sale price equals the value. Preregistration procedures (for example, checking for property in value, no bribes main city included • Is fully owned by the seller. liens, notarizing sales agreement, paying property transfer taxes) • Has no mortgages attached and has been Registration procedures in the economy’s selected 33.3% 33.3% under the same ownership for the past 10 city Time Cost years. Postregistration procedures (for example, filing title • Is registered in the land registry or cadas- with municipality) tre, or both, and is free of title disputes. Time required to complete each procedure 33.3% Procedures (calendar days) • Is located in a periurban commercial zone, Does not include time spent gathering information and no rezoning is required. Each procedure starts on a separate day Steps to check encumbrances, obtain clearance • Consists of land and a building. The land certificates, prepare deed and transfer title so Procedure completed once final document is received area is 6,000 square feet (557.4 square that the property can be occupied, sold or used as collateral meters). A 2-story warehouse of 10,000 No prior contact with officials square feet (929 square meters) is located Cost required to complete each procedure buyer can use the property for expanding its on the land. The warehouse is 10 years (% of property value) business, as collateral in taking new loans or, if old, is in good condition and complies with Official costs only, no bribes necessary, sell to another business. The process all safety standards, building codes and No value added or capital gains taxes included starts with obtaining the necessary documents, other legal requirements. The property of such as a copy of the seller’s title if necessary, land and building will be transferred in its entirety. Time and conducting due diligence if required. The transaction is considered complete when it is • Will not be subject to renovations or ad- Time is recorded in calendar days. The measure ditional building following the purchase. captures the median duration that property opposable to third parties and when the buyer can use the property, use it as collateral for a • Has no trees, natural water sources, natu- lawyers, notaries or registry officials indicate ral reserves or historical monuments of is necessary to complete a procedure. It is bank loan or resell it. The ranking on the ease any kind. assumed that the minimum time required for of registering property is the simple average • Will not be used for special purposes, and each procedure is 1 day. Although procedures of the percentile rankings on its component no special permits, such as for residential may take place simultaneously, they cannot indicators (figure 7.3). use, industrial plants, waste storage or start on the same day (that is, simultaneous certain types of agricultural activities, are Every procedure required by law or neces- procedures start on consecutive days). It is required. sary in practice is included, whether it is the assumed that the buyer does not waste time • Has no occupants (legal or illegal), and no responsibility of the seller or the buyer or must and commits to completing each remaining other party holds a legal interest in it. be completed by a third party on their behalf. procedure without delay. If a procedure can Local property lawyers, notaries and property Procedures be accelerated for an additional cost, the registries provide information on procedures fastest legal procedure available and used by A procedure is defined as any interaction as well as the time and cost to complete each the majority of property owners is chosen. If of the buyer or the seller, their agents (if an of them. procedures can be undertaken simultaneously, it agent is legally or in practice required) or the property with external parties, including is assumed that they are. It is assumed that the To make the data comparable across economies, parties involved are aware of all regulations and government agencies, inspectors, notaries several assumptions about the parties to the their sequence from the beginning. Time spent and lawyers. Interactions between company transaction, the property and the procedures officers and employees are not considered. on gathering information is not considered. are used. All procedures that are legally or in practice required for registering property are recorded, Cost Assumptions about the parties even if they may be avoided in exceptional Cost is recorded as a percentage of the property The parties (Buyer and Seller): cases. It is assumed that the buyer follows value, assumed to be equivalent to 50 times • Are limited liability companies. income per capita. Only official costs required the fastest legal option available and used by • Are located in the periurban area of the the majority of property owners. Although the by law are recorded, including fees, transfer selected city. taxes, stamp duties and any other payment to buyer may use lawyers or other professionals • Are 100% domestically and privately where necessary in the registration process, the property registry, notaries, public agencies owned. it is assumed that it does not employ an or lawyers. Other taxes, such as capital gains • Have 50 employees each, all of whom are outside facilitator in the registration process tax or value added tax, are excluded from the nationals. unless legally or in practice required to do so cost measure. Both costs borne by the buyer • Perform general commercial activities. (table 7.3). and those borne by the seller are included. 42 DOING BUSINESS IN KENYA 2012 If cost estimates differ among sources, the to pay for the goods on the grounds that TABLE 7.4 What do the enforcing contracts median reported value is used. the delivered goods were not of adequate indicators measure? quality. Procedures to enforce a contract through the courts The data details on registering property can • Seller (the plaintiff) sues Buyer (the de- (number) be found for each economy at http://www. fendant) to recover the amount under Any interaction between the parties in a commercial dispute, or between them and the judge or court doingbusiness.org by selecting the economy in the sales agreement (that is, 200% of the officer the drop-down list. economy’s income per capita). Buyer op- Steps to file and serve the case poses Seller’s claim, saying that the quality Steps for trial and judgment of the goods is not adequate. The claim is disputed on the merits. The court cannot Steps to enforce the judgment ENFORCING CONTRACTS decide the case on the basis of documen- Time required to complete procedures (calendar days) Indicators on enforcing contracts measure the tary evidence or legal title alone. Time to file and serve the case efficiency of the judicial system in resolving • A court in the economy’s selected city with Time for trial and obtaining judgment a commercial dispute. The data are built by jurisdiction over commercial cases worth following the step-by-step evolution of a Time to enforce the judgment 200% of income per capita decides the commercial sale dispute before local courts. The dispute. Cost required to complete procedures (% of claim) data are collected through study of the codes No bribes • Seller attaches Buyer’s movable assets (for of civil procedure and other court regulations example, office equipment and vehicles) Average attorney fees as well as surveys completed by local litigation before obtaining a judgment because Seller Court costs, including expert fees lawyers and by judges. The ranking on the ease fears that Buyer may become insolvent. Enforcement costs of enforcing contracts is the simple average • An expert opinion is given on the quality of of the percentile rankings on its component the delivered goods. If it is standard prac- example, in civil law jurisdictions the judge indicators (figure 7.4). tice in the economy for each party to call can appoint an independent expert, while in its own expert witness, the parties each common law jurisdictions each party submits a The name of the relevant court in each call one expert witness. If it is standard list of expert witnesses to the court. To indicate economy—the court in the selected city with practice for the judge to appoint an inde- overall efficiency, 1 procedure is subtracted jurisdiction over commercial cases worth pendent expert, the judge does so. In this from the total number for economies that have 200% of income per capita—is published at case the judge does not allow opposing specialized commercial courts, and 1 procedure http://www.doingbusiness.org/ExploreTopics/ expert testimony. for economies that allow electronic filing of the EnforcingContracts/. • The judgment is 100% in favor of Seller: initial complaint in court cases. Some procedural the judge decides that the goods are of Assumptions about the case adequate quality and that Buyer must pay steps that take place simultaneously with or the agreed price. are included in other procedural steps are not • The value of the claim equals 200% of the economy’s income per capita. counted in the total number of procedures. • Buyer does not appeal the judgment. Seller • The dispute concerns a lawful transac- decides to start enforcing the judgment as Time tion between 2 businesses (Seller and soon as the time allocated by law for ap- Buyer), located in the selected city. Seller peal expires. Time is recorded in calendar days, counted sells goods worth 200% of the economy’s • Seller takes all required steps for prompt from the moment the plaintiff decides to file income per capita to Buyer. After Seller enforcement of the judgment. The money the lawsuit in court until payment. This includes delivers the goods to Buyer, Buyer refuses is successfully collected through a public both the days when actions take place and the sale of Buyer’s movable assets (for ex- waiting periods between. The average duration FIGURE 7.4 Enforcing contracts: resolving a ample, office equipment and vehicles). of different stages of dispute resolution is commercial dispute through the recorded: the completion of service of process courts Procedures (time to file and serve the case), the issuance Rankings are based on 3 indicators The list of procedural steps compiled for each of judgment (time for the trial and obtaining Days to resolve Attorney, court and economy traces the chronology of a commercial the judgment) and the moment of payment commercial sale dispute enforcement costs as dispute before the relevant court. A procedure (time for enforcement of the judgment). through the courts % of claim value is defined as any interaction, required by law or commonly used in practice, between the Cost 33.3% 33.3% Time Cost parties or between them and the judge or court Cost is recorded as a percentage of the claim, officer. This includes steps to file and serve the assumed to be equivalent to 200% of income case, steps for trial and judgment and steps per capita. No bribes are recorded. Three types 33.3% Procedures necessary to enforce the judgment (table 7.4). of costs are recorded: court costs, enforcement costs and average attorney fees. The survey allows respondents to record Steps to file claim, obtain judgment procedures that exist in civil law but not Court costs include all court costs that Seller and enforce it common law jurisdictions and vice versa. For (Plaintiff) must advance to the court, regardless DATA NOTES 43 of the final cost to Seller. Expert fees, if required constraints, what package of reforms is most first year in which data were available for the by law or commonly used in practice, are effective and how these issues are shaped by majority of economies (a total of 174) and for included in court costs. Enforcement costs are the context of an economy. The Doing Business all 9 indicator sets included in the measure. all costs that Seller (Plaintiff) must advance indicators provide a new empirical data set that To mitigate the effects of extreme outliers in to enforce the judgment through a public sale may improve understanding of these issues. the distributions of the rescaled data (very of Buyer’s movable assets, regardless of the few economies need 694 days to complete final cost to Seller. Average attorney fees are Distance to frontier measure the procedures to start a business, but many the fees that Seller (Plaintiff) must advance This year’s report, Doing Business 2012—Doing need 9 days), the maximum (max) is defined to a local attorney to represent Seller in the business in a more transparent world, introduces as the 95th percentile of the pooled data for standardized case. a new measure to illustrate how the regula- all economies and all years for each indicator. tory environment for local businesses in each The data details on enforcing contracts can be found economy has changed over time. The distance for each economy at http://www.doingbusiness. to frontier measure illustrates the distance of org by selecting the economy in the drop-down an economy to the “frontier” and shows the list. This methodology was developed in Djankov extent to which the economy has closed this and others (2003) and is adopted here with gap over time. The frontier is a score derived minor changes. from the most efficient practice or highest score achieved on each of the component indicators RANKINGS in 9 Doing Business indicator sets (excluding The aggregate rank index ranks cities from 1 to the employing workers and getting electricity 13. The index is calculated as the ranking on the indicators) by any economy since 2005. In simple average of city percentile rankings on starting a business, for example, New Zealand each of the 4 topics covered in Doing Business has achieved the highest performance on the in Kenya 2012. The ranking on each topic is the time (1 day), Canada and New Zealand on the simple average of the percentile rankings on number of procedures required (1), Denmark its component indicators. The ease of starting and Slovenia on the cost (0% of income per a business is a simple average of the city capita) and Australia on the paid-in minimum rankings on the number of procedures, and capital requirement (0% of income per capita). the associated time and cost (% of income per capita) required to start a business. The ease of Calculating the distance to frontier for each dealing with construction permits is a simple economy involves 2 main steps. First, individual average of the city rankings on the number of indicator scores are normalized to a common procedures, and the associated time and cost unit. To do so, each of the 32 component indica- (% of income per capita) required to deal with tors y is rescaled to (y – min)/(max – min), formalities to build a warehouse. The ease of with the minimum value (min) representing registering property is a simple average of the the frontier—the highest performance on that city rankings on the number of procedures, indicator across all economies since 2005. associated time and cost (% of the property Second, for each economy the scores obtained value) required for a business to purchase a for individual indicators are aggregated through property from another business, and to transfer simple averaging into one distance to frontier the property title to the buyer’s name. The ease score. An economy’s distance to the frontier of enforcing contracts is a simple average of is indicated on a scale from 0 to 100, where the city percentile rankings on the procedures, 0 represents the frontier and 100 the lowest time and cost (% of claim value) to resolve a performance. commercial dispute through the courts. The difference between an economy’s distance The rankings are limited in scope. They do not to frontier score in 2005 and its score in 2011 account for an economy’s proximity to large illustrates the extent to which the economy has markets, the quality of its infrastructure services closed the gap to the frontier over time. The (other than services related to construction maximum (max) and minimum (min) observed permits), the security of property from theft values are computed for the 174 economies and looting, macroeconomic conditions or included in the Doing Business sample since the strength of underlying institutions. There 2005 and for all years (from 2005 to 2011). remains a large unfinished agenda for research The year 2005 was chosen as the baseline into what regulation constitutes binding for the economy sample because it was the 45 City tables Eldoret Doing Business in Kenya 2012 (rank) 5 Starting a business (rank) 10 Dealing with construction permits (rank) 2 Enforcing contracts (rank) 5 Procedures (number) 10 Procedures (number) 11 Procedures (number) 41 Time (days) 50 Time (days) 77 Time (days) 435 Cost (% of income per capita) 43.4 Cost (% of income per capita) 162.3 Cost (% of claim value) 39.0 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 7 Procedures (number) 9 Time (days) 44 Cost (% of the property value) 4.3 Garissa Doing Business in Kenya 2012 (rank) 4 Starting a business (rank) 12 Dealing with construction permits (rank) 3 Enforcing contracts (rank) 1 Procedures (number) 10 Procedures (number) 13 Procedures (number) 41 Time (days) 53 Time (days) 64 Time (days) 351 Cost (% of income per capita) 44.7 Cost (% of income per capita) 161.5 Cost (% of claim value) 38.7 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 8 Procedures (number) 9 Time (days) 86 Cost (% of the property value) 4.2 Isiolo Doing Business in Kenya 2012 (rank) 7 Starting a business (rank) 2 Dealing with construction permits (rank) 4 Enforcing contracts (rank) 4 Procedures (number) 10 Procedures (number) 12 Procedures (number) 41 Time (days) 46 Time (days) 71 Time (days) 455 Cost (% of income per capita) 39.8 Cost (% of income per capita) 164.6 Cost (% of claim value) 38.4 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 13 Procedures (number) 9 Time (days) 93 Cost (% of the property value) 9.1 Kakamega Doing Business in Kenya 2012 (rank) 11 Starting a business (rank) 6 Dealing with construction permits (rank) 9 Enforcing contracts (rank) 12 Procedures (number) 10 Procedures (number) 12 Procedures (number) 41 Time (days) 43 Time (days) 118 Time (days) 460 Cost (% of income per capita) 43.4 Cost (% of income per capita) 163.4 Cost (% of claim value) 43.5 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 9 Procedures (number) 9 Time (days) 71 Cost (% of the property value) 4.2 46 DOING BUSINESS IN KENYA 2012 Kilifi Doing Business in Kenya 2012 (rank) 9 Starting a business (rank) 3 Dealing with construction permits (rank) 11 Enforcing contracts (rank) 6 Procedures (number) 10 Procedures (number) 12 Procedures (number) 41 Time (days) 44 Time (days) 86 Time (days) 425 Cost (% of income per capita) 42.6 Cost (% of income per capita) 206.5 Cost (% of claim value) 39.8 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 11 Procedures (number) 9 Time (days) 76 Cost (% of the property value) 4.2 Kisumu Doing Business in Kenya 2012 (rank) 8 Starting a business (rank) 13 Dealing with construction permits (rank) 10 Enforcing contracts (rank) 9 Procedures (number) 10 Procedures (number) 9 Procedures (number) 41 Time (days) 53 Time (days) 111 Time (days) 425 Cost (% of income per capita) 48.4 Cost (% of income per capita) 272.0 Cost (% of claim value) 41.2 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 2 Procedures (number) 9 Time (days) 45 Cost (% of the property value) 4.2 Malaba Doing Business in Kenya 2012 (rank) 1 Starting a business (rank) 6 Dealing with construction permits (rank) 1 Enforcing contracts (rank) 3 Procedures (number) 10 Procedures (number) 9 Procedures (number) 41 Time (days) 45 Time (days) 64 Time (days) 395 Cost (% of income per capita) 43.1 Cost (% of income per capita) 133.7 Cost (% of claim value) 39.2 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 4 Procedures (number) 9 Time (days) 32 Cost (% of the property value) 4.2 Mombasa Doing Business in Kenya 2012 (rank) 6 Starting a business (rank) 9 Dealing with construction permits (rank) 7 Enforcing contracts (rank) 8 Procedures (number) 10 Procedures (number) 9 Procedures (number) 40 Time (days) 37 Time (days) 93 Time (days) 455 Cost (% of income per capita) 47.6 Cost (% of income per capita) 228.0 Cost (% of claim value) 39.9 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 1 Procedures (number) 9 Time (days) 28 Cost (% of the property value) 4.2 Nairobi Doing Business in Kenya 2012 (rank) 13 Starting a business (rank) 5 Dealing with construction permits (rank) 11 Enforcing contracts (rank) 13 Procedures (number) 10 Procedures (number) 9 Procedures (number) 40 Time (days) 32 Time (days) 125 Time (days) 465 Cost (% of income per capita) 45.1 Cost (% of income per capita) 251.1 Cost (% of claim value) 47.1 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 12 Procedures (number) 9 Time (days) 73 Cost (% of the property value) 4.3 CITY TABLES 47 Nakuru Doing Business in Kenya 2012 (rank) 12 Starting a business (rank) 4 Dealing with construction permits (rank) 13 Enforcing contracts (rank) 11 Procedures (number) 10 Procedures (number) 13 Procedures (number) 41 Time (days) 38 Time (days) 140 Time (days) 455 Cost (% of income per capita) 44.3 Cost (% of income per capita) 208.8 Cost (% of claim value) 43.3 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 6 Procedures (number) 9 Time (days) 71 Cost (% of the property value) 4.2 Narok Doing Business in Kenya 2012 (rank) 2 Starting a business (rank) 8 Dealing with construction permits (rank) 5 Enforcing contracts (rank) 2 Procedures (number) 10 Procedures (number) 12 Procedures (number) 41 Time (days) 55 Time (days) 72 Time (days) 351 Cost (% of income per capita) 39.3 Cost (% of income per capita) 173.4 Cost (% of claim value) 38.9 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 5 Procedures (number) 9 Time (days) 53 Cost (% of the property value) 4.2 Nyeri Doing Business in Kenya 2012 (rank) 10 Starting a business (rank) 10 Dealing with construction permits (rank) 6 Enforcing contracts (rank) 10 Procedures (number) 10 Procedures (number) 11 Procedures (number) 41 Time (days) 55 Time (days) 81 Time (days) 455 Cost (% of income per capita) 41.4 Cost (% of income per capita) 199.8 Cost (% of claim value) 40.3 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 10 Procedures (number) 9 Time (days) 56 Cost (% of the property value) 4.4 Thika Doing Business in Kenya 2012 (rank) 3 Starting a business (rank) 1 Dealing with construction permits (rank) 7 Enforcing contracts (rank) 7 Procedures (number) 10 Procedures (number) 9 Procedures (number) 41 Time (days) 38 Time (days) 134 Time (days) 455 Cost (% of income per capita) 41.0 Cost (% of income per capita) 179.3 Cost (% of claim value) 39.5 Paid-in min. capital (% of income per capita) 0.0 Registering property (rank) 3 Procedures (number) 9 Time (days) 63 Cost (% of the property value) 4.1 48 Indicator tables Starting a business Dealing with construction permits Doing Business Paid-in Ease of in Kenya minimum Ease of Cost dealing with 2012 Cost capital starting a (% of construction (aggregate Procedures Time (% of income (% of income business Procedures Time income per permits rank) (number) (days) per capita) per capita) (rank) (number) (days) capita) (rank) Eldoret 5 10 50 43.4 0.0 10 11 77 162.3 2 Garissa 4 10 53 44.7 0.0 12 13 64 161.5 3 Isiolo 7 10 46 39.8 0.0 2 12 71 164.6 4 Kakamega 11 10 43 43.4 0.0 6 12 118 163.4 9 Kilifi 9 10 44 42.6 0.0 3 12 86 206.5 11 Kisumu 8 10 53 48.4 0.0 13 9 111 272.0 10 Malaba 1 10 45 43.1 0.0 6 9 64 133.7 1 Mombasa 6 10 37 47.6 0.0 9 9 93 228.0 7 Nairobi 13 10 32 45.1 0.0 5 9 125 251.1 11 Nakuru 12 10 38 44.3 0.0 4 13 140 208.8 13 Narok 2 10 55 39.3 0.0 8 12 72 173.4 5 Nyeri 10 10 55 41.4 0.0 10 11 81 199.8 6 Thika 3 10 38 41.0 0.0 1 9 134 179.3 7 INDICATOR TABLES 49 Registering property Enforcing contracts Cost Ease of Ease of (% of registering Cost enforcing Procedures Time property property Procedures Time (% claim contracts (number) (days) value) (rank) (number) (days) value) (rank) Eldoret 9 44 4.3 7 41 435 39.0 5 Garissa 9 86 4.2 8 41 351 38.7 1 Isiolo 9 93 9.1 13 41 455 38.4 4 Kakamega 9 71 4.2 9 41 460 43.5 12 Kilifi 9 76 4.2 11 41 425 39.8 6 Kisumu 9 45 4.2 2 41 425 41.2 9 Malaba 9 32 4.2 4 41 395 39.2 3 Mombasa 9 28 4.2 1 40 455 39.9 8 Nairobi 9 73 4.3 12 40 465 47.1 13 Nakuru 9 71 4.2 6 41 455 43.3 11 Narok 9 53 4.2 5 41 351 38.9 2 Nyeri 9 56 4.4 10 41 455 40.3 10 Thika 9 63 4.1 3 41 455 39.5 7 LIST OF PROCEDURES 51 Procedure 5. File deed and details with the less than the maximum) is determined by reference to LIST OF PROCEDURES salary bands. This procedure is done at the local NSSF Registrar of Companies at the Attorney office in Eldoret. STARTING A BUSINESS General’s Chamber in Nairobi (Sheria House) Procedure 9. Register with the National Time: 21 days Hospital Insurance Fund (NHIF) Eldoret Cost: KES 5,836 Time: 1 day Standard company legal form: Limited Liability Company Comments: The founder must file the incorporation Cost: No cost (LLC) deed and the required documents and forms (listed Comments: The employee contributes a fixed sum to Paid-in minimum capital requirement: none below) with the Registrar of Companies: the National Hospital Insurance Fund (NHIF), which Data as of: March 2012 a. Stamped memorandum and articles of association; must be deducted by the employer from the employ- b. Statement of capital; ees’ salary. The maximum contribution is KES 320 per Procedure 1. Obtain approval for the month. The contributions are used to offset the costs c. Form 201, Notice of Situation of Registered Office; company name from the Registrar of of medical treatment. This procedure is done at the Companies d. Form 203, Particulars of Directors and Secretary; Eldoret NHIF office. e. Form 208, Declaration of Compliance with the Time: 4 days (3 days name approval + 1 day travel) Companies Act; Procedure 10. Make a company seal after a Cost: KES 2,100 (filing fee: KES 100 + transportation: f. Copy of the company name approval. certificate of incorporation has been issued KES 2,000) The fees to be paid for the registration of a company in Time: 7 days Comments: The company name reservation lasts 30 Kenya are currently regulated by Legal Notice No. 80 days but can be renewed for a similar period. This pro- Cost: KES 3,000 of 2003 and are payable as follows: cedure can only be done in Nairobi. Most applicants Comments: Seals are made by private entities that re- complete procedures 1 to 5 in Nairobi given that the a. For the first KES 100,000 of nominal capital, there quire sight of a copy of the certificate of incorporation. applicant, or the company’s agent, is already in town. is a fixed fee of KES 2,200; The average price of the company seal is KES 3,000. Given that the use of lawyers is not mandatory for b. For every additional KES 20,000 of nominal capital There are now seal shops in Eldoret. company incorporation in Kenya, lawyer fees are not after the first KES 100,000, there is a fee of KES The Companies Bill 2010, which is pending parliament taken into consideration. 120, subject to a maximum of KES 60,000; approval, proposes to make common seals optional. An online name search and reservation system is c. Filing fee for 3 forms: KES 600. currently being piloted. Until the system is fully imple- STARTING A BUSINESS mented, one must still submit a letter to the Registrar Procedure 6. Register with the Tax of Companies accompanied by the prescribed search Department for the single taxpayer Garissa fees when seeking to reserve a name. identification number online Standard company legal form: Limited Liability Company Time: 1 day (LLC) Procedure 2. Stamp the memorandum and articles and a statement of the nominal Cost: No cost Paid-in minimum capital requirement: none capital Comments: Registration for a personal and a company Data as of: March 2012 identification number (PIN) is required for the local Time: 11 days Procedure 1. Obtain approval for the service tax and the pay-as-you-earn (PAYE) tax. KRA Cost: KES 8,080 (1% of nominal capital + KES 2,020 has adopted the PIN as the single taxpayer identifica- company name from the Registrar of stamp duty on the memorandum and articles of as- tion and discontinued the VAT number. Companies sociation) The registration for PIN can be done online. Time: 4 days (3 days name approval + 1 day travel) Comments: Effective January 1, 2005, the Kenya Rev- Cost: KES 2,100 (filing fee: KES 100 + transportation: enue Authority (KRA) took over stamp duty collection Procedure 7. Apply for a business permit KES 2,000) from the Ministry of Lands and Housing. Documents must be first assessed by the Stamp Duty Office Time: 2 days Comments: The company name reservation lasts 30 before payment can be processed by KRA-designated Cost: KES 7,000 days but can be renewed for a similar period. This pro- banks. In 2009, a Stamp Duty Office opened at the Comments: The applicant fills out the application cedure can only be done in Nairobi. Most applicants Attorney General’s Chamber, making the assessment form with details about the scope, size and location of complete procedures 1 to 5 in Nairobi given that the of the stamp duty more efficient. intended business. The municipal regulation requires applicant, or the company’s agent, is already in town. that an officer from the Eldoret Municipal Council Given that the use of lawyers is not mandatory for This procedure is usually done in Nairobi since the visits the intended business site before issuing a new company incorporation in Kenya, lawyer fees are not applicant is already in town. single business permit. Thereafter, the applicant is taken into consideration. Procedure 3. Pay stamp duty at bank given a generated bill (amount payable for acquiring a An online name search and reservation system is permit). The fee varies by type of business, number of currently being piloted. Until the system is fully imple- Time: 1 day mented, one must still submit a letter to the Registrar employees, size and location of company’s premises. Cost: KES 100 (bank commission) The fee is payable to the Eldoret Municipal Council. of Companies accompanied by the prescribed search Comments: This procedure can be done either locally For a medium-size trader, shop or retail service from fees when seeking to reserve a name. or in Nairobi. Payment of stamp duty is done by 5 to 20 employees and/or premises from 50 to 300 Banker’s check or cash at an accredited bank. square meters, the fee is KES 7,000. Upon payment, Procedure 2. Stamp the memorandum and all forms are taken for signature and the permit is articles and a statement of the nominal Procedure 4. Sign declaration of ready for collection latest by the following day. The capital compliance (Form 208) before a business permit is usually issued in 2 days for new Time: 14 days Commissioner for Oaths businesses and in 1 day for renewals. Cost: KES 8,080 (1% of nominal capital + KES 2,020 Time: 1 day stamp duty on the memorandum and articles of as- Procedure 8. Register with the National Cost: KES 200 Social Security Fund (NSSF) sociation) Comments: A company founder must sign Form 208, Comments: Effective January 1, 2005, the Kenya Rev- Time: 1 day the Declaration of Compliance with the Companies enue Authority (KRA) took over stamp duty collection Act, which accompanies the registration documents Cost: No cost from the Ministry of Lands and Housing. Documents to be submitted to the Registrar of Companies. Comments: The National Social Security Fund (NSSF) must be first assessed by the Stamp Duty Office provides the employee with a lump-sum retirement before payment can be processed by KRA-designated benefit. Participation is mandatory. The employer banks. In 2009, a Stamp Duty Office opened at the pays a standard contribution of about 5% of salary, Attorney General’s Chamber, making the assessment subject to a maximum of KES 400 per month. Half of the stamp duty more efficient. the contribution is deductible from the employee’s This procedure is usually done in Nairobi since the salary. The precise amount of the contribution (where applicant is already in town. 52 DOING BUSINESS IN KENYA 2012 Procedure 3. Pay stamp duty at bank meters is KES 7,000. Upon payment, all forms are Given that the use of lawyers is not mandatory for taken for signature and the permit is ready for collec- company incorporation in Kenya, lawyer fees are not Time: 1 day tion latest by the following day. taken into consideration. Cost: KES 100 (bank commission) It is not a prerequisite for an officer from the Municipal An online name search and reservation system is Comments: This procedure can be done either locally Council to visit the site before the permit is issued. currently being piloted. Until the system is fully imple- or in Nairobi. Payment of stamp duty is done by Periodic visits by officers from the Municipality are mented, one must still submit a letter to the Registrar Banker’s check or cash at accredited bank. subsequently made to businesses within the munici- of Companies accompanied by the prescribed search pality to confirm compliance with the permit. fees when seeking to reserve a name. Procedure 4. Sign declaration of compliance (Form 208) before a Procedure 8. Register with the National Procedure 2. Stamp the memorandum and Commissioner for Oaths Social Security Fund (NSSF) articles and a statement of the nominal Time: 1 day Time: 1 day capital Cost: KES 200 Cost: No cost Time: 14 days Comments: A company founder must sign Form 208, Comments: The National Social Security Fund (NSSF) Cost: KES 8,080 (1% of nominal capital + KES 2,020 the Declaration of Compliance with the Companies provides the employee with a lump-sum retirement stamp duty on the memorandum and articles of as- Act, which accompanies the registration documents benefit. Participation is mandatory. The employer sociation) to be submitted to the Registrar of Companies. pays a standard contribution of about 1% of salary, Comments: Effective January 1, 2005, the Kenya Rev- subject to a maximum of KES 400 per month. Half enue Authority (KRA) took over stamp duty collection Procedure 5. File deed and details with the the contribution is deductible from the employee’s from the Ministry of Lands and Housing. Documents Registrar of Companies at the Attorney salary. The precise amount of the contribution (where must be first assessed by the Stamp Duty Office General’s Chamber in Nairobi (Sheria less than the maximum) is determined by reference to before payment can be processed by KRA-designated House) salary bands. This procedure is done at the local NSSF banks. In 2009, a Stamp Duty Office opened at the office in Garissa. Attorney General’s Chamber, making the assessment Time: 21 days of the stamp duty more efficient. Cost: KES 5,836 Procedure 9. Register with the National This procedure is usually done in Nairobi since the Comments: The founder must file the incorporation Hospital Insurance Fund (NHIF) applicant is already in town. deed and the required documents and forms (listed Time: 1 day below) with the Registrar of Companies: Procedure 3. Pay stamp duty at bank Cost: No cost a. Stamped memorandum and articles of association; Time: 1 day Comments: The employee contributes a fixed sum to b. Statement of capital; the National Hospital Insurance Fund (NHIF), which Cost: KES 100 (bank commission) c. Form 201, Notice of Situation of Registered Office; must be deducted by the employer from the employ- Comments: This procedure can be done either locally d. Form 203, Particulars of Directors and Secretary; ees’ salary. The maximum contribution is KES 320 per or in Nairobi. Payment of stamp duty is done by e. Form 208, Declaration of Compliance with the month. The contributions are used to offset the costs Banker’s check or cash at accredited bank. Companies Act; of medical treatment. This procedure is done at the Garissa NHIF office. Procedure 4. Sign declaration of f. Copy of the company name approval. The fees to be paid for the registration of a company in compliance (Form 208) before a Procedure 10. Make a company seal after a Commissioner for Oaths Kenya are currently regulated by Legal Notice No. 80 certificate of incorporation has been issued of 2003 and are payable as follows: Time: 1 day Time: 7 days a. For the first KES 100,000 of nominal capital, there Cost: KES 200 is a fixed fee of KES 2,200; Cost: KES 3,800 (company seal: KES 3,000 + courier: KES 800) Comments: A company founder must sign Form 208, b. For every additional KES 20,000 of nominal capital the Declaration of Compliance with the Companies after the first KES 100,000, there is a fee of KES Comments: Seals are made by private entities that re- Act, which accompanies the registration documents 120, subject to a maximum of KES 60,000; quire sight of a copy of the certificate of incorporation. to be submitted to the Registrar of Companies. The average price of the company seal is KES 3,000. c. Filing fee for 3 forms: KES 600. The common practice is for applicants to obtain the Procedure 5. File deed and details with the company seal in Nairobi. Once the company seal is Procedure 6. Register with the Tax ready, private providers will send the seal by courier. Registrar of Companies at the Attorney Department for the single taxpayer The average cost of mailing the seal is KES 800. General’s Chamber in Nairobi (Sheria identification number online The Companies Bill 2010, which is pending parliament House) Time: 1 day approval, proposes to make common seals optional. Time: 14 days Cost: No cost Cost: KES 5,836 Comments: Registration for a personal and a company STARTING A BUSINESS Comments: The founder must file the incorporation identification number (PIN) is required for the local deed and the required documents and forms (listed Isiolo below) with the Registrar of Companies: service tax and the pay-as-you-earn (PAYE) tax. KRA has adopted the PIN as the single taxpayer identifica- Standard company legal form: Limited Liability Company a. Stamped memorandum and articles of association; tion and discontinued the VAT number. (LLC) b. Statement of capital; The registration for PIN can be done online. Paid-in minimum capital requirement: none c. Form 201, Notice of Situation of Registered Office; Data as of: March 2012 d. Form 203, Particulars of Directors and Secretary; Procedure 7. Apply for a business permit Procedure 1. Obtain approval for the e. Form 208, Declaration of Compliance with the Time: 2 days Companies Act; company name from the Registrar of Cost: KES 7,000 Companies f. Copy of the company name approval. Comments: The applicant fills out the application The fees to be paid for the registration of a company in Time: 4 days (3 days name approval + 1 day travel) form with details about the scope, size and location of Kenya are currently regulated by Legal Notice No. 80 intended business. The applicant is given a generated Cost: KES 2,100 (filing fee: KES 100 + transportation: KES 2,000) of 2003 and are payable as follows: bill (amount payable for acquiring a permit). The fee varies by type of business, number of employees, Comments: The company name reservation lasts 30 a. For the first KES 100,000 of nominal capital, there size and location of company’s premises. The fee is days but can be renewed for a similar period. This pro- is a fixed fee of KES 2,200; payable to the Garissa Municipal Council. The fee for cedure can only be done in Nairobi. Most applicants b. For every additional KES 20,000 of nominal capital a medium trader, shop, or retail service from 5 to 20 complete procedures 1 to 5 in Nairobi given that the after the first KES 100,000, there is a fee of KES employees and/or premises from 50 to 300 square applicant, or the company’s agent, is already in town. 120, subject to a maximum of KES 60,000; c. Filing fee for 3 forms: KES 600. LIST OF PROCEDURES 53 Procedure 6. Register with the Tax STARTING A BUSINESS b. Statement of capital; Department for the single taxpayer Kakamega c. Form 201, Notice of Situation of Registered Office; identification number online Standard company legal form: Limited Liability Company d. Form 203, Particulars of Directors and Secretary; Time: 1 day (LLC) e. Form 208, Declaration of Compliance with the Cost: No cost Companies Act; Paid-in minimum capital requirement: none Comments: Registration for a personal and a company Data as of: March 2012 f. Copy of the company name approval. identification number (PIN) is required for the local The fees to be paid for the registration of a company in service tax and the pay-as-you-earn (PAYE) tax. KRA Procedure 1. Obtain approval for the Kenya are currently regulated by Legal Notice No. 80 has adopted the PIN as the single taxpayer identifica- company name from the Registrar of of 2003 and are payable as follows: tion and discontinued the VAT number. Companies a. For the first KES 100,000 of nominal capital, there The registration for PIN can be done online. Time: 4 days (3 days name approval + 1 day travel) is a fixed fee of KES 2,200; Cost: KES 2,100 (filing fee: KES 100 + transportation: b. For every additional KES 20,000 of nominal capital Procedure 7. Apply for a business permit KES 2,000) after the first KES 100,000, there is a fee of KES Time: 2 days 120, subject to a maximum of KES 60,000; Comments: The company name reservation lasts 30 Cost: KES 3,500 days but can be renewed for a similar period. This pro- c. Filing fee for 3 forms: KES 600. Comments: The applicant fills out the application cedure can only be done in Nairobi. Most applicants form with details about the scope, size and location of complete procedures 1 to 5 in Nairobi given that the Procedure 6. Register with the Tax intended business. The applicant is given a generated applicant, or the company’s agent, is already in town. Department for the single taxpayer bill (amount payable for acquiring a permit). The fee Given that the use of lawyers is not mandatory for identification number online varies by type of business, number of employees, company incorporation in Kenya, lawyer fees are not Time: 1 day size and location of company’s premises. The fee is taken into consideration. Cost: No cost payable to the Isiolo County Council. The fee for a An online name search and reservation system is Comments: Registration for a personal and a company medium trader, shop, or retail service from 5 to 20 currently being piloted. Until the system is fully imple- identification number (PIN) is required for the local employees and/or premises from 50 to 300 square mented, one must still submit a letter to the Registrar service tax and the pay-as-you-earn (PAYE) tax. KRA meters is KES 3,500. of Companies accompanied by the prescribed search has adopted the PIN as the single taxpayer identifica- It is not a prerequisite for an officer from the Isiolo fees when seeking to reserve a name. tion and discontinued the VAT number. County Council to visit the site before the permit is Procedure 2. Stamp the memorandum and The registration for PIN can be done online. issued. articles and a statement of the nominal Procedure 8. Register with the National capital Procedure 7. Apply for a business permit Social Security Fund (NSSF) Time: 5 days Time: 10 days Time: 1 day Cost: KES 7,000 Cost: KES 8,080 (1% of nominal capital + KES 2,020 Cost: KES 400 (transportation) stamp duty on the memorandum and articles of as- Comments: The applicant fills out the application sociation) form with details about the scope, size and location of Comments: The National Social Security Fund (NSSF) intended business. An officer from the Kakamega Mu- provides the employee with a lump-sum retirement Comments: Effective January 1, 2005, the Kenya Rev- nicipal Council might visit the intended business site benefit. Participation is mandatory. The employer enue Authority (KRA) took over stamp duty collection to confirm the details given by the applicant. There- pays a standard contribution of about 1% of salary, from the Ministry of Lands and Housing. Documents after, the applicant is given a generated bill (amount subject to a maximum of KES 400 per month. Half the must be first assessed by the Stamp Duty Office payable for acquiring a permit). The fee varies by type contribution is deductible from the employee’s salary. before payment can be processed by KRA-designated of business, number of employees, size and location of The precise amount of the contribution (where less banks. In 2009, a Stamp Duty Office opened at the company’s premises. The fee is payable to the Kaka- than the maximum) is determined by reference to sal- Attorney General’s Chamber, making the assessment mega Municipal Council. The fee for a medium trader, ary bands. A NSSF mobile office comes to Isiolo twice of the stamp duty more efficient. shop, or retail service from 5 to 20 employees and/or a month. There is no permanent office here. Most This procedure is usually done in Nairobi since the premises from 50 to 300 square meters is KES 7,000. people go to Meru for registration. applicant is already in town. Upon payment, all forms are taken for signature and the permit is ready for collection by the following day. Procedure 9. Register with the National Procedure 3. Pay stamp duty at bank Hospital Insurance Fund (NHIF) Time: 1 day Procedure 8. Register with the National Time: 1 day Cost: KES 100 (bank commission) Social Security Fund (NSSF) Cost: No cost Comments: This procedure can be done either locally Time: 1 day Comments: The employee contributes a fixed sum or in Nairobi. Payment of stamp duty is done by Cost: No cost to the National Hospital Insurance Fund (NHIF), which Banker’s check or cash at accredited bank. Comments: The National Social Security Fund (NSSF) must be deducted by the employer from the employ- provides the employee with a lump-sum retirement ees’ salary. The maximum contribution is KES 320 per Procedure 4. Sign declaration of compliance benefit. Participation is mandatory. The employer month. The contributions are used to offset the costs (Form 208) before a Commissioner for Oaths pays a standard contribution of about 1% of salary, of medical treatment. A NHIF satellite office opened subject to a maximum of KES 400 per month. Half Time: 1 day in Isiolo in 2009. Applicants can travel to Meru or Na- the contribution is deductible from the employee’s niuki to register at the local NHIF branch offices there. Cost: KES 200 salary. The precise amount of the contribution (where Comments: A company founder must sign Form 208, less than the maximum) is determined by reference to Procedure 10. Make a company seal after a the Declaration of Compliance with the Companies salary bands. This procedure is done at the local NSSF certificate of incorporation has been issued Act, which accompanies the registration documents office in Kakamega. to be submitted to the Registrar of Companies. Time: 7 days Cost: KES 3,900 (company seal: KES 3,000 + courier: Procedure 9. Register with the National Procedure 5. File deed and details with the KES 900) Hospital Insurance Fund (NHIF) Registrar of Companies at the Attorney Comments: Seals are made by private entities that re- General’s Chamber in Nairobi (Sheria Time: 1 day quire sight of a copy of the certificate of incorporation. House) Cost: No cost The average price of the company seal is KES 3,000. Comments: The employee contributes a fixed sum to The common practice is for applicants to obtain the Time: 14 days the National Hospital Insurance Fund (NHIF), which company seal in Nairobi. Once the company seal is Cost: KES 5,836 must be deducted by the employer from the employ- ready, private providers will send the seal by courier. Comments: The founder must file the incorporation ees’ salary. The maximum contribution is KES 320 per The average cost of mailing the seal is KES 900. deed and the required documents and forms (listed month. The contributions are used to offset the costs The Companies Bill 2010, which is pending parliament below) with the Registrar of Companies: of medical treatment. This procedure is done at the approval, proposes to make common seals optional. a. Stamped memorandum and articles of association; Kakamega NHIF office. 54 DOING BUSINESS IN KENYA 2012 Procedure 10. Make a company seal after a Comments: A company founder must sign Form 208, the contribution is deductible from the employee’s the Declaration of Compliance with the Companies salary. The precise amount of the contribution (where certificate of incorporation has been issued Act, which accompanies the registration documents less than the maximum) is determined by reference to Time: 5 days to be submitted to the Registrar of Companies. salary bands. Since there is no NSSF office in Kilifi, this Cost: KES 3,000 procedure is commonly done in Malindi or Mombasa. Comments: Seals are made by private entities that re- Procedure 5. File deed and details with the quire sight of a copy of the certificate of incorporation. Registrar of Companies at the Attorney Procedure 9. Register with the National The average price of the company seal is KES 3,000. General’s Chamber in Nairobi (Sheria Hospital Insurance Fund (NHIF) The Companies Bill 2010, which is pending parliament House) Time: 1 day approval, proposes to make common seals optional. Time: 14 days Cost: No cost Cost: KES 5,836 Comments: The employee contributes a fixed sum STARTING A BUSINESS Comments: The founder must file the incorporation to the National Hospital Insurance Fund (NHIF), Kilifi deed and the required documents and forms (listed which must be deducted by the employer from the below) with the Registrar of Companies: employees’ salary. The maximum contribution is KES Standard company legal form: Limited Liability Company 320 per month. The contributions are used to offset (LLC) a. Stamped memorandum and articles of association; the costs of medical treatment. A satellite NHIF office Paid-in minimum capital requirement: none b. Statement of capital; opened in Kilifi. This procedure can also be done at the Data as of: March 2012 c. Form 201, Notice of Situation of Registered Office; Mombasa NHIF branch office. d. Form 203, Particulars of Directors and Secretary; Procedure 1. Obtain approval for the e. Form 208, Declaration of Compliance with the Procedure 10. Make a company seal after a company name from the Registrar of Companies Act; certificate of incorporation has been issued Companies f. Copy of the company name approval. Time: 3 days Time: 4 days (3 days name approval + 1 day travel) The fees to be paid for the registration of a company in Cost: KES 3,000 Cost: KES 3,100 (filing fee: KES 100 + transportation: Kenya are currently regulated by Legal Notice No. 80 Comments: Seals are made by private entities that re- KES 3,000) of 2003 and are payable as follows: quire sight of a copy of the certificate of incorporation. Comments: The company name reservation lasts 30 a. For the first KES 100,000 of nominal capital, there The average price of the company seal is KES 3,000. days but can be renewed for a similar period. This pro- is a fixed fee of KES 2,200; There are now seal shops in Kilifi. cedure can only be done in Nairobi. Most applicants b. For every additional KES 20,000 of nominal capital The Companies Bill 2010, which is pending parliament complete procedures 1 to 5 in Nairobi given that the after the first KES 100,000, there is a fee of KES approval, proposes to make common seals optional. applicant, or the company’s agent, is already in town. 120, subject to a maximum of KES 60,000; Given that the use of lawyers is not mandatory for c. Filing fee for 3 forms: KES 600. STARTING A BUSINESS company incorporation in Kenya, lawyer fees are not taken into consideration. Kisumu Procedure 6. Register with the Tax An online name search and reservation system is Standard company legal form: Limited Liability Company Department for the single taxpayer currently being piloted. Until the system is fully imple- (LLC) mented, one must still submit a letter to the Registrar identification number online Paid-in minimum capital requirement: none of Companies accompanied by the prescribed search Time: 1 day fees when seeking to reserve a name. Data as of: March 2012 Cost: No cost Comments: Registration for a personal and a company Procedure 1. Obtain approval for the Procedure 2. Stamp the memorandum and identification number (PIN) is required for the local company name from the Registrar of articles and a statement of the nominal service tax and the pay-as-you-earn (PAYE) tax. KRA Companies capital has adopted the PIN as the single taxpayer identifica- tion and discontinued the VAT number. Time: 4 days (3 days name approval + 1 day travel) Time: 11 days The registration for PIN can be done online. Cost: KES 2,100 (filing fee: KES 100 + transportation: Cost: KES 8,080 (1% of nominal capital + KES 2,020 KES 2,000) stamp duty on the memorandum and articles of as- sociation) Procedure 7. Apply for a business permit Comments: The company name reservation lasts 30 days but can be renewed for a similar period. This pro- Comments: Effective January 1, 2005, the Kenya Rev- Time: 7 days cedure can only be done in Nairobi. Most applicants enue Authority (KRA) took over stamp duty collection Cost: KES 5,000 complete procedures 1 to 5 in Nairobi given that the from the Ministry of Lands and Housing. Documents Comments: The applicant fills out the application applicant, or the company’s agent, is already in town. must be first assessed by the Stamp Duty Office form with details about the scope, size and location Given that the use of lawyers is not mandatory for before payment can be processed by KRA-designated of intended business. An officer from the Kilifi County company incorporation in Kenya, lawyer fees are not banks. In 2009, a Stamp Duty Office opened at the Council visits the intended business site to confirm taken into consideration. Attorney General’s Chamber, making the assessment the details given by the applicant. Thereafter, the of the stamp duty more efficient. An online name search and reservation system is applicant is given a generated bill (amount payable for currently being piloted. Until the system is fully imple- This procedure can be done either in Nairobi, since acquiring a permit). The fee varies by type of business, mented, one must still submit a letter to the Registrar the applicant is already in town, or at the Lands Office number of employees, size and location of company’s of Companies accompanied by the prescribed search in Mombasa. The Lands Office has acquired franking premises. The fee is payable to the Kilifi County Coun- fees when seeking to reserve a name. machines and it liaises with the local banks accredited cil. The fee for a medium trader, shop, or retail service to collect the stamp duty. from 5 to 20 employees and/or premises from 50 to Procedure 2. Stamp the memorandum and 300 square meters is KES 5,000. Upon payment, all articles and a statement of the nominal Procedure 3. Pay stamp duty at bank forms are taken for signature and the permit is ready for collection by the following day. capital Time: 1 day Time: 14 days Cost: KES 100 (bank commission) Procedure 8. Register with the National Cost: KES 8,080 (1% of nominal capital + KES 2,020 Comments: This procedure can be done either locally stamp duty on the memorandum and articles of as- Social Security Fund (NSSF) or in Nairobi. Payment of stamp duty is done by sociation) Banker’s check or cash at accredited bank. Time: 1 day Cost: KES 500 (transportation) Comments: Effective January 1, 2005, the Kenya Rev- enue Authority (KRA) took over stamp duty collection Procedure 4. Sign declaration of Comments: The National Social Security Fund (NSSF) from the Ministry of Lands and Housing. Documents compliance (Form 208) before a provides the employee with a lump-sum retirement must be first assessed by the Stamp Duty Office Commissioner for Oaths benefit. Participation is mandatory. The employer before payment can be processed by KRA-designated Time: 1 day pays a standard contribution of about 1% of salary, subject to a maximum of KES 400 per month. Half Cost: KES 200 LIST OF PROCEDURES 55 banks. In 2009, a Stamp Duty Office opened at the to confirm the size of the business premises, based Given that the use of lawyers is not mandatory for Attorney General’s Chamber, making the assessment on which the payable fee is assessed. Thereafter, the company incorporation in Kenya, lawyer fees are not of the stamp duty more efficient. applicant is given a generated bill (amount payable for taken into consideration. This procedure is usually done in Nairobi since the acquiring a permit). The fee varies by type of business, An online name search and reservation system is applicant is already in town. number of employees, size and location of company’s currently being piloted. Until the system is fully imple- premises. The fee is payable to the Kisumu Municipal mented, one must still submit a letter to the Registrar Procedure 3. Pay stamp duty at bank Council. The fee for a medium trader, shop, or retail of Companies accompanied by the prescribed search service from 5 to 20 employees and/or premises from fees when seeking to reserve a name. Time: 1 day 50 to 300 square meters is KES 10,000. Upon pay- Cost: KES 100 (bank commission) ment, all forms are taken for signature and the permit Procedure 2. Stamp the memorandum and Comments: This procedure can be done either locally is ready for collection by the following day. articles and a statement of the nominal or in Nairobi. Payment of stamp duty is done by capital Banker’s check or cash at accredited bank. Procedure 8. Register with the National Social Security Fund (NSSF) Time: 14 days Procedure 4. Sign declaration of Time: 1 day Cost: KES 8,080 (1% of nominal capital + KES 2,020 compliance (Form 208) before a stamp duty on the memorandum and articles of as- Cost: No cost sociation) Commissioner for Oaths Comments: The National Social Security Fund (NSSF) Comments: Effective January 1, 2005, the Kenya Rev- Time: 1 day provides the employee with a lump-sum retirement enue Authority (KRA) took over stamp duty collection Cost: KES 200 benefit. Participation is mandatory. The employer from the Ministry of Lands and Housing. Documents Comments: A company founder must sign Form 208, pays a standard contribution of about 1% of salary, must be first assessed by the Stamp Duty Office the Declaration of Compliance with the Companies subject to a maximum of KES 400 per month. Half before payment can be processed by KRA-designated Act, which accompanies the registration documents the contribution is deductible from the employee’s banks. In 2009, a Stamp Duty Office opened at the to be submitted to the Registrar of Companies. salary. The precise amount of the contribution (where Attorney General’s Chamber, making the assessment less than the maximum) is determined by reference to of the stamp duty more efficient. Procedure 5. File deed and details with the salary bands. This procedure is done at the local NSSF office in Kisumu. This procedure is usually done in Nairobi since the Registrar of Companies at the Attorney applicant is already in town. General’s Chamber in Nairobi (Sheria Procedure 9. Register with the National House) Procedure 3. Pay stamp duty at bank Hospital Insurance Fund (NHIF) Time: 21 days Time: 1 day Time: 1 day Cost: KES 5,836 Cost: KES 100 (bank commission) Cost: No cost Comments: The founder must file the incorporation Comments: This procedure can be done either locally deed and the required documents and forms (listed Comments: The employee contributes a fixed sum to or in Nairobi. Payment of stamp duty is done by below) with the Registrar of Companies: the National Hospital Insurance Fund (NHIF), which Banker’s check or cash at accredited bank. must be deducted by the employer from the employ- a. Stamped memorandum and articles of association; ees’ salary. The maximum contribution is KES 320 per b. Statement of capital; month. The contributions are used to offset the costs Procedure 4. Sign declaration of c. Form 201, Notice of Situation of Registered Office; of medical treatment. This procedure is done at the compliance (Form 208) before a Kisumu NHIF office. Commissioner for Oaths d. Form 203, Particulars of Directors and Secretary; Time: 1 day e. Form 208, Declaration of Compliance with the Procedure 10. Make a company seal after a Cost: KES 200 Companies Act; certificate of incorporation has been issued Comments: A company founder must sign Form 208, f. Copy of the company name approval. Time: 4 days the Declaration of Compliance with the Companies The fees to be paid for the registration of a company in Cost: KES 3,000 Act, which accompanies the registration documents Kenya are currently regulated by Legal Notice No. 80 Comments: Seals are made by private entities that to be submitted to the Registrar of Companies. of 2003 and are payable as follows: a. For the first KES 100,000 of nominal capital, there require sight of a copy of the certificate of incorpora- tion. The average price of the company seal is KES Procedure 5. File deed and details with the is a fixed fee of KES 2,200; Registrar of Companies at the Attorney 3,000. Since 2009, seal shops, such as SealHoney b. For every additional KES 20,000 of nominal capital and National Printing Press, opened in Kisumu. General’s Chamber in Nairobi (Sheria after the first KES 100,000, there is a fee of KES House) 120, subject to a maximum of KES 60,000; The Companies Bill 2010, which is pending parliament approval, proposes to make common seals optional. Time: 14 days c. Filing fee for 3 forms: KES 600. Cost: KES 5,836 Procedure 6. Register with the Tax STARTING A BUSINESS Comments: The founder must file the incorporation Department for the single taxpayer Malaba deed and the required documents and forms (listed identification number online below) with the Registrar of Companies: Standard company legal form: Limited Liability Company Time: 1 day a. Stamped memorandum and articles of association; (LLC) Cost: No cost b. Statement of capital; Paid-in minimum capital requirement: none Comments: Registration for a personal and a company c. Form 201, Notice of Situation of Registered Office; Data as of: March 2012 identification number (PIN) is required for the local d. Form 203, Particulars of Directors and Secretary; service tax and the pay-as-you-earn (PAYE) tax. KRA Procedure 1. Obtain approval for the e. Form 208, Declaration of Compliance with the has adopted the PIN as the single taxpayer identifica- company name from the Registrar of Companies Act; tion and discontinued the VAT number. Companies f. Copy of the company name approval. The registration for PIN can be done online. Time: 4 days (3 days name approval + 1 day travel) The fees to be paid for the registration of a company in Cost: KES 3,100 (filing fee: KES 100 + transportation: Kenya are currently regulated by Legal Notice No. 80 Procedure 7. Apply for a business permit KES 3,000) of 2003 and are payable as follows: Time: 5 days Comments: The company name reservation lasts 30 a. For the first KES 100,000 of nominal capital, there Cost: KES 10,000 days but can be renewed for a similar period. This pro- is a fixed fee of KES 2,200; Comments: The applicant fills out the application cedure can only be done in Nairobi. Most applicants b. For every additional KES 20,000 of nominal capital form with details about the scope, size and location complete procedures 1 to 5 in Nairobi given that the after the first KES 100,000, there is a fee of KES of intended business. An officer from the Kisumu applicant, or the company’s agent, is already in town. 120, subject to a maximum of KES 60,000; Municipal Council visits the intended business site to c. Filing fee for 3 forms: KES 600. confirm that all safety requirements are in place and 56 DOING BUSINESS IN KENYA 2012 STARTING A BUSINESS Comments: The founder must file the incorporation Procedure 6. Register with the Tax Mombasa deed and the required documents and forms (listed Department for the single taxpayer below) with the Registrar of Companies: identification number online Standard company legal form: Limited Liability Company a. Stamped memorandum and articles of association; Time: 1 day (LLC) b. Statement of capital; Cost: No cost Paid-in minimum capital requirement: none c. Form 201, Notice of Situation of Registered Office; Comments: Registration for a personal and a company Data as of: March 2012 identification number (PIN) is required for the local d. Form 203, Particulars of Directors and Secretary; service tax and the pay-as-you-earn (PAYE) tax. KRA Procedure 1. Obtain approval for the e. Form 208, Declaration of Compliance with the has adopted the PIN as the single taxpayer identifica- company name from the Registrar of Companies Act; tion and discontinued the VAT number. Companies f. Copy of the company name approval. The registration for PIN can be done online. Time: 4 days (3 days name approval + 1 day travel) The fees to be paid for the registration of a company in Cost: KES 3,100 (filing fee: KES 100 + transportation: Kenya are currently regulated by Legal Notice No. 80 Procedure 7. Apply for a business permit KES 3,000) of 2003 and are payable as follows: Time: 3 days Comments: The company name reservation lasts 30 a. For the first KES 100,000 of nominal capital, there Cost: KES 4,000 days but can be renewed for a similar period. This pro- is a fixed fee of KES 2,200; Comments: The applicant fills out the application cedure can only be done in Nairobi. Most applicants b. For every additional KES 20,000 of nominal capital form with details about the scope, size and location of complete procedures 1 to 5 in Nairobi given that the after the first KES 100,000, there is a fee of KES intended business. An officer from the Malaba Town applicant, or the company’s agent, is already in town. 120, subject to a maximum of KES 60,000; Council visits the intended business site to confirm the Given that the use of lawyers is not mandatory for c. Filing fee for 3 forms: KES 600. details given by the applicant. Thereafter, the applicant company incorporation in Kenya, lawyer fees are not is given a generated bill (amount payable for acquiring taken into consideration. Procedure 6. Register with the Tax a permit). The fee is payable to the Malaba Town An online name search and reservation system is Department for the single taxpayer Council. The town council will issue a business permit, currently being piloted. Until the system is fully imple- identification number online which is signed by the officer on duty on behalf of the mented, one must still submit a letter to the Registrar of Companies accompanied by the prescribed search Time: 1 day Treasurer. The fee for a medium trader, shop, or retail service from 5 to 20 employees and/or premises from fees when seeking to reserve a name. Cost: No cost 50 to 300 square meters is KES 4,000. Upon pay- Comments: Registration for a personal and a company ment, all forms are taken for signature and the permit Procedure 2. Stamp the memorandum and identification number (PIN) is required for the local is ready for collection latest by the following day. articles and a statement of the nominal service tax and the pay-as-you-earn (PAYE) tax. KRA capital has adopted the PIN as the single taxpayer identifica- Procedure 8. Register with the National Time: 10 days tion and discontinued the VAT number. Social Security Fund (NSSF) The registration for PIN can be done online. Cost: KES 8,080 (1% of nominal capital + KES 2,020 Time: 1 day stamp duty on the memorandum and articles of as- Cost: KES 400 (transportation) sociation) Procedure 7. Apply for a business permit Comments: The National Social Security Fund (NSSF) Comments: Effective January 1, 2005, the Kenya Rev- Time: 2 days provides the employee with a lump-sum retirement enue Authority (KRA) took over stamp duty collection Cost: KES 8,500 benefit. Participation is mandatory. The employer from the Ministry of Lands and Housing. Documents Comments: The applicant fills out the application pays a standard contribution of about 1% of salary, must be first assessed by the Stamp Duty Office form with details about the scope, size and location of subject to a maximum of KES 400 per month. Half the before payment can be processed by KRA-designated intended business. The applicant is given a generated contribution is deductible from the employee’s salary. banks. In 2009, a Stamp Duty Office opened at the bill (amount payable for acquiring a permit). The fee The precise amount of the contribution (where less Attorney General’s Chamber, making the assessment varies by type of business, number of employees, size than the maximum) is determined by reference to sal- of the stamp duty more efficient. and location of company’s premises. The fee is pay- ary bands. Since there is no local NSSF in Malaba, this This procedure can be done either in Nairobi, since able to the Mombasa Municipal Council. The fee for procedure is commonly done in Bungoma. the applicant is already in town, or at the Lands Office a medium trader, shop, or retail service from 5 to 20 in Mombasa. The Lands Office has acquired franking employees and/or premises from 50 to 300 square Procedure 9. Register with the National machines and it liaises with the local banks accredited meters is KES 8,500. Upon payment, all forms are Hospital Insurance Fund (NHIF) to collect the stamp duty. taken for signature and the permit is ready for collec- Time: 1 day tion latest by the following day. Cost: KES 400 (transportation) Procedure 3. Pay stamp duty at bank Time: 1 day Procedure 8. Register with the National Comments: The employee contributes a fixed sum Social Security Fund (NSSF) to the National Hospital Insurance Fund (NHIF), Cost: KES 100 (bank commission) which must be deducted by the employer from the Time: 1 day Comments: This procedure can be done either locally employees’ salary. The maximum contribution is KES or in Nairobi. Payment of stamp duty is done by Cost: No cost 320 per month. The contributions are used to offset Banker’s check or cash at accredited bank. Comments: The National Social Security Fund (NSSF) the costs of medical treatment. This procedure is done provides the employee with a lump-sum retirement at the Bungoma NHIF office since there is no local Procedure 4. Sign declaration of compliance benefit. Participation is mandatory. The employer office in Malaba. (Form 208) before a Commissioner for Oaths pays a standard contribution of about 1% of salary, subject to a maximum of KES 400 per month. Half Time: 1 day Procedure 10. Make a company seal after a the contribution is deductible from the employee’s certificate of incorporation has been issued Cost: KES 200 salary. The precise amount of the contribution (where Time: 5 days Comments: A company founder must sign Form 208, less than the maximum) is determined by reference to the Declaration of Compliance with the Companies salary bands. This procedure is done at the local NSSF Cost: KES 4,000 (company seal: KES 3,000 + courier: Act, which accompanies the registration documents office in Mombasa. KES 1,000) to be submitted to the Registrar of Companies. Comments: Seals are made by private entities that re- Procedure 9. Register with the National quire sight of a copy of the certificate of incorporation. Procedure 5. File deed and details with the Hospital Insurance Fund (NHIF) The average price of the company seal is KES 3,000. Registrar of Companies at the Attorney The common practice is for applicants to obtain the Time: 1 day General’s Chamber in Nairobi (Sheria Cost: No cost company seal in Nairobi. Once the company seal is ready, private providers will send the seal by courier. House) The average cost of mailing the seal is KES 1,000. Time: 14 days The Companies Bill 2010, which is pending parliament Cost: KES 5,836 approval, proposes to make common seals optional. LIST OF PROCEDURES 57 Comments: The employee contributes a fixed sum to Comments: According to the Companies Act (Cap. salary. The precise amount of the contribution (where the National Hospital Insurance Fund (NHIF), which 486), an advocate engaged in the formation of the less than the maximum) is determined by reference to must be deducted by the employer from the employ- company or a director or company secretary named salary bands. ees’ salary. The maximum contribution is KES 320 per in the Articles must sign Form 208, the Declaration of month. The contributions are used to offset the costs Compliance with the Companies Act, which accompa- Procedure 9. Register with the National of medical treatment. This procedure is done at the nies the registration documents to be submitted to the Hospital Insurance Fund (NHIF) Mombasa NHIF office. Registrar of Companies. Time: 1 day Procedure 10. Make a company seal after a Procedure 5. File deed and details with the Cost: No cost certificate of incorporation has been issued Registrar of Companies at the Attorney Comments: The employee contributes a fixed sum to General’s Chamber in Nairobi (Sheria the National Hospital Insurance Fund (NHIF), which Time: 2 days must be deducted by the employer from the employ- Cost: KES 3,000 House) ees’ salary. The maximum contribution is KES 320 per Comments: Seals are made by private entities that Time: 12 days month. The contributions are used to offset the costs require sight of a copy of the certificate of incorpora- Cost: KES 5,836 of medical treatment, but they only cover a fraction of tion. There are seal shops in Mombasa. Comments: The founder must file the incorporation actual costs. Hence, most companies provide employ- The Companies Bill 2010, which is pending parliament deed and the required documents and forms (listed ees with medical insurance. approval, proposes to make common seals optional. below) with the Registrar of Companies: a. Stamped memorandum and articles of association; Procedure 10. Make a company seal after a certificate of incorporation has been issued STARTING A BUSINESS b. Statement of capital; Time: 2 days Nairobi c. Form 201, Notice of Situation of Registered Office; Cost: KES 3,000 (between KES 2,500 and KES 3,500) Standard company legal form: Limited Liability Company d. Form 203, Particulars of Directors and Secretary; Comments: Seals are made by private entities that re- (LLC) e. Form 208, Declaration of Compliance with the quire sight of a copy of the certificate of incorporation. Paid-in minimum capital requirement: none Companies Act; Data as of: March 2012 f. Copy of the company name approval. STARTING A BUSINESS The fees to be paid for the registration of a company in Procedure 1. State registration of legal Kenya are currently regulated by Legal Notice No. 80 Nakuru entity, statistical, and tax registration with of 2003 and are payable as follows: Standard company legal form: Limited Liability Company the Center for Public Registration a. For the first KES 100,000 of nominal capital, there (LLC) Time: 3 days is a fixed fee of KES 2,200; Paid-in minimum capital requirement: none Cost: KES 100 b. For every additional KES 20,000 of nominal capital Data as of: March 2012 Comments: The company name reservation lasts 30 after the first KES 100,000, there is a fee of KES days but can be renewed for a similar period. 120, subject to a maximum of KES 60,000; Procedure 1. Obtain approval for the c. Filing fee for 3 forms: KES 600. company name from the Registrar of Procedure 2. Stamp the memorandum and Companies articles and a statement of the nominal Procedure 6. Register with the Tax Time: 3 days capital Department for the single taxpayer Cost: KES 1,100 (filing fee: KES 100 + transportation: Time: 5 days identification number online KES 1,000) Cost: KES 8,080 (1% of nominal capital + KES 2,020 Time: 1 day Comments: The company name reservation lasts 30 stamp duty on the memorandum and articles of as- Cost: No cost days but can be renewed for a similar period. This pro- sociation) Comments: Registration for a personal and a company cedure can only be done in Nairobi. Most applicants Comments: Effective January 1, 2005, the Kenya identification number (PIN) is required for the local complete procedures 1 to 5 in Nairobi given that the Revenue Authority (KRA) took over stamp duty col- service tax and the pay-as-you-earn (PAYE) tax. KRA applicant, or the company’s agent, is already in town. lection from the Ministry of Lands and Housing. As has adopted the PIN as the single taxpayer identifica- Given that the use of lawyers is not mandatory for an administrative requirement, the KRA now requires tion and discontinued the VAT number. company incorporation in Kenya, lawyer fees are not the personal identification numbers (PINs) of all par- The registration for PIN can be done online. taken into consideration. ties on whose behalf duty-stamped documents are An online name search and reservation system is submitted. Documents must be first assessed by the Procedure 7. Apply for a business permit currently being piloted. Until the system is fully imple- Stamp Duty Office before payment can be processed mented, one must still submit a letter to the Registrar Time: 5 days by the KRA-designated banks. The process has length- of Companies accompanied by the prescribed search ened initially to about 2 weeks because the Stamp Cost: KES 10,000 fees when seeking to reserve a name. Duty Office waited to receive confirmation of bank Comments: The fee to apply for a business permit payment after clearance of funds. However, the time varies by type of business, number of employees, and Procedure 2. Stamp the memorandum and has reduced in 2008 as a result of better communica- size of the company’s premises. The fee is payable to articles and a statement of the nominal tion between the Ministry of Lands and housing and the Nairobi City Council, Licensing Department. The capital Kenya Revenue Authority (KRA) to 5-10 days. Bank City Council will issue a business permit. The fee for a medium trader, shop, or retail service from 5 to 20 Time: 10 days handling charges of KES 100 for each transaction are also due. employees and/or premises from 50 to 300 square Cost: KES 8,080 (1% of nominal capital + KES 2,020 meters is KES 10,000. stamp duty on the memorandum and articles of as- Procedure 3. Pay stamp duty at bank sociation) Time: 1 day Procedure 8. Register with the National Comments: Effective January 1, 2005, the Kenya Rev- Social Security Fund (NSSF) enue Authority (KRA) took over stamp duty collection Cost: KES 100 (bank commission) from the Ministry of Lands and Housing. Documents Time: 1 day must be first assessed by the Stamp Duty Office Procedure 4. Sign declaration of Cost: No cost before payment can be processed by KRA-designated compliance (Form 208) before a Comments: The National Social Security Fund (NSSF) banks. In 2009, a Stamp Duty Office opened at the Commissioner for Oaths provides the employee with a lump-sum retirement Attorney General’s Chamber, making the assessment Time: 1 day benefit. Historically, the rate of return paid by the of the stamp duty more efficient. state is considerably less than that achieved by private This procedure can be done either in Nairobi, since Cost: KES 200 schemes, but participation is mandatory. The employ- the applicant is already in town, or at the Lands Office er pays a standard contribution of about 1% of salary, in Nakuru. The Lands Office has acquired franking subject to a maximum of KES 400 per month. Half machines and it liaises with the local banks accredited the contribution is deductible from the employee’s to collect the stamp duty. 58 DOING BUSINESS IN KENYA 2012 Procedure 3. Pay stamp duty at bank Procedure 8. Register with the National Cost: KES 8,080 (1% of nominal capital + KES 2,020 stamp duty on the memorandum and articles of as- Time: 1 day Social Security Fund (NSSF) sociation) Cost: KES 100 (bank commission) Time: 1 day Comments: Effective January 1, 2005, the Kenya Rev- Comments: This procedure can be done either locally Cost: No cost enue Authority (KRA) took over stamp duty collection or in Nairobi. Payment of stamp duty is done by Comments: The National Social Security Fund (NSSF) from the Ministry of Lands and Housing. Documents Banker’s check or cash at accredited bank. provides the employee with a lump-sum retirement must be first assessed by the Stamp Duty Office benefit. Participation is mandatory. The employer before payment can be processed by KRA-designated Procedure 4. Sign declaration of pays a standard contribution of about 1% of salary, banks. In 2009, a Stamp Duty Office opened at the compliance (Form 208) before a subject to a maximum of KES 400 per month. Half Attorney General’s Chamber, making the assessment Commissioner for Oaths the contribution is deductible from the employee’s of the stamp duty more efficient. salary. The precise amount of the contribution (where This procedure is usually done in Nairobi since the Time: 1 day less than the maximum) is determined by reference to applicant is already in town. Cost: KES 200 salary bands. This procedure is done at the local NSSF Comments: A company founder must sign Form 208, office in Nakuru. Procedure 3. Pay stamp duty at bank the Declaration of Compliance with the Companies Act, which accompanies the registration documents Time: 1 day Procedure 9. Register with the National to be submitted to the Registrar of Companies. Hospital Insurance Fund (NHIF) Cost: KES 100 (bank commission) Time: 1 day Comments: This procedure can be done either locally Procedure 5. File deed and details with the or in Nairobi. Payment of stamp duty is done by Registrar of Companies at the Attorney Cost: No cost Banker’s check or cash at accredited bank. General’s Chamber in Nairobi (Sheria Comments: The employee contributes a fixed sum to House) the National Hospital Insurance Fund (NHIF), which Procedure 4. Sign declaration of must be deducted by the employer from the employ- compliance (Form 208) before a Time: 14 days ees’ salary. The maximum contribution is KES 320 per Commissioner for Oaths Cost: KES 5,836 month. The contributions are used to offset the costs of medical treatment. This procedure is done at the Time: 1 day Comments: The founder must file the incorporation deed and the required documents and forms (listed Nakuru NHIF office. Cost: KES 200 below) with the Registrar of Companies: Comments: A company founder must sign Form 208, a. Stamped memorandum and articles of association; Procedure 10. Make a company seal after a the Declaration of Compliance with the Companies b. Statement of capital; certificate of incorporation has been issued Act, which accompanies the registration documents Time: 2 days to be submitted to the Registrar of Companies. c. Form 201, Notice of Situation of Registered Office; d. Form 203, Particulars of Directors and Secretary; Cost: KES 3,000 Procedure 5. File deed and details with the e. Form 208, Declaration of Compliance with the Comments: Seals are made by private entities that re- Registrar of Companies at the Attorney Companies Act; quire sight of a copy of the certificate of incorporation. The average price of the company seal is KES 3,000. General’s Chamber in Nairobi (Sheria f. Copy of the company name approval. There are seal shops opened in Nakuru. House) The fees to be paid for the registration of a company in The Companies Bill 2010, which is pending parliament Time: 21 days Kenya are currently regulated by Legal Notice No. 80 approval, proposes to make common seals optional. Cost: KES 5,836 of 2003 and are payable as follows: Comments: The founder must file the incorporation a. For the first KES 100,000 of nominal capital, there deed and the required documents and forms (listed STARTING A BUSINESS is a fixed fee of KES 2,200; below) with the Registrar of Companies: b. For every additional KES 20,000 of nominal capital Narok a. Stamped memorandum and articles of association; after the first KES 100,000, there is a fee of KES Standard company legal form: Limited Liability Company b. Statement of capital; 120, subject to a maximum of KES 60,000; (LLC) c. Form 201, Notice of Situation of Registered Office; c. Filing fee for 3 forms: KES 600. Paid-in minimum capital requirement: none d. Form 203, Particulars of Directors and Secretary; Data as of: March 2012 Procedure 6. Register with the Tax e. Form 208, Declaration of Compliance with the Department for the single taxpayer Procedure 1. Obtain approval for the Companies Act; identification number online company name from the Registrar of f. Copy of the company name approval. Time: 1 day Companies The fees to be paid for the registration of a company in Cost: No cost Time: 3 days Kenya are currently regulated by Legal Notice No. 80 of 2003 and are payable as follows: Comments: Registration for a personal and a company Cost: KES 1,100 (filing fee: KES 100 + transportation: identification number (PIN) is required for the local KES 1,000) a. For the first KES 100,000 of nominal capital, there service tax and the pay-as-you-earn (PAYE) tax. KRA is a fixed fee of KES 2,200; Comments: The company name reservation lasts 30 has adopted the PIN as the single taxpayer identifica- days but can be renewed for a similar period. This pro- b. For every additional KES 20,000 of nominal capital tion and discontinued the VAT number. cedure can only be done in Nairobi. Most applicants after the first KES 100,000, there is a fee of KES The registration for PIN can be done online. complete procedures 1 to 5 in Nairobi given that the 120, subject to a maximum of KES 60,000; applicant, or the company’s agent, is already in town. c. Filing fee for 3 forms: KES 600. Procedure 7. Apply for a business permit Given that the use of lawyers is not mandatory for Time: 4 days company incorporation in Kenya, lawyer fees are not Procedure 6. Register with the Tax taken into consideration. Department for the single taxpayer Cost: KES 8,500 An online name search and reservation system is identification number online Comments: The applicant fills out the application currently being piloted. Until the system is fully imple- form with details about the scope, size and location Time: 1 day mented, one must still submit a letter to the Registrar of intended business. An officer from the Nakuru of Companies accompanied by the prescribed search Cost: No cost Municipal Council visits the intended business site to fees when seeking to reserve a name. Comments: Registration for a personal and a company confirm the details given by the applicant. Thereafter, identification number (PIN) is required for the local the applicant is given a generated bill (amount payable Procedure 2. Stamp the memorandum and service tax and the pay-as-you-earn (PAYE) tax. KRA for acquiring a permit). The fee is payable to the Na- has adopted the PIN as the single taxpayer identifica- articles and a statement of the nominal kuru Municipal Council. The fee for a medium trader, tion and discontinued the VAT number. shop, or retail service from 5 to 20 employees and/or capital The registration for PIN can be done online. premises from 50 to 300 square meters is KES 8,500. Time: 14 days Upon payment, all forms are taken for signature and the permit is ready for collection by the following day. LIST OF PROCEDURES 59 Procedure 7. Apply for a business permit Comments: The company name reservation lasts 30 Procedure 6. Register with the Tax days but can be renewed for a similar period. This pro- Time: 8 days Department for the single taxpayer cedure can only be done in Nairobi. Most applicants Cost: KES 5,000 complete procedures 1 to 5 in Nairobi given that the identification number online Comments: The applicant fills out the application applicant, or the company’s agent, is already in town. Time: 1 day form with details about the scope, size and location Given that the use of lawyers is not mandatory for Cost: No cost of intended business. An officer from the Narok Town company incorporation in Kenya, lawyer fees are not Comments: Registration for a personal and a company Council visits the intended business site to confirm taken into consideration. identification number (PIN) is required for the local the details given by the applicant. Thereafter, the An online name search and reservation system is service tax and the pay-as-you-earn (PAYE) tax. KRA applicant is given a generated bill (amount payable for currently being piloted. Until the system is fully imple- has adopted the PIN as the single taxpayer identifica- acquiring a permit). The fee is payable to the Narok mented, one must still submit a letter to the Registrar tion and discontinued the VAT number. Town Council. The fee for a medium trader, shop, or of Companies accompanied by the prescribed search The registration for PIN can be done online. retail service from 5 to 20 employees and/or premises fees when seeking to reserve a name. from 50 to 300 square meters is KES 5,000. Upon payment, all forms are taken for signature and the Procedure 7. Apply for a business permit Procedure 2. Stamp the memorandum and permit is ready for collection by the following day. Time: 6 days articles and a statement of the nominal capital Cost: KES 6,000 Procedure 8. Register with the National Comments: The applicant fills out the application Time: 14 days Social Security Fund (NSSF) form with details about the scope, size and location of Cost: KES 8,080 (1% of nominal capital + KES 2,020 intended business. An officer from the Nyeri Munici- Time: 1 day stamp duty on the memorandum and articles of as- pal Council might visit the intended business site to Cost: No cost sociation) confirm the details given by the applicant. Thereafter, Comments: The National Social Security Fund (NSSF) Comments: Effective January 1, 2005, the Kenya Rev- the applicant is given a generated bill (amount pay- provides the employee with a lump-sum retirement enue Authority (KRA) took over stamp duty collection able for acquiring a permit). The fee is payable to the benefit. Participation is mandatory. The employer from the Ministry of Lands and Housing. Documents Nyeri Municipal Council. The fee for a medium trader, pays a standard contribution of about 1% of salary, must be first assessed by the Stamp Duty Office shop, or retail service from 5 to 20 employees and/or subject to a maximum of KES 400 per month. Half before payment can be processed by KRA-designated premises from 50 to 300 square meters is KES 6,000. the contribution is deductible from the employee’s banks. In 2009, a Stamp Duty Office opened at the Upon payment, all forms are taken for signature and salary. The precise amount of the contribution (where Attorney General’s Chamber, making the assessment the permit is ready for collection by the following day. less than the maximum) is determined by reference to of the stamp duty more efficient. salary bands. This procedure is done at the local NSSF Procedure 8. Register with the National This procedure is usually done in Nairobi since the office in Narok. applicant is already in town. Social Security Fund (NSSF) Procedure 9. Register with the National Time: 1 day Procedure 3. Pay stamp duty at bank Hospital Insurance Fund (NHIF) Cost: No cost Time: 1 day Time: 1 day Comments: The National Social Security Fund (NSSF) Cost: KES 100 (bank commission) provides the employee with a lump-sum retirement Cost: No cost Comments: This procedure can be done either locally benefit. Participation is mandatory. The employer Comments: The employee contributes a fixed sum to or in Nairobi. Payment of stamp duty is done by pays a standard contribution of about 1% of salary, the National Hospital Insurance Fund (NHIF), which Banker’s check or cash at accredited bank. subject to a maximum of KES 400 per month. Half must be deducted by the employer from the employ- the contribution is deductible from the employee’s ees’ salary. The maximum contribution is KES 320 per Procedure 4. Sign declaration of compliance salary. The precise amount of the contribution (where month. The contributions are used to offset the costs less than the maximum) is determined by reference to of medical treatment. This procedure is done at the (Form 208) before a Commissioner for Oaths salary bands. This procedure is done at the local NSSF Narok NHIF office. Time: 1 day office in Nyeri. Cost: KES 200 Procedure 10. Make a company seal after a Comments: A company founder must sign Form 208, Procedure 9. Register with the National certificate of incorporation has been issued the Declaration of Compliance with the Companies Hospital Insurance Fund (NHIF) Time: 4 days Act, which accompanies the registration documents Time: 1 day Cost: KES 3,500 (company seal: KES 3,000 + courier: to be submitted to the Registrar of Companies. Cost: No cost KES 500) Procedure 5. File deed and details with the Comments: The employee contributes a fixed sum to Comments: Seals are made by private entities that re- the National Hospital Insurance Fund (NHIF), which quire sight of a copy of the certificate of incorporation. Registrar of Companies at the Attorney General’s Chamber in Nairobi (Sheria House) must be deducted by the employer from the employ- The average price of the company seal is KES 3,000. ees’ salary. The maximum contribution is KES 320 per The common practice is for applicants to obtain the Time: 21 days month. The contributions are used to offset the costs company seal in Nairobi. Once the company seal is Cost: KES 5,836 of medical treatment. This procedure is done at the ready, private providers will send the seal by courier. Comments: The founder must file the incorporation Nyeri NHIF office. The average cost of mailing the seal is KES 500. deed and the required documents and forms (listed The Companies Bill 2010, which is pending parliament below) with the Registrar of Companies: Procedure 10. Make a company seal after a approval, proposes to make common seals optional. a. Stamped memorandum and articles of association; certificate of incorporation has been issued b. Statement of capital; Time: 6 days STARTING A BUSINESS c. Form 201, Notice of Situation of Registered Office; Cost: KES 3,800 (company seal: KES 3,000 + courier: Nyeri d. Form 203, Particulars of Directors and Secretary; KES 800) Standard company legal form: Limited Liability Company e. Form 208, Declaration of Compliance with the Comments: Seals are made by private entities that re- (LLC) Companies Act; quire sight of a copy of the certificate of incorporation. f. Copy of the company name approval. The average price of the company seal is KES 3,000. Paid-in minimum capital requirement: none The fees to be paid for the registration of a company in The common practice is for applicants to obtain the Data as of: March 2012 company seal in Nairobi. Once the company seal is Kenya are currently regulated by Legal Notice No. 80 ready, private providers will send the seal by courier. Procedure 1. Obtain approval for the of 2003 and are payable as follows: The average cost of mailing the seal is KES 800. company name from the Registrar of a. For the first KES 100,000 of nominal capital, there is a fixed fee of KES 2,200; The Companies Bill 2010, which is pending parliament Companies approval, proposes to make common seals optional. Time: 3 days b. For every additional KES 20,000 of nominal capital after the first KES 100,000, there is a fee of KES Cost: KES 1,100 (filing fee: KES 100 + transportation: 120, subject to a maximum of KES 60,000; KES 1,000) c. Filing fee for 3 forms: KES 600. 60 DOING BUSINESS IN KENYA 2012 STARTING A BUSINESS Comments: The founder must file the incorporation Comments: The employee contributes a fixed sum to Thika deed and the required documents and forms (listed the National Hospital Insurance Fund (NHIF), which below) with the Registrar of Companies: must be deducted by the employer from the employ- Standard company legal form: Limited Liability Company ees’ salary. The maximum contribution is KES 320 per a. Stamped memorandum and articles of association; (LLC) month. The contributions are used to offset the costs b. Statement of capital; Paid-in minimum capital requirement: none of medical treatment. This procedure is done at the c. Form 201, Notice of Situation of Registered Office; Thika NHIF office. Data as of: March 2012 d. Form 203, Particulars of Directors and Secretary; Procedure 1. Obtain approval for the e. Form 208, Declaration of Compliance with the Procedure 10. Make a company seal after a company name from the Registrar of Companies Act; certificate of incorporation has been issued Companies f. Copy of the company name approval. Time: 4 days Time: 3 days The fees to be paid for the registration of a company in Cost: KES 3,250 (company seal: KES 3,000 + courier: Cost: KES 400 (filing fee: KES 100 + transportation: Kenya are currently regulated by Legal Notice No. 80 KES 250) KES 300) of 2003 and are payable as follows: Comments: Seals are made by private entities that re- Comments: The company name reservation lasts 30 a. For the first KES 100,000 of nominal capital, there quire sight of a copy of the certificate of incorporation. days but can be renewed for a similar period. This pro- is a fixed fee of KES 2,200; The average price of the company seal is KES 3,000. cedure can only be done in Nairobi. Most applicants b. For every additional KES 20,000 of nominal capital The common practice is for applicants to obtain the complete procedures 1 to 5 in Nairobi given that the after the first KES 100,000, there is a fee of KES company seal in Nairobi. Once the company seal is applicant, or the company’s agent, is already in town. 120, subject to a maximum of KES 60,000; ready, private providers will send the seal by courier. Given that the use of lawyers is not mandatory for c. Filing fee for 3 forms: KES 600. The average cost of mailing the seal is KES 250. company incorporation in Kenya, lawyer fees are not The Companies Bill 2010, which is pending parliament taken into consideration. Procedure 6. Register with the Tax approval, proposes to make common seals optional. An online name search and reservation system is Department for the single taxpayer currently being piloted. Until the system is fully imple- identification number online mented, one must still submit a letter to the Registrar LIST OF PROCEDURES of Companies accompanied by the prescribed search Time: 1 day fees when seeking to reserve a name. Cost: No cost DEALING WITH CONSTRUCTION Comments: Registration for a personal and a company PERMITS Procedure 2. Stamp the memorandum and identification number (PIN) is required for the local articles and a statement of the nominal service tax and the pay-as-you-earn (PAYE) tax. KRA capital has adopted the PIN as the single taxpayer identifica- Eldoret tion and discontinued the VAT number. Warehouse value: KES 32,500,000 (US$ 418,341) Time: 10 days The registration for PIN can be done online. Data as of: March 2012 Cost: KES 8,080 (1% of nominal capital + KES 2,020 stamp duty on the memorandum and articles of as- sociation) Procedure 7. Apply for a business permit Procedure 1. Request approval of the Time: 2 days architectural plans from the Eldoret Comments: Effective January 1, 2005, the Kenya Rev- enue Authority (KRA) took over stamp duty collection Cost: KES 7,000 Municipal Council from the Ministry of Lands and Housing. Documents Comments: The applicant fills out the application Time: 1 day must be first assessed by the Stamp Duty Office form with details about the scope, size and location of Cost: KES 21,626 [KES 2,000 for the building occu- before payment can be processed by KRA-designated intended business. The applicant is given a generated pancy certificate + KES 10,486 for scrutiny fees + KES banks. In 2009, a Stamp Duty Office opened at the bill (amount payable for acquiring a permit). The fee 200 for submission forms + KES 3,640 for structural Attorney General’s Chamber, making the assessment varies by type of business, number of employees, fees + KES 300 for the Physical Planning Act 1 (PPA1) of the stamp duty more efficient. size and location of company’s premises. The fee is form + KES 5,000 for public health fees] This procedure is usually done in Nairobi since the payable to the Thika Municipal Council. The fee for Comments: BuildCo submits an approval request applicant is already in town. a medium trader, shop, or retail service from 5 to 20 together with building plans. The officer in charge of employees and/or premises from 50 to 300 square verification checks the rates clearance and the zon- Procedure 3. Pay stamp duty at bank meters is KES 7,000. Upon payment, all forms are ing requirements. If it complies with the regulation, taken for signature and the permit is ready for collec- BuildCo is then charged a scrutiny fee and a circula- Time: 1 day tion latest by the following day. tion fee. The municipality makes information available Cost: KES 100 (bank commission) After licensing, an officer from the Municipal Council at its website (www.eldoretmunicipal.go.ke). Comments: This procedure can be done either locally will visit the site to confirm that the business is or in Nairobi. Payment of stamp duty is done by operational. Procedure 2. Submit project plans and Banker’s check or cash at accredited bank. get approval from the Physical Planning Procedure 8. Register with the National Department (Ministry of Lands) Procedure 4. Sign declaration of Social Security Fund (NSSF) compliance (Form 208) before a Time: 3 days Time: 1 day Cost: KES 3,400 (KES 1,700 per floor) Commissioner for Oaths Cost: No cost Comments: The application has to be approved by the Time: 1 day Comments: The National Social Security Fund (NSSF) Physical Planning Department and the Lands Office of Cost: KES 200 provides the employee with a lump-sum retirement the Ministry of Lands. Comments: A company founder must sign Form 208, benefit. Participation is mandatory. The employer the Declaration of Compliance with the Companies pays a standard contribution of about 1% of salary, Procedure 3. Obtain final approval from the Act, which accompanies the registration documents subject to a maximum of KES 400 per month. Half municipal council to be submitted to the Registrar of Companies. the contribution is deductible from the employee’s Time: 30 days salary. The precise amount of the contribution (where Procedure 5. File deed and details with the less than the maximum) is determined by reference to Cost: No cost (Paid in procedure 1) Registrar of Companies at the Attorney salary bands. This procedure is done at the local NSSF Comments: Architectural and structural plans are General’s Chamber in Nairobi (Sheria office in Thika. presented to a technical committee for verification. House) The technical committee is made up of an engineer, a Time: 14 days Procedure 9. Register with the National public health officer and an environmental expert—all Hospital Insurance Fund (NHIF) within the municipality. The technical committee Cost: KES 5,836 meets every Friday and, if everything is in order, Time: 1 day approves plans as a team. This technical committee Cost: No cost was formed in 2010 (appointment letter ref: EMC/ LIST OF PROCEDURES 61 ADM.2/1/IV/53 dated 14th October, 2010) replacing DEALING WITH CONSTRUCTION PERMITS Procedure 7. Request an occupancy the need for separate approvals, as required previ- Garissa certificate and receive a final on-site ously. Also, approvals no longer require ratification by the Town Planning Committee before being com- inspection by the municipal authority Warehouse value: KES 32,500,000 (US$ 418,341) municated to the applicant. The council established Time: 2 days Data as of: March 2012 this policy in 2010 based on the guidelines set by the Cost: No cost Ministry of Local Government (see circular number Procedure 1. Request approval of the Comments: BuildCo informs the Municipal Council 5/2002 dated 13th June 2002). Currently, approved architectural plans and get a Physical Engineer’s Department that the warehouse is development plans are reported to the planning com- completed. The municipal engineer or other officers Planning Act 1 (PPA1) form from the mittee on monthly basis. inspect the warehouse and confirm whether the struc- Garissa Municipal Council ture conforms to all the relevant building plans. Time: 1 day Procedure 4. Obtain project report from an Cost: KES 5,300 (KES 300 Physical Planning Act 1 environmental expert Procedure 8. Obtain an occupancy [PPA1] form + KES 5,000 building plans approval fee) Time: 5 days certificate Comments: BuildCo obtains the PPA1 form at the mu- Cost: KES 50,000 Time: 1 day nicipality, which allows the process to start and go to Comments: A licensed environmental expert must Cost: No cost (paid in procedure 1) the relevant offices to obtain the approval of the plans. be hired to prepare a project report to be submitted The municipality’s fees and charges were approved Comments: The inspection card (PPA1) is fully filled to the National Environment Management Authority together with the by-laws in 2008. and an occupancy certificate is issued by the Munici- (NEMA). pal Council Engineer’s Department. The cost for the occupancy certificate is paid in procedure 1. Procedure 2. Submit project plans and Procedure 5. Obtain approval from the get approval from the Physical Planning National Environment Management Procedure 9. Apply for water and sewerage Department (Ministry of Lands) Authority (NEMA) connection at Eldoret Water & Sewerage Time: 3 days Time: 30 days Company (ELDOWAS) Cost: KES 3,400 (KES 1,700 per floor) Cost: KES 16,250 (0.05% of total project cost) Time: 1 day Comments: BuildCo submits the project plans for Comments: Projects of all risk categories are subject Cost: No cost approval to the Physical Planning Department (PPD), the NEMA approval, including BuildCo’s warehouse. which is under the central Ministry of Lands. Larger Comments: To apply for water and sewerage connec- In 2009, the cost was lowered from 0.1% to 0.05% of cities have Health and Physical Planning offices tion, BuildCo has to submit the following: warehouse value (KES 32,500,000). included in the municipal council so approvals are a. Application form; managed within the municipality, but in Garissa these The regulation regarding environmental approvals for Kenya has been in place since 1999. However, in b. Identification card; central government offices are separate. A PPD officer recent years NEMA has started enforcing the rules c. Personal identification number (PIN); approves the plans and signs the applicable section of more vigorously. The legislation is not clear on which d. Sketch map of the warehouse site. the PPA1 form. categories of buildings this regulation would apply to, At this stage no costs are absorbed since BuildCo has but most townships and municipalities require it for all Procedure 3. Submit project plans and to wait for the Eldoret Water and Sewerage Company commercial constructions. (ELDOWAS) officers to visit the site and ascertain get approval from the Public Health NEMA conducts periodic inspections during the whether there is an existing water line near the build- Department (Ministry of Health) construction. If new projects at the moment of inspec- ing site and whether there will be sufficient supply in Time: 3 days tion do not have an environmental approval, they the future. Application forms for water and sewerage Cost: KES 3,000 may order the project be closed and erected objects connection can be downloaded from ELDOWAS Comments: BuildCo submits the structural plans for demolished. Therefore, construction companies are website (www.eldowas.or.ke). approval to the Public Health Department (PHD). now obtaining the environmental approval before the A PHD officer approves the plans and signs the ap- building is completed. BuildCo would usually hire an Procedure 10. Pay water and sewerage plicable section of the PPA1 form. environmental expert to prepare the environmental installation costs and obtain connection report and to deal with approval from NEMA. Time: 3 days Procedure 4. Submit project plans and get Procedure 6. Notify the Eldoret Municipal Cost: KES 3,660 approval from Garissa Water & Sewerage Council of the commencement of building Company (GAWASCO) work and receive a routine on-site Procedure 11*. Apply and pay for telephone Time: 1 day inspection connection Cost: No cost Time: 1 day Comments: GAWASCO needs to approve the con- Time: 1 day Cost: KES 3,395 (Pre-paid connection cost) nection to water and sewerage. It sends the inspectors Cost: No cost (paid in procedure 1) Comments: BuildCo applies for telephone connection to check the site after which they return to the office, Comments: Inspectors from the Eldoret Municipal sign and stamp the plans. at the local Orange Telkom Kenya office where readily Council are available during business hours every day. available forms can be immediately filled out and There are several inspections required by the munici- Procedure 5. Submit project plans and submitted. To obtain a commercial connection, the pal by-laws. However, the common practice is that inspectors only come for routine checks during the applicant needs to submit, along with the application, signed PPA1 form to the Municipal Council proof of ownership of the business and an identifica- Engineer’s Department and obtain approval construction phase. They stop by the construction site tion card. The same tariff and connection fee apply Time: 7 days while the construction continues and check if every- across the country. thing is being built in accordance with the architectur- Cost: KES 7,000 (Fixed fee: Building plans approval al plans submitted initially. The cost for this inspection * This procedure can be completed simultaneously fee) is included in the scrutiny fees paid in procedure 1. The with previous procedures. Comments: The municipal council engineer reviews Municipal Council Engineer’s Department provides the building plans and checks if all approvals have BuildCo with an inspection card upon approval of the been obtained in the PPA1 form. The surveyor at the plans. The inspectors are required by law to sign the municipality confirms the plot location, owner- inspection card on site and also note any changes in ship titles, stamp duty and tax payments clearance. layout for purposes of preparing as-built drawings. Construction can commence only after the municipal council engineer has given approval of the plans. 62 DOING BUSINESS IN KENYA 2012 Procedure 6. Obtain project report from an Procedure 11. Apply for water and sewerage Procedure 3. Submit project plans and environmental expert connection Garissa Water & Sewerage get approval from the Public Health Time: 5 days Company (GAWASCO) Department (Ministry of Health) Cost: KES 50,000 Time: 1 day Time: 2 days Comments: A licensed environmental expert must Cost: KES 2,000 Cost: KES 5,000 (For commercial buildings) be hired to prepare a project report to be submitted Comments: After submitting the application form to Comments: BuildCo submits the project plans for ap- to the National Environment Management Authority the Garissa Water and Sewerage Company (GAWAS- proval to the Public Health Department (PHD). A PHD (NEMA). CO), a plumber comes on-site to assess the require- officer approves the plans and signs the applicable ments and costs of connection and advises BuildCo section of the PPA1 form. Procedure 7. Obtain approval from the on the same. If BuildCo agrees on the cost, then the National Environment Management information is forwarded to a technical manager of Procedure 4. Submit project plans and Authority (NEMA) GAWASCO for approval and issuance of the meter. signed PPA1 form to the County Council Time: 30 days Engineer’s Department and obtain approval Procedure 12. Pay water and sewerage Cost: KES 16,250 (0.05% of total project cost) Time: 10 days installation costs and obtain connection Comments: Projects of all risk categories are subject Cost: No cost (Paid in procedure 1) Time: 5 days to the NEMA approvals, including BuildCo’s ware- Comments: The municipal council engineer reviews house. In 2009, the cost was lowered from 0.1% to Cost: KES 5,000 the building plans, checks if all approvals have been 0.05% of warehouse value (KES 32,500,000). Comments: BuildCo submits a supply agreement form obtained in the PPA1 form and then issues the building The regulation regarding environmental approvals obtained from GAWASCO detailing the property loca- permit. for Kenya has been in place since 1999. However, in tion, postal address and an attached receipt for water recent years NEMA has started enforcing the rules deposit. Only a quarter of the municipality has con- Procedure 5. Obtain project report from an more vigorously. The legislation is not clear on which nection to sewage, therefore the majority use septic environmental expert categories of buildings this regulation would apply to, tanks, which are emptied out by GAWASCO. Time: 5 days but most townships and municipalities require it for all commercial constructions. Procedure 13*. Apply and pay for telephone Cost: KES 50,000 NEMA conducts periodic inspections during the connection Comments: A licensed environmental expert must be construction. If new projects at the moment of inspec- Time: 3 days hired to prepare a project report to be submitted to tion do not have an environmental approval, they the National Environmental Management Authority Cost: KES 3,395 (pre-paid connection cost) (NEMA). may order the project be closed and erected objects Comments: BuildCo applies for telephone connection demolished. Therefore, construction companies are at the local Orange Telkom Kenya office where readily Procedure 6. Obtain approval from the now obtaining the environmental approval before the available forms can be immediately filled out and National Environment Management building is completed. BuildCo would usually hire an submitted. To obtain a commercial connection, the Authority (NEMA) environmental expert to prepare the environmental applicant needs to submit, along with the application, report and to deal with approval from NEMA. Time: 20 days proof of ownership of the business and an identifica- tion card. The same tariff and connection fee apply Cost: KES 16,250 (0.05% of total project cost) Procedure 8. Notify the Garissa Municipal across the country. Comments: Projects of all risk categories are subject Council of the commencement of building to the NEMA approvals, including BuildCo’s ware- work and receive a routine on-site * This procedure can be completed simultaneously with previous procedures. house. In 2009, the cost was lowered from 0.1% to inspection 0.05% of warehouse value (KES 32,500,000). Time: 1 day DEALING WITH CONSTRUCTION PERMITS The regulation regarding environmental approvals Cost: No cost for Kenya has been in place since 1999. However, in Isiolo recent years NEMA has started enforcing the rules Comments: There are several inspections required by the municipal by-laws. However, the common practice Warehouse value: KES 32,500,000 (US$ 418,341) more vigorously. The legislation is not clear on which is that the inspectors only come for routine checks Data as of: March 2012 categories of buildings this regulation would apply to, during the construction phase. In Garissa, the inspec- but most townships and municipalities require it for all tions conducted at the different critical stages of con- Procedure 1. Request approval of commercial constructions. struction are carried out by the engineer who travels architectural plans and get a Physical NEMA conducts periodic inspections during the from Nairobi. They stop by the construction site while Planning Act 1 (PPA1) form from the Isiolo construction. If new projects at the moment of inspec- the construction continues and check if everything County Council tion do not have an environmental approval, they is being built in accordance with the architectural Time: 1 day may order the project be closed and erected objects plans submitted initially and sign the inspection card demolished. Therefore, construction companies are accordingly. Cost: KES 12,700 (KES 10,700 for the first 10,000 now obtaining the environmental approval before the square feet + KES 500 KES for every additional 1,000 building is completed. BuildCo would usually hire an square feet) environmental expert to prepare the environmental Procedure 9. Request occupancy certificate and receive a final on-site inspection by the report and to deal with approval from NEMA. Procedure 2. Submit project plans and municipal authority get approval from the Physical Planning Procedure 7. Notify the Isiolo County Time: 2 days Department (Ministry of Lands) Council of the commencement of building Cost: KES 2,500 Time: 2 days work and receive a routine on-site Comments: BuildCo informs the Garissa Municipal Cost: KES 3,400 (KES 1,700 per floor) inspection Council once construction is completed. The inspec- tion is conducted by the fire section before the oc- Comments: BuildCo submits the PPA1 form together Time: 1 day cupancy certificate can be issued. The fire section was with the PPA1 project plans for approval to the Physi- Cost: KES 2,000 established in July 2009 within the Municipal Council cal Planning Department (PPD), which is under the Comments: BuildCo and the inspector agree on the Engineer’s Department. central Ministry of Lands. A PPD officer approves the stages of inspection and each keep a copy of the plans and signs the applicable section of the PPA1 sitebook. Inspections should take place: form. Larger cities have Health and Physical Planning Procedure 10. Obtain an occupancy a. Before commencement; offices included in the municipal council so approvals certificate from the municipal council are managed within the municipality, but in Isiolo b. To check the structural liability of the building up to Time: 5 days these central government offices are separate. the ground floor; Cost: No cost (paid in procedure 1) c. After completion of the first floor; Comments: An officer from the Municipal Council En- d. Once the construction is finished, as a final inspec- gineer’s Department issues an occupancy certificate, tion. after having inspected the building (procedure 7). LIST OF PROCEDURES 63 Procedure 8. Request an occupancy Comments: BuildCo submits the project plans for NEMA conducts periodic inspections during the approval to the Physical Planning Department (PPD), construction. If new projects at the moment of inspec- certificate and receive a final on-site which is under the central Ministry of Lands. A PPD tion do not have an environmental approval, they inspection by the county council officer approves the plans and signs the applicable may order the project be closed and erected objects Time: 3 days section of the PPA1 form. Larger cities have Health demolished. Therefore, construction companies are Cost: No cost (paid in procedure 1) and Physical Planning offices included in the mu- now obtaining the environmental approval before the Comments: BuildCo informs the Isiolo Town Council nicipal council so approvals are managed within the building is completed. BuildCo would usually hire an once construction is completed. The Town Council municipality. The Municipal Council of Kakamega has environmental expert to prepare the environmental sends inspectors to the construction site before the a physical planner in-house, but it has not yet gone report and to deal with approval from NEMA. occupancy certificate is issued. through the approvals necessary so BuildCo still needs to go to the Ministry of Lands. Procedure 7. Notify the Kakamega Procedure 9. Obtain an occupancy Municipal Council of the commencement of certificate from the county council Procedure 3. Submit project plans and building work and receive a routine on-site get approval from the Public Health inspection Time: 10 days Department (Ministry of Health) Time: 2 days Cost: No cost Time: 7 days Cost: No cost Procedure 10. Apply for water and Cost: KES 5,000 Comments: There are several inspections required by sewerage connection at Isiolo Water & Comments: BuildCo submits the architectural plans the municipal by-laws. However, the common practice Sewerage Company and the PPA1 filled in, providing the information is that the inspectors only come for routine checks required by the Public Health Department (PHD). A during the construction phase. They stop by the Time: 2 days PHD officer approves the plans and signs the applica- construction site while the construction continues and Cost: No cost ble section of the PPA1 form. The PHD officer looks at check if everything is being built in accordance with the development’s impact for occupiers and surround- the architectural plans submitted initially. Procedure 11. Pay water and sewerage ing. If there is anything wrong it is communicated to installation costs and obtain connection the Lands Department. The municipality has recently Procedure 8. Request occupancy certificate Time: 5 days filled in the position ofPHD officer, which reports to and receive on-site inspection by the the town clerk, so it expects that this procedure will municipal authority after construction Cost: KES 7,000 (includes connection fees and a not need to go to the external office in the future. deposit) Time: 10 days Comments: BuildCo presents an approved PPA1 form. Procedure 4. Submit project plans and get Cost: No cost (paid in procedure 4) A representative from the Isiolo Water and Sewerage final approval and a Physical Planning Act Comments: BuildCo informs the Kakamega Municipal Company visits and inspects the site to determine Council once construction is completed. The Munici- material requirements and water pressure available. 2 (PPA2) form from the Municipal Council of Kakamega pal Council sends inspectors to the construction site The process takes 5 days on average because there before the occupancy certificate is issued. are only specific days of the week on which the Isiolo Time: 20 days Water and Sewerage Company crew can come for Cost: KES 9,970 (KES 5,320 for the architectural plans Procedure 9. Obtain an occupancy installation. The deposit fee is refundable in case + KES 2,300 for the structural plans + KES 2,350 BuildCo decides to discontinue the water and sewer- certificate from the municipal council for inspections. All fees calculated for a plinth area age service. between 837 and 930 square meters) Time: 14 days Comments: The building plans need to be approved Cost: KES 2,500 Procedure 12*. Apply and pay for telephone by 2 municipal bodies—the technical committee connection and the political committee. The political committee Procedure 10. Apply for water and Time: 14 days meents once in 3 months. However, the construction sewerage connection at Amatsi Water Cost: KES 3,395 (pre-paid connection cost) can start once the technical committee has given ap- Services Company proval and issued the Physical Planning Act 2 (PPA2) Time: 1 day Comments: BuildCo applies for telephone connection form. at the local Orange Telkom Kenya office where readily Cost: No cost available forms can be immediately filled out and Procedure 5. Obtain project report from an submitted. To obtain a commercial connection, the Procedure 11. Pay water and sewerage applicant needs to submit, along with the application environmental expert installation costs and obtain connection proof of ownership of the business and an identifica- Time: 5 days Time: 14 days tion card. The same tariff and connection fee apply Cost: KES 50,000 across the country. Cost: KES 7,000 (KES 4,500 application + KES 2,500 Comments: A licensed environmental expert must be meter) * This procedure can be completed simultaneously hired to prepare a project report to be submitted to with previous procedures. the National Environmental Management Authority Procedure 12*. Apply and pay for telephone (NEMA). connection DEALING WITH CONSTRUCTION PERMITS Procedure 6. Obtain approval from the Time: 5 days Kakamega Cost: KES 3,395 (pre-paid connection cost) National Environment Management Warehouse value: KES 32,500,000 (US$ 418,341) Authority (NEMA) Comments: BuildCo applies for telephone connection Data as of: March 2012 Time: 30 days at the local Orange Telkom Kenya office where readily available forms can be immediately filled out and Procedure 1. Request approval of Cost: KES 16,250 (0.05% of total project cost) submitted. To obtain a commercial connection, the architectural plans and obtain a Physical Comments: Projects of all risk categories are subject applicant needs to submit, along with the application, Planning Act 1 (PPA1) form from the to the NEMA approvals, including BuildCo’s ware- proof of ownership of the business and an identifica- Kakamega Municipal Council house. In 2009, the cost was lowered from 0.1% to tion card. The same tariff and connection fee apply 0.05% of warehouse value (KES 32,500,000). across the country. Time: 1 day The regulation regarding environmental approvals Cost: KES 1,500 * This procedure can be completed simultaneously for Kenya has been in place since 1999. However, in with previous procedures. recent years NEMA has started enforcing the rules Procedure 2. Submit project plans and more vigorously. The legislation is not clear on which get approval from the Physical Planning categories of buildings this regulation would apply to, Department (Ministry of Lands) but most townships and municipalities require it for all Time: 14 days commercial constructions. Cost: KES 3,400 (KES 1,700 per floor) 64 DOING BUSINESS IN KENYA 2012 DEALING WITH CONSTRUCTION PERMITS Comments: Once the external approvals are obtained, Comments: Along with the application form, BuildCo Kilifi the council meets for approval. needs to submit the following: a. Sketch map of the building site; Warehouse value: KES 32,500,000 (US$ 418,341) Procedure 5. Obtain project report from an Data as of: March 2012 b. Copy of certificate of incorporation; environmental expert c. PIN number; Procedure 1. Request approval of Time: 5 days d. Copy of ID or passport; architectural plans and obtain a Physical Cost: KES 50,000 e. Copy of state of deed or lease agreement or sale Planning Act 1 (PPA1) form from the Kilifi Comments: A licensed environmental expert must be agreement; Town Council hired to prepare a project report to be submitted to f. Two passport-size photos; Time: 1 day the National Environmental Management Authority (NEMA). g. The meter together with the copy of the receipt. Cost: KES 20,100 [KES 100 form D application fee + KES 500 PPA1 form + KES 1,500 building permit Procedure 6. Obtain approval from the Procedure 11. Pay water and sewerage + KES 14,000 for building approval fee as KES 1 per installation costs and obtain connection square foot + KES 1,000 inspections + 3000 occu- National Environment Management Authority (NEMA) Time: 7 days pancy certificate for commercial buildings] Time: 30 days Cost: KES 20,000 (includes a KES 15,000 deposit) Comments: BuildCo needs to submit the following documents at the town council: Cost: KES 16,250 (0.05% of total project cost) Comments: Once the survey is conducted by the Comments: Projects of all risk categories are subject meter reader, KIMAWASCO will give the specific cost a. Proof of land ownership (title deed/ sale agree- to the NEMA approvals, including BuildCo’s ware- and will carry out the installation after payment. The ment/ certificate of official search); house. In 2009, the cost was lowered from 0.1% to existing sewerage is limited and therefore BuildCo will b. Indemnity form duly filled and signed by owner/ need to install a septic tank. developer and the concerned consultants (obtained 0.05% of warehouse value (KES 32,500,000). from the county council office); The regulation regarding environmental approvals Procedure 12*. Apply and pay for telephone c. Development proposals duly signed by the consul- for Kenya has been in place since 1999. However, in recent years NEMA has started enforcing the rules connection tants involved (registered architect and registered more vigorously. The legislation is not clear on which Time: 3 days structural engineer); categories of buildings this regulation would apply to, Cost: KES 3,395 (pre-paid connection cost) d. Rates clearance certificate. but most townships and municipalities require it for all Comments: BuildCo applies for telephone connection Application forms are available at the cashier’s office commercial constructions. at the local Orange Telkom Kenya office where readily of the county council, and cost just KES 100 each. NEMA conducts periodic inspections during the available forms can be immediately filled out and The PPA1 form costs KES 500 and is completed by construction. If new projects at the moment of inspec- submitted. To obtain a commercial connection, the applicant for submission of development proposals. tion do not have an environmental approval, they applicant needs to submit, along with the application, The technical experts within the town council assess may order the project be closed and erected objects proof of ownership of the business and an identifica- the plan and the District Public Works Department demolished. Therefore, construction companies are tion card. The same tariff and connection fee apply checks that the drawings have been prepared by a now obtaining the environmental approval before the across the country. registered professional. Subsequently, the documents building is completed. BuildCo would usually hire an are circulated externally. * This procedure can be completed simultaneously environmental expert to prepare the environmental BuildCo will then need to pay the different fees to the with previous procedures. report and to deal with approval from NEMA. Kilifi Town Council, which cover the inspections and occupancy certificate costs (per fees and charges Procedure 7. Notify the Kilifi Town Council DEALING WITH CONSTRUCTION PERMITS published in the Kenya Gazette on March 12, 2010). Kisumu of the commencement of building work and The town council displays all the information related to approval of building plans, including fee schedules receive a routine on-site inspection Warehouse value: KES 32,500,000 (US$ 418,341) and application forms, in its website (www.kilifitown. Time: 2 days Data as of: March 2012 org). The same information is also displayed in pub- Cost: No cost (paid in procedure 1) licly available boards. There is an ongoing reform to Procedure 1. Request and get approval of Comments: BuildCo has to notify the County Council allow online application for building plan approvals. 30 hours before the inspection. Inspections are carried the architectural plans from the Kisumu out by the staff of the County Council, which will fill in Municipal Council Procedure 2. Submit project plans and the inspection card. Time: 30 days get approval from the Physical Planning Cost: KES 77,668 (KES 39,925 architectural fee + Department and Lands Department Procedure 8. Request an occupancy KES 26,743 structural submission fee + KES 6,000 (Ministry of Lands) certificate and receive a final on-site building inspection fee + KES 5,000 Public Health Time: 1 day inspection by the Building Works Department fee) Cost: KES 10,400 [KES 3,400 for the Physical Plan- Department Comments: The building permit is issued by the ning Department (KES 1,700 per floor) + KES 7,000 Time: 2 days Kisumu Municipal Council. BuildCo must submit, for the Lands Department (KES 1,500 for the first 200 along with a site plan, the following: Cost: No cost square meters and KES 500 for every additional 100 a. Proof of ownership of the plot; Comments: The company has to file an inspection square meters)] b. Receipt evidencing the purchase of land; request and an officer from the Building Works De- Comments: The Physical Planner ascertains the land partment performs an on-site inspection the next day. c. Physical Planning Act 1 (PPA1) form, which is then use, while the Lands Department officer ascertains submitted to the Municipal Planner’s Department ownership. Procedure 9. Obtain an occupancy for approval. certificate from the town council The Kisumu Municipal Council has a Municipal Plan- Procedure 3. Submit project plans and ner’s Department that includes the Physical Planning get approval from the Health Department Time: 14 days Department and the Public Health Department. (Ministry of Health) Cost: No cost (Paid at procedure 1) Everything is done in-house, including approval of Time: 1 day Comments: If the warehouse is found to be in compli- signatures for the PPA1 form. The technical approval ance with the inspection requirements, an occupancy committee now meets every 2 weeks, and it is com- Cost: KES 5,000 (for commercial buildings) certificate is issued by the Kilifi Town Council. posed of a town planner, a town engineer, a public Procedure 4. Submit project plans and health officer, a value officer, a director of housing Procedure 10. Apply for water and and an environmental expert. The building approval is get final approval from the Town Planning sewerage connection at Mariakani Water & valid for a period of 2 years within which BuildCo must Department at Kilifi Town Council Sewerage Company (KIMAWASCO) commence the construction. Time: 21 days Time: 2 days Cost: No cost (paid in procedure 1) Cost: No cost LIST OF PROCEDURES 65 Procedure 2. Obtain project report from an Comments: BuildCo needs to submit the following: Comments: A licensed environmental expert must a. Copy of ID/Registration Certificate for the Com- be hired to prepare a project report to be submitted environmental expert pany; to NEMA. Time: 5 days b. Copy of PIN card; Cost: KES 50,000 Procedure 3. Obtain approval from the c. Site plan from the Ministry of Lands; Comments: A licensed environmental expert must be National Environment Management hired to prepare a project report to be submitted to d. Land Rent (LR)/Plot Number. Authority (NEMA) the National Environmental Management Authority Water connection can be requested online through Time: 30 days (NEMA). KIWASCO’s website: www.kiwasco.co.ke. Cost: KES 16,250 (0.05% of total project cost) Procedure 3. Obtain approval from the Procedure 8. Pay water and sewerage Comments: Projects of all risk categories are subject National Environment Management installation costs and obtain connection to the NEMA approvals, including BuildCo’s ware- house. In 2009, the cost was lowered from 0.1% to Authority (NEMA) Time: 10 days 0.05% of warehouse value (KES 32,500,000). Time: 45 days Cost: KES 10,000 (KES 4,000 for 1-inch pipe water The regulation regarding environmental approvals Cost: KES 16,250 (0.05% of total project cost) connection + KES 6,000 for sewer connection) for Kenya has been in place since 1999. However, in Comments: Projects of all risk categories are subject Comments: The periurban areas of Kisumu do not recent years NEMA has started enforcing the rules to the NEMAapprovals, including BuildCo’s ware- have sewerage and water networks. The developer has more vigorously. The legislation is not clear on which house. In 2009, the cost was lowered from 0.1% to to build a septic tank. categories of buildings this regulation would apply to, 0.05% of warehouse value (KES 32,500,000). but most townships and municipalities require it for all The regulation regarding environmental approvals Procedure 9*. Apply and pay for telephone commercial constructions. for Kenya has been in place since 1999. However, in connection NEMA conducts periodic inspections during the recent years NEMA has started enforcing the rules Time: 6 days construction. If new projects at the moment of inspec- more vigorously. The legislation is not clear on which Cost: KES 3,395 (pre-paid connection cost) tion do not have an environmental approval, they categories of buildings this regulation would apply to, may order the project be closed and erected objects Comments: BuildCo applies for telephone connection but most townships and municipalities require it for all demolished. Therefore, construction companies are at the local Orange Telkom Kenya office where readily commercial constructions. now obtaining the environmental approval before the available forms can be immediately filled out and NEMA conducts periodic inspections during the building is completed. BuildCo would usually hire an submitted. To obtain a commercial connection, the construction. If new projects at the moment of inspec- environmental expert to prepare the environmental applicant needs to submit, along with the application, tion do not have an environmental approval, they report and to deal with approval from NEMA. proof of ownership of the business and an identifica- may order the project be closed and erected objects tion card. The same tariff and connection fee apply demolished. Therefore, construction companies are across the country. Procedure 4. Notify the Malaba Town now obtaining the environmental approval before the Council of the commencement of building building is completed. BuildCo would usually hire an * This procedure can be completed simultaneously work and receive a routine on-site environmental expert to prepare the environmental with previous procedures. inspection report and to deal with approval from NEMA. DEALING WITH CONSTRUCTION PERMITS Time: 2 days Procedure 4. Receive a routine on-site Cost: No cost (paid in procedure 1) Malaba inspection Comments: BuildCo has to notify the Town Engineer’s Warehouse value: KES 32,500,000 (US$ 418,341) Department of the commencement of the construc- Time: 1 day Data as of: March 2012 tion works. A joint inspection is conducted by the Cost: No cost Town Inspector’s Department, the Physical Planner, Comments: The building company receives an Procedure 1. Request approval of the the Public Health officer and, occasionally, a NEMA inspection form that has to be filled throughout the architectural plans from the Malaba Town officer. There are 4 critical stages of construction: stages of construction. Construction must start within Council substructure, superstructure, roofing and finishes. 2 years of obtaining the building permit. There are Time: 14 days They stop by the construction site while the construc- several inspections required by the municipal by-laws. tion continues and check if everything is being built Cost: KES 6,400 (KES 2,500 application fees for the However, the common practice is that the inspectors in accordance with the architectural plans initially approval of the building plans of a commercial building only come for routine checks during the construc- submitted. An inspection card is used to keep track of + KES 2,500 plan inspection fee + KES 1,400 setting tion phase. They stop by the construction site while the inspections. out) the construction continues and check if everything is being built in accordance with the architectural plans Comments: BuildCo submits to the Malaba Town Procedure 5. Request completion and initially submitted. Council the following: occupancy certificates from the town a. Building plans; council Procedure 5. Notify the municipality of the b. Title deed; Time: 1 day completion of construction and receive a c. Proof of land ownership. Cost: No cost (Paid in procedure 1) final on-site inspection by the municipal An officer from the Public Works Department will authority Comments: A final inspection is conducted by a team look at the plans and make recommendations. If the from the Town Engineer’s Department, the Physical Time: 10 days plans are in order, the company will pay the required Planner Department, a building inspector and an Cost: No cost fees for the permit. The plans will be circulated electrician. among the Physical Planning Department and the Procedure 6. Apply and obtain an Public Health Department, which are within the town Procedure 6. Obtain completion and occupancy certificate council. BuildCo does not need to go to the respective departments at the Ministry of Lands and the Ministry occupancy certificates Time: 7 days of Health. Afterwards, the plans are forwarded to the Time: 3 days Cost: KES 5,000 (for commercial buildings) Town Planning Committee for formalization, which Cost: KES 1,500 Comments: Once the building has been inspected and meets twice a month. Once the town clerk signs, his Comments: Both certificates are obtained concur- found to be in compliance with inspection require- office communicates to BuildCo that it has approved rently at the Engineers Department. One states that ments, an occupancy certificate is issued. the plans, subject to approval by the National Environ- the construction has been finished and the other one mental Management Authority (NEMA). that it is ready for use. Procedure 7. Apply for water and sewerage connection at Kisumu Water & Sewerage Procedure 2. Obtain project report from an Procedure 7. Apply for water and sewerage Company (KIWASCO) environmental expert connection at Nzoia Water Services Co Ltd Time: 3 days Time: 5 days Time: 1 day Cost: KES 2,500 (for commercial use) Cost: KES 50,000 Cost: KES 1,500 66 DOING BUSINESS IN KENYA 2012 Procedure 8. Pay water and sewerage Procedure 3. Obtain approval from the Comments: Mombasa Water Supply and Sanitation Company was incorporated on March 18, 2011 under installation costs and obtain connection National Environment Management the Companies Act chapter 486 laws of Kenya and Time: 7 days Authority (NEMA) started operations on July 1, 2011. Cost: KES 2,000 Time: 30 days Cost: KES 16,250 (0.05% of total project cost) Procedure 9*. Apply and pay for telephone Procedure 9*. Apply and pay for telephone Comments: Projects of all risk categories are subject connection connection to the NEMA approvals, including BuildCo’s ware- Time: 20 days Time: 7 days house. In 2009, the cost was lowered from 0.1% to Cost: KES 3,395 (pre-paid connection cost) Cost: KES 3,395 (pre-paid connection cost) 0.05% of warehouse value (KES 32,500,000). Comments: BuildCo applies for telephone connection Comments: BuildCo applies for telephone connection The regulation regarding environmental approvals at the local Orange Telkom Kenya office where readily at the local Orange Telkom Kenya office where readily for Kenya has been in place since 1999. However, in available forms can be immediately filled out and available forms can be immediately filled out and recent years NEMA has started enforcing the rules submitted. To obtain a commercial connection, the submitted. To obtain a commercial connection, the more vigorously. The legislation is not clear on which applicant needs to submit, along with the application, applicant needs to submit, along with the application, categories of buildings this regulation would apply to, proof of ownership of the business and an identifica- proof of ownership of the business and an identifica- but most townships and municipalities require it for all tion card. The same tariff and connection fee apply tion card. The same tariff and connection fee apply commercial constructions. across the country. across the country. NEMA conducts periodic inspections during the construction. If new projects at the moment of inspec- * This procedure can be completed simultaneously * This procedure can be completed simultaneously tion do not have an environmental approval, they with previous procedures. with previous procedures. may order the project be closed and erected objects demolished. Therefore, construction companies are DEALING WITH CONSTRUCTION PERMITS DEALING WITH CONSTRUCTION PERMITS now obtaining the environmental approval before the Nairobi Mombasa building is completed. BuildCo would usually hire an Warehouse value: KES 32,500,000 (US$ 418,341) environmental expert to prepare the environmental Warehouse value: KES 32,500,000 (US$ 418,341) Data as of: March 2012 report and to deal with approval from NEMA. Data as of: March 2012 Procedure 1. Submit architectural plan for Procedure 1. Request and get approval Procedure 4. Notify the Mombasa approval and obtain provisional building of the architectural plans the Mombasa Municipal Council of the commencement of permit Municipal Council building work and receive a routine on-site inspection Time: 30 days Time: 30 days Cost: KES 54,484 [Building plan approval fee (first Time: 2 days Cost: KES 47,000 [KES 35,500 to the Town Planning 930 square meters cost KES 12,850 + KES 1,500 for and Architecture Department (KES 1,000 for PPA1 Cost: No cost every 93 square meters above original 930 square form + KES 23,000 Submission of architectural plans Comments: The developer is given a pink inspection meters) + construction sign board fee KES 17,000 + for a commercial building + KES 11,500 Submission of card together with the approval which specifies all the Application fee KES 2,000 + Infrastructure develop- structural plans) + KES 11,500 for the submission of stages of inspection for the officer to sign. After the ment levy fee (0.05% of estimated development cost the structural plans of a commercial construction to notification, an inspector conducts the first inspection of building). According to the methodology of the the Engineer’s Department] and schedules subsequent inspections. The inspector City Council of Nairobi (CCN), current building cost Comments: BuildCo is required to submit the follow- sent by the Municipal Council could check, among for warehouses in the Central Region (Nairobi) is KES ing documents: other things, the building boundaries, accessibility to 21,000 per square meter (excluding VAT) + inspection the power line, sewerage, water, and telephone line, of building file KES 1,000 + occupancy certificate KES a. Copy of the title deed; cement mixture, reinforcements, roofing, and site 1,000 + commencement and completion certificate / b. Clearance certificate; consolidation. preliminary submission of building plans and propos- c. Architectural drawings; als KES 1,000] d. Structural drawings. Procedure 5. Request an occupancy Comments: BuildCo would approach the City After submitting these documents, the file is circu- certificate and receive a final on-site Development Department at the City Council of lated among the Building Department, the Municipal inspection by the municipal authority Nairobi (CCN) to get its architectural plans approved Planning Department, the Valuation Department and Time: 1 day first. Before submitting the application, BuildCo pays the Public Health Department. relevant fees. Once payment is made, BuildCo submits Cost: No cost The plans do not need to be approved by the Physical the receipt to the City Development Department. The Comments: BuildCo submits to the council 3 forms application must contain the architectural drawings Planning Department of the Ministry of Lands given filled in by the architect, the civil engineer and the that the Physical Planning Act establishes that if the and plans, land title and a copy of main architect’s plumber and a form for the Central Bureau of Statis- license. The application then gets forwarded to various council has a fully-fledged city planning department, tics. The council sends the engineer to carry out the they can clear it in-house. The Mombasa Municipal departments: Physical Planning, Road Department, final inspection. Public Health, Fire Department, Water Authority and Council has most of the experts in-house (a survey department, a full planning section and development Electricity Authority. Each department takes at least 1 Procedure 6. Obtain an occupancy week to clear the respective section of the plans and control section which monitors the enforcement certificate from the municipal council grants separate permits for the plumbing, sewerage and is supported by an engineer). It is still not fully fledged since they only have 1 planner (only Nairobi is Time: 2 days and electrical activities that BuildCo will be involved in fully fledged). But Mombasa can do all the clearance Cost: KES 14,000 during the construction of the warehouse. Thereafter, in-house unless it is for a big project that needs to be the application is forwarded for approval to technical committee that convenes twice a week and issues the checked by the control department. Procedure 7. Apply for water and sewerage approvals. As a result of the approval of architectural connection at Mombasa Water & Sewerage drawings, BuildCo will receive the building permit. Procedure 2. Obtain project report from an Company Building permit is granted only provisionally, until the environmental expert Time: 2 days structural segment is approved. Time: 5 days Cost: KES 1,000 After that the building permit is obtained BuildCo Cost: KES 50,000 needs to submit its structural project separately. Comments: A licensed environmental expert must be Procedure 8. Pay water and sewerage Since 2006, CCN has been reforming under Rapid hired to prepare a project report to be submitted to installation costs and obtain connection Results Initiative (RRI), trying to reduce the number the National Environmental Management Authority Time: 20 days of days and eliminate the bottlenecks. Since 2008 (NEMA). the architectural project approvals are issued by the Cost: KES 6,500 technical committee that convenes twice a week. Previously, the approving body was the city council LIST OF PROCEDURES 67 itself. However, due to its busy schedule and backlog, building is completed. BuildCo would usually hire an DEALING WITH CONSTRUCTION PERMITS it was decided to transfer the responsibility from the environmental expert to prepare the environmental Nakuru city council to the technical committee. Because of report and to deal with approval from NEMA. various reforms it takes on average 30 days to obtain Warehouse value: KES 32,500,000 (US$ 418,341) this part of approval as opposed to 50 days before. Procedure 5. Request and receive on-site Data as of: March 2012 However, approval time varies because it depends on inspection by the municipal authority after the diligence of the architect. Procedure 1. Request approval of construction As of November 2008, occupancy certificate fee must architectural plans and obtain a Physical Time: 5 days Planning Act 1 (PPA1) form from the be paid at this stage. Cost: KES 1,000 Director of Town Planning Nakuru The last changes to the fees and charges took place in 2011. Municipal Council Procedure 6. Obtain occupancy certificate Time: 4 days Procedure 2. Submit and obtain structural Time: 14 days Cost: KES 18,100 [KES 2,000 application + KES 2,000 plan approval and final building permit Cost: KES 10,992 [KES 900 for the first 930 square surveyor office + KES 14,100 approval by Town Plan- meters + KES 500 for every additional 93 square ning Department] Time: 10 days meters or part thereof over 930 square meters] Cost: KES 8,936 structural plan approval fee (KES Comments: BuildCo needs to submit the following: Comments: Once the construction is completed 6,425 for the first 930 square meters + KES 630 for a. Six blueprint copies of the plans; alongside statutory inspections, BuildCo lodges an ap- every additional 93 square meters or part thereof over b. Proof of plot ownership (title deed, certified copies plication for an occupancy certificate. The occupancy 930 square meters) of sales/lease agreements, lease certificates); certificate is given when the city council deems the Comments: Once the architectural plans and draw- building is in compliance with the approved architec- c. PIN and ID card copies; ings are approved and comments and changes were tural drawings. d. Survey plan; made, BuildCo has to incorporate them into the The application is then forwarded to the Assistant e. Copy of an up-to-date practicing certificate of the structural plans and re-submit the application to CCN Director of Enforcement so that an inspector is as- submitting architect/engineer; for approval. This is the common practice because signed for the final inspection of the construction. submitting both plans together is impossible. One f. Rate clearance certificate/receipts; Normally it should be a combined visit from several other reason why these 2 steps happen separately g. Septic tank details. other departments. is because the architectural drawings and plans are BuildCo submits the plans to the Town Planning checked by Structural Department at stage when Department. The Town Planning Department gets structural plans are approved. Construction works Procedure 7. Apply for water and sewerage connection the approval from the municipal architect and checks begin only after this approval. the rates clearance and that the application complies Since beginning this year, due to the RRI program and Time: 1 day with the Building Code. Once the fees are paid at the internal process of simplification in the CCN, it Cost: KES 1,100 the treasury office, the Town Planning Department now takes 10 days to obtain the structural approval authorizes BuildCo to circulate the plans among the compared to previous 25 days. Procedure 8. Pay water and sewerage relevant departments. The company must have the following items ap- installation costs and obtain connection proved: project plans, architectural drawings, location Time: 30 days Procedure 2. Submit project plans and survey of property documents and more. Cost: KES 6,000 get approval from the Physical Planning The last changes to the fees and charges took place Comments: The applicant is required to submit an Department and Lands Department in 2011. “Application for Water and Sewerage Supply Form” (Ministry of Lands) obtained from the Nairobi City Water and Sewerage Time: 14 days Procedure 3. Obtain a project report from Company. Thereafter, the applicant is required to pay Cost: KES 20,150 [KES 3,400 (KES 1,700 per floor) + an environmental expert KES 1,100 for a survey and estimates fees and attach KES 16,750] Time: 5 days the receipt of payment to the application form. The Comments: BuildCo submits the architectural plans Cost: KES 50,000 applicant is also required to attach the company’s for approval to the Physical Planning Department certificate of registration and its PIN number. The Comments: A licensed environmental expert must be (PPD) and the Lands Department, which are under Nairobi Water Company may approve the applica- hired to prepare a project report to be submitted to the central Ministry of Lands. Larger cities have health tion after all these documents have been submitted. the National Environmental Management Authority and physical planning offices included in the municipal After approval, applicant is required to pay KES 6,000. (NEMA). council so approvals are managed within the munici- The applicant is responsible for payment of all water, pality, but in Nakuru these central government offices meter rent, sewer, conservancy and refuse collection Procedure 4. Obtain approval from the are separate. charges. The process usually takes a month. National Environment Management Authority (NEMA) Procedure 3. Submit project plans and get Procedure 9*. Apply and pay for telephone approval from the Health Department at Time: 30 days connection the municipality Cost: KES 16,250 (0.05% of total project cost) Time: 5 days Time: 6 days Comments: Projects of all risk categories are subject Cost: KES 3,395 to the NEMA approvals, including BuildCo’s ware- Cost: KES 1,000 Comments: BuildCo applies for telephone connec- house. In 2009, the cost was lowered from 0.1% to tion at the local Orange Telkom Kenya office where Comments: BuildCo submits the structural plans for 0.05% of warehouse value (KES 32,500,000). readily available forms can be immediately filled out approval to the Public Health Department (PHD). The regulation regarding environmental approvals and submitted. To obtain a commercial connection the Nakuru’s municipality has its own health department, for Kenya has been in place since 1999. However, in applicant needs to submit, along with the application, so the plans do not need to go to the offices of the recent years NEMA has started enforcing the rules proof of ownership of the business and an identifica- Ministry of Health. more vigorously. The legislation is not clear on which tion card. The same tariff and connection fee apply categories of buildings this regulation would apply to, across the country. Procedure 4. Submit project plans and get but most townships and municipalities require it for all approval from the Survey Department commercial constructions. * This procedure can be completed simultaneously with previous procedures. Time: 1 day NEMA conducts periodic inspections during the Cost: No cost (paid at procedure 1) construction. If new projects at the moment of inspec- Comments: The municipal surveyor verifies the tion do not have an environmental approval, they boundaries of the plot. may order the project be closed and erected objects demolished. Therefore, construction companies are now obtaining the environmental approval before the 68 DOING BUSINESS IN KENYA 2012 Procedure 5. Submit project plans and Procedure 10. Obtain an occupancy Cost: No cost (paid in procedure 1) get final approval from the Town Planning certificate from the municipal council Comments: After the works department checks the Department at Nakuru Municipal Council application, the town clerk signs it. Time: 15 days Time: 30 days Cost: KES 5,000 Procedure 5. Obtain project report from an Cost: No cost (paid at procedure 1) environmental expert Comments: The town planner and the municipal Procedure 11. Apply for water and sewerage Time: 5 days engineer give their approvals and issue a preliminary connection at Nakuru Water & Sanitation letter of commencement, so BuildCo can start the Services Company Cost: KES 50,000 works. The town planner recommends the plans for Time: 4 days Comments: A licensed environmental expert must be final approval by the Town Planning Committee. hired to prepare a project report to be submitted to Cost: No cost the National Environmental Management Authority Procedure 6. Obtain project report from an (NEMA). Procedure 12. Pay water and sewerage environmental expert installation costs and obtain connection Procedure 6. Obtain approval from the Time: 5 days Time: 26 days National Environment Management Cost: KES 50,000 Authority (NEMA) Cost: KES 10,150 Comments: A licensed environmental expert must be Comments: The majority of establishments use septic Time: 21 days hired to prepare a project report to be submitted to tanks due to the limited coverage of the sewerage Cost: KES 16,250 (0.05% of total project cost) the National Environmental Management Authority network. (NEMA). Comments: Projects of all risk categories are subject to the NEMA approvals, including BuildCo’s ware- Procedure 13*. Apply and pay for telephone house. In 2009, the cost was lowered from 0.1% to Procedure 7. Obtain approval from the connection 0.05% of warehouse value (KES 32,500,000). National Environment Management Authority (NEMA) Time: 8 days The regulation regarding environmental approvals Time: 30 days Cost: KES 3,395 (pre-paid connection cost) for Kenya has been in place since 1999. However, in Comments: BuildCo applies for telephone connection recent years NEMA has started enforcing the rules Cost: KES 16,250 (0.05% of total project cost) more vigorously. The legislation is not clear on which at the local Orange Telkom Kenya office where readily Comments: Projects of all risk categories are subject available forms can be immediately filled out and categories of buildings this regulation would apply to, to the NEMA approvals, including BuildCo’s ware- submitted. To obtain a commercial connection, the but most townships and municipalities require it for all house. In 2009, the cost was lowered from 0.1% to applicant needs to submit, along with the application, commercial constructions. 0.05% of warehouse value (KES 32,500,000). proof of ownership of the business and an identifica- NEMA conducts periodic inspections during the The regulation regarding environmental approvals tion card. The same tariff and connection fee apply construction. If new projects at the moment of inspec- for Kenya has been in place since 1999. However, in across the country. tion do not have an environmental approval, they recent years NEMA has started enforcing the rules may order the project be closed and erected objects more vigorously. The legislation is not clear on which * This procedure can be completed simultaneously demolished. Therefore, construction companies are categories of buildings this regulation would apply to, with previous procedures. now obtaining the environmental approval before the but most townships and municipalities require it for all building is completed. BuildCo would usually hire an commercial constructions. DEALING WITH CONSTRUCTION PERMITS environmental expert to prepare the environmental NEMA conducts periodic inspections during the Narok report and to deal with approval from NEMA. construction. If new projects at the moment of inspec- Warehouse value: KES 32,500,000 (US$ 418,341) tion do not have an environmental approval, they Procedure 7. Notify the Narok Municipal Data as of: March 2012 may order the project be closed and erected objects Council of the commencement of building demolished. Therefore, construction companies are Procedure 1. Request approval of work and receive a routine on-site now obtaining the environmental approval before the architectural plans and get a Physical inspection building is completed. BuildCo would usually hire an environmental expert to prepare the environmental Planning Act 1 (PPA1) form from the Narok Time: 1 day report and to deal with approval from NEMA. Municipal Council Cost: No cost Time: 1 day Comments: There are several inspections required Procedure 8. Notify about commencement Cost: KES 19,000 [KES 18,000 to the Town Council by the municipal by-laws. However, the common of works and receive inspection + KES 1,000 for the Physical Planning Act 1 (PPA1) practice is that the inspectors only come for routine Time: 2 days form] checks during the construction phase. They stop by Comments: The Narok Town Council will circulate the construction site while the construction continues Cost: No cost and check if everything is being built in accordance the plans for approval to various departments that are Comments: There are several inspections required by with the architectural plans initially submitted. The in- either in the same premises or in the vicinity of the the municipal by-laws. However, the common practice spector sent by the town council could check, among Town Council building. is that the inspectors only come for routine checks other things, the building boundaries, accessibility to during the construction phase. They stop by the the power line, sewerage, water, and telephone line, construction site while the construction continues and Procedure 2. Submit project plans and get cement mixture, reinforcements, roofing and site check if everything is being built in accordance with approval from the District Public Health consolidation. the architectural plans submitted initially. Office Time: 1 day Procedure 8. Request an occupancy Procedure 9. Request an occupancy Cost: KES 5,000 certificate and receive a final on- certificate and receive a final on-site site inspection by the Public Health inspection by the municipal authority Procedure 3. Submit project plans and Department Time: 3 days get approval from the Physical Planning Time: 1 day Cost: KES 2,500 (Public Health Department fee) Department (Ministry of Lands) Cost: No cost Comments: BuildCo informs the Nakuru Municipal Time: 1 day Council once construction is completed. The regis- Cost: KES 3,400 (KES 1,700 per floor) Procedure 9. Obtain an occupancy tered architect submits a formal application attaching certificate from the municipal council the certificate as to workmanship signed by the Procedure 4. Request approval of the Time: 5 days architect and the engineer. The town council sends 2 architectural plans and final approval from inspectors to the construction site: a public health in- Cost: KES 2,000 the Narok Municipal Council spector and the senior building inspector who checks the work done by the other inspectors. Time: 30 days LIST OF PROCEDURES 69 Comments: The occupancy certificate is issued only Cost: KES 40,000 [KES 11,500 for architectural plans Nyeri introduced a system by which the inspector is after the inspector has determined that the building is (KES 6,500 for 9,000 square feet + KES 1,000 for assigned at the moment of the approval of the plans, in full compliance with the architectural plans submit- every additional 1,000) + KES 10,000 for structural including the contact details in the inspection card. ted initially. plans (KES 6,000 for 10,000 square feet + KES 1,000 This facilitates the direct interaction between BuildCo for every additional 1,000) + KES 1,000 inspection and inspectors through the construction process. Procedure 10. Apply for water and card + KES 5,000 inspection fee for buildings over sewerage connection at Narok Water & 6,001 square feet + KES 5,000 occupancy certificate Procedure 7. Request an occupancy Sewerage Company for buildings larger than 5,000 square feet + KES certificate and receive a final on-site 4,000 fire service fee + KES 1,500 mayor’s office fee inspection by the municipal authority Time: 1 day (so-called x-mas fee) + KES 1,000 application fee + Cost: KES 1,000 KES 1,000 PPA 1 form] Time: 1 day Comments: BuildCo pays the fees and obtains the Cost: No cost Procedure 11. Pay water and sewerage PPA1 form to circulate the plans among the municipal Comments: BuildCo informs the relevant departments installation costs and obtain connection departments. The plans are approved by the Urban at the Nyeri Municipal Council that the warehouse is Time: 5 days Planning Department, the Engineering Department completed. The council sends officers from the engi- and the Development Department. neer’s office, as well as the public health officer and Cost: KES 5,000 the municipal planner for the final inspection. They Comments: The Narok Water and Sewerage Company visit the site to inspect the building and check that it is a subsidiary of the Rift Valley Water and Sewerage Procedure 4. Obtain project report from an environmental expert conforms to the architectural and structural design Company and is co-owned by the Narok Town Coun- that the company had submitted for approval. cil. It is required that all buildings provide a conser- Time: 5 days vancy tank for sewerage and foul water disposal. Cost: KES 50,000 Procedure 8. Obtain an occupancy Comments: A licensed environmental expert must be certificate from the municipal council Procedure 12*. Apply and pay for telephone hired to prepare a project report to be submitted to connection Time: 1 day the National Environmental Management Authority (NEMA). Cost: No cost (paid in procedure 3) Time: 3 days Comments: The occupancy certificate is issued only Cost: KES 3,395 (pre-paid connection cost) Procedure 5. Obtain approval from the after the inspection is finished and the inspectors de- Comments: BuildCo applies for telephone connection termine that the necessary requirements are fulfilled. at the local Orange Telkom Kenya office where readily National Environment Management available forms can be immediately filled out and Authority (NEMA) Procedure 9. Apply for water and sewerage submitted. To obtain a commercial connection, the Time: 40 days connection at Nyeri Water & Sewerage applicant needs to submit, along with the application, Cost: KES 16,250 (0.05% of total project cost) proof of ownership of the business and an identifica- Company Comments: Projects of all risk categories are subject Time: 2 days tion card. The same tariff and connection fee apply to the NEMA approvals, including BuildCo’s ware- across the country. Cost: No cost house. In 2009, the cost was lowered from 0.1% to * This procedure can be completed simultaneously 0.05% of warehouse value (KES 32,500,000). Comments: BuildCo is required to submit to the Nyeri with previous procedures. The regulation regarding environmental approvals Water and Sewerage Company the following: for Kenya has been in place since 1999. However, in a. Copy of the certificate of incorporation; DEALING WITH CONSTRUCTION PERMITS recent years NEMA has started enforcing the rules b. Plot number; Nyeri more vigorously. The legislation is not clear on which c. PIN number. categories of buildings this regulation would apply to, Warehouse value: KES 32,500,000 (US$ 418,341) but most townships and municipalities require it for all Data as of: March 2012 Procedure 10. Pay water and sewerage commercial constructions. installation costs and obtain connection Procedure 1. Submit project plans and NEMA conducts periodic inspections during the Time: 7 days construction. If new projects at the moment of inspec- get approval from the Physical Planning tion do not have an environmental approval, they Cost: KES 5,000 (KES 2,500 deposit + KES 2,500 Department (Ministry of Lands) may order the project be closed and erected objects application fee) Time: 8 days demolished. Therefore, construction companies are Comments: BuildCo is required to pay the connection Cost: KES 3,400 (KES 1,700 per floor) now obtaining the environmental approval before the fee before installation begins. Comments: BuildCo submits the project plans for building is completed. BuildCo would usually hire an approval to the Physical Planning Department (PPD), environmental expert to prepare the environmental Procedure 11*. Apply and pay for telephone which is under the central Ministry of Lands. A PPD report and to deal with approval from NEMA. connection officer approves the plans and signs the plans, writing Time: 3 days any comments directly on the plans. Larger cities have Procedure 6. Notify the Nyeri Municipal Cost: KES 3,395 (pre-paid connection cost) Health and Physical Planning offices included in the Council of the commencement of building work and receive a routine on-site Comments: BuildCo applies for telephone connection municipal council so approvals are managed within at the local Orange Telkom Kenya office where readily the municipality, but in Nyeri these central govern- inspection available forms can be immediately filled out and ment offices are separate. Time: 2 days submitted. To obtain a commercial connection, the Cost: No cost (paid in procedure 3) applicant needs to submit, along with the application, Procedure 2. Submit project plans and proof of ownership of the business and an identifica- get approval from the Public Health Comments: There are several inspections required by the municipal by-laws. However, the common practice tion card. The same tariff and connection fee apply Department is that the inspectors only come for routine checks across the country. Time: 1 day during the construction phase. They stop by the * This procedure can be completed simultaneously Cost: KES 3,000 construction site while the construction continues and with previous procedures. Comments: The Public Health officer approves the check if everything is being built in accordance with plans and signs the plans, writing any comments the architectural plans initially submitted. The inspec- directly on the plans. tor sent by the municipal council could check, among other things, the building boundaries, accessibility to Procedure 3. Request approval of the the power line, sewerage, water, and telephone line, cement mixture, reinforcements, roofing, and site architectural plans and final approval from consolidation. the Nyeri Municipal Council Time: 14 days 70 DOING BUSINESS IN KENYA 2012 DEALING WITH CONSTRUCTION PERMITS building is completed. BuildCo would usually hire an Thika environmental expert to prepare the environmental LIST OF PROCEDURES report and to deal with approval from NEMA. Warehouse value: KES 32,500,000 (US$ 418,341) REGISTERING PROPERTY Data as of: March 2012 Procedure 4. Notify the Thika Municipal Council of the commencement of building Procedure 1. Request approval of the work and receive a routine on-site architectural plans from the Thika inspection Eldoret Municipal Council Property value: KES 3,029,823 (US$ 39,000) Time: 2 days Time: 45 days Data as of: March 2012 Cost: No cost (Paid in procedure 1) Cost: KES 21,500 [KES 300 application fee + KES 10,000 for the approval of the architectural plans to Comments: Once BuildCo is ready to start, it has to Procedure 1. Apply for a search on the title the Town Planning Department (KES 7,000 for 901- notify the municipality with 48 hours of advance. The at the Lands Office 1,000 square meters + KES 1,000 for every additional building inspector, from the Town Planning Depart- ment, will come to the site. There is no additional Time: 3 days 100 square meters) + KES 5,000 for the structural cost, unless something was done incorrectly and the Cost: KES 500 plans to the Town Engineer Department (KES 3,500 for 901-1,000 square meters + KES 500 for every inspection needs to be repeated after the problem has Comments: Regarding searches on property regis- additional 100 square meters) + KES 5,000 inspection been solved. tered under the Registration of Titles Act, a copy of fee + KES 1,200 Physical Planning Act 1 (PPA1) form the title deed is required to be submitted at the time and printing. No cost for the physical planning or Procedure 5. Request an occupancy of applying for the search. Also, one cannot carry out public health approvals] certificate and receive a final on-site a personal search but must instead apply for an official inspection by the municipal authority search. The applicant fills and submits the prescribed Comments: BuildCo’s registered architect submits form and pays KES 500. the drawings to the Town Planning Department at Time: 4 days the municipality, where a first assessment is made to Cost: No cost confirm that the application complies with the require- Procedure 2*. Apply, pay and obtain Rates Comments: Inspectors from the Public Health and Clearance Certificate from the Municipal ments (ownership, zoning, rates clearance). The the Town Planning Departments come together to Council of Eldoret plans are then circulated to the following approving conduct the final inspection. departments: Time: 2 days a. Engineering Department; Procedure 6. Obtain an occupancy Cost: KES 2,600 b. The Water Company; certificate from the municipal council Comments: The applicant gets a demand notice, pays c. Public Health Department; Time: 7 days and waits for the document from the clerk of Munici- d. Physical Planner Department; pal Council of Eldoret. Cost: KES 5,000 e. The Town Planning Department (again), where the Comments: The occupancy certificate is issued once Procedure 3*. Apply and obtain Land application is then listed for the Town Planning and BuildCo has fulfilled all relevant requirements issued in Works Committee meeting. Rent Clearance Certificate from the the PPA1 form, as determined by the final inspection. Commissioner of Lands The plans are approved by the technical officers and then submitted to the committee which is the politi- Procedure 7. Apply for water and sewerage Time: 15 days cal body. The Town Planning and Works Committee connection at Thika Water & Sewerage Cost: KES 3,800 meets once a month. The plans do not need to be ap- Services proved by the Ministry of Lands since they have their Procedure 4. Apply and obtain the Consent own physical planner. Time: 1 day to Transfer from the Commissioner of Cost: KES 300 Lands Procedure 2. Obtain project report from an Procedure 8. Pay water and sewerage Time: 9 days environmental expert installation costs and obtain connection Cost: KES 1,000 Time: 5 days Time: 10 days Comments: Upon obtaining the Land Rent and Rates Cost: KES 50,000 Clearance Certificates, the parties should submit the Comments: A licensed environmental expert must be Cost: KES 12,200 [KES 200 application fee + KES certificates and apply for Consent to Transfer from the hired to prepare a project report to be submitted to 6,000 water connection (KES 2,000 meter fee + KES Commissioner of Lands. the National Environmental Management Authority 2,000 connection fee + KES 2,000 customer deposit) (NEMA). + KES 6,000 sewerage connection] Procedure 5. File the transfer instrument at Procedure 9*. Apply and pay for telephone the Lands Office and obtain appointment Procedure 3. Obtain approval from the for valuation National Environment Management connection Time: 3 days Time: 5 days Authority (NEMA) Cost: KES 3,395 (Pre-paid connection cost) Cost: No cost Time: 60 days Comments: BuildCo applies for telephone connection Comments: This procedure is carried out at the Lands Cost: KES 16,250 (0.05% of total project cost) Office of Eldoret in Uasin Gishu District. The draft at the local Orange Telkom Kenya office where readily Comments: Projects of all risk categories are subject transfer is prepared by the buyer’s lawyers and needs available forms can be immediately filled out and to the NEMA approvals, including BuildCo’s ware- to be approved by the seller’s counterpart. submitted. To obtain a commercial connection, the house. In 2009, the cost was lowered from 0.1% to applicant needs to submit, along with the application, 0.05% of warehouse value (KES 32,500,000). Procedure 6. Receive site inspection by a proof of ownership of the business and an identifica- The regulation regarding environmental approvals tion card. The same tariff and connection fee apply government valuer and obtain valuation for Kenya has been in place since 1999. However, in across the country. report recent years NEMA has started enforcing the rules * This procedure can be completed simultaneously Time: 4 days more vigorously. The legislation is not clear on which categories of buildings this regulation would apply to, with previous procedures. Cost: No cost but most townships and municipalities require it for all Comments: While the draft transfer is being pro- commercial constructions. cessed at the Lands Office, a government valuer visits NEMA conducts periodic inspections during the the site to assess the value of the property (i.e. land construction. If new projects at the moment of inspec- and building). Due to lack of transport, in practice, the tion do not have an environmental approval, they valuer often has to be picked up in person and driven may order the project be closed and erected objects to the site. demolished. Therefore, construction companies are now obtaining the environmental approval before the LIST OF PROCEDURES 71 Procedure 7. Endorsement of value for Procedure 3*. Apply and obtain Land e. Rates Clearance Certificate; stamp duty purposes and assessment of Rent Clearance Certificate from the f. Land Rent Clearance Certificate; stamp duty by Kenya Revenue Authority Commissioner of Lands g. Consent to Transfer; Time: 3 days Time: 19 days h. Valuation of property. Cost: No cost Cost: KES 2,500 * This procedure can be completed simultaneously Comments: The Stamp Duty Assessment Form is Comments: An application for Land Rent Certificate with previous procedures. completed, including the purchase price. The stamp is submitted along with the latest payment receipt. duty assessment officer will then assess the stamp REGISTERING PROPERTY duty payable and indicate the amount on the forms. Procedure 4. Apply and obtain the Consent Isiolo Stamping of the document takes on average 3 days. to Transfer from the Commissioner of Property value: KES 3,029,823 (US$ 39,000) Lands Procedure 8. Pay stamp duty at a Data as of: March 2012 Time: 6 days commercial bank and receive confirmation of payment from Kenya Revenue Authority Cost: KES 1,000 Procedure 1. Apply for a search on the title Comments: Upon obtaining the Land Rent and Rates at the Lands Office Time: 2 days Clearance Certificates, the parties should submit the Time: 5 days (4 days to carry out search + 1 day Cost: KES 121,393 (4% of property value + KES 200 certificates and apply for Consent to Transfer from the transportation to and from Nairobi) bank charge) Commissioner of Lands. Cost: KES 2,500 (KES 500 search fee + KES 2,000 Procedure 9. Lodge stamped transfer transportation to and from Nairobi) Procedure 5. File the transfer instrument at document for registration and receive duly Comments: This procedure is carried out in Nairobi as the Lands Office and obtain appointment these services are not available in Isiolo. The time and registered documents from Lands Office for valuation cost to travel between Isiolo and Nairobi is considered Time: 4 days Time: 6 days in this procedure. Regarding searches on property Cost: KES 500 Cost: No cost registered under the Registration of Titles Act, a copy Comments: The applicant submits to the Lands Of- Comments: The draft transfer is prepared by the of the title document is required to be submitted at fice of Eldoret the following documents: buyer’s lawyers and needs to be approved by the the time of application. Also, one cannot carry out a a. Application for Registration of Transfer; seller’s counterpart. personal search but must instead apply for an official search. The applicant fills and submits the prescribed b. Personal Identification Number (PIN) Certificate; form and pays KES 500. c. Certificate of Incorporation; Procedure 6. Receive site inspection by a government valuer and obtain valuation Procedure 2*. Apply, pay and obtain Rates d. Certificate of Title; report Clearance Certificate from the County e. Rates Clearance Certificate; Time: 22 days Council of Isiolo f. Land Rent Clearance Certificate; Cost: No cost Time: 2 days g. Consent to Transfer; Comments: While the draft transfer is being pro- Cost: KES 151,491 (5% of property value) h. Valuation of property. cessed at the Lands Office, a government valuer visits The applicant fills the application forms, pays the the site to assess the value of the property (i.e., land fees and lodges the documents for registration of the Procedure 3*. Apply and obtain Land and building). Due to lack of transport, in practice, the transfer. valuer often has to be picked up in person and driven Rent Clearance Certificate from the to the site. Commissioner of Lands * This procedure can be completed simultaneously with previous procedures. Time: 19 days Procedure 7. Endorsement of value for Cost: KES 250 REGISTERING PROPERTY stamp duty purposes and assessment of stamp duty by Kenya Revenue Authority Procedure 4. Apply and obtain the Consent Garissa to Transfer from the Commissioner of Time: 4 days Property value: KES 3,029,823 (US$ 39,000) Lands Cost: No cost Data as of: March 2012 Time: 7 days Comments: The Stamp Duty Assessment Form is Procedure 1. Apply for a search on the title completed, including the purchase price. The stamp Cost: KES 1,000 at the Lands Office duty assessment officer will then assess the stamp Comments: Upon obtaining the Land Rent and Rates duty payable and indicate the amount on the forms. Clearance Certificates, the parties should submit the Time: 3 days Stamping of the document takes on average 4 days. certificates and apply for Consent to Transfer from the Cost: KES 500 Commissioner of Lands. An Application for Consent is Comments: Regarding searches on property regis- Procedure 8. Pay stamp duty at a filled by both the buyer and the seller and submitted tered under the Registration of Titles Act, a copy of the commercial bank and receive confirmation with an application fee of KES 1,000. title document is required to be submitted at the time of payment from Kenya Revenue Authority of applying for the search. Also, one cannot carry out Procedure 5. File the transfer instrument at Time: 2 days a personal search but must instead apply for an official the Lands Office and obtain appointment search. The applicant fills and submits the prescribed Cost: KES 121,393 (4% of property value + KES 200 bank charge) for valuation form and pays KES 500. Time: 6 days Procedure 2*. Apply, pay and obtain Rates Procedure 9. Lodge stamped transfer Cost: No cost Clearance Certificate from the Municipal document for registration and receive duly Comments: The draft transfer is prepared by the Council of Garissa registered documents from Lands Office buyer’s lawyers and needs to be approved by the Time: 25 days seller’s counterpart. Time: 1 day Cost: KES 250 Cost: KES 500 Procedure 6. Receive site inspection by a Comments: An application for the Rates Clearance Comments: The applicant submits to the Lands Of- fice the following documents: government valuer and obtain valuation Certificate is submitted along with the latest payment report receipt. a. Application for Registration of Transfer; Time: 21 days b. Personal Identification Number (PIN) Certificate Cost: No cost c. Certificate of Incorporation; d. Certificate of Title; 72 DOING BUSINESS IN KENYA 2012 Comments: While the draft transfer is being Procedure 2*. Apply, pay and obtain Rates Comments: It is mandatory to pay the above- processed at the Lands Office, a government valuer mentioned stamp duty with a banker’s check. The Clearance Certificate from the Municipal visits the site to assess the value of the property (i.e. payment is made through commercial banks and the land and building). Isiolo has no land valuer of its Council of Kakamega approved banks include the Kenya Commercial Bank own, and the Land Registrar has to request a valuer Time: 2 days and the National Bank of Kenya. Payment is made to in Meru to do the valuation in Isiolo and then forward Cost: KES 4,000 the Commissioner of Domestic Taxes on behalf of the it to Nairobi. Due to lack of transport, in practice, the Comments: Seller’s lawyer obtains the Rates Clear- Commissioner of Lands. valuer often has to be picked up in person and driven ance Certificate from the Municipal Council of Kaka- to the site. mega. This certificate is important proof that there are Procedure 9. Lodge stamped transfer no outstanding fees to be paid to the municipality. document for registration and receive duly Procedure 7. Endorsement of value for registered documents from Lands Office stamp duty purposes and assessment of Procedure 3*. Apply and obtain Land Time: 6 days stamp duty by Kenya Revenue Authority Rent Clearance Certificate from the Cost: KES 500 Time: 4 days Commissioner of Lands Comments: The applicant submits to the Lands Of- Cost: No cost Time: 19 days fice the following documents: Comments: The Stamp Duty Assessment Form is Cost: No cost a. Application for Registration of Transfer; completed, including the purchase price. The stamp Comments: Seller’s lawyer obtains the Land Rent b. Personal Identification Number (PIN) Certificate duty assessment officer will then assess the stamp Clearance Certificate from the Commissioner of Lands duty payable and indicate the amount on the forms. c. Certificate of Incorporation; at no cost. Stamping of the document takes on average 4 days. d. Certificate of Title; Procedure 4. Apply and obtain the Consent e. Rates Clearance Certificate; Procedure 8. Pay stamp duty at a to Transfer from the Commissioner of f. Land Rent Clearance Certificate; commercial bank and receive confirmation Lands g. Consent to Transfer; of payment from Kenya Revenue Authority Time: 7 days h. Valuation of property. Time: 4 days Cost: KES 1,000 The Certificate of the Registered Transfer is collected Cost: KES 121,293 (4% of property value + KES 100 at the Lands Office. bank charge) Comments: Upon obtaining the Land Rent and Rates Clearance Certificates, the parties should submit the * This procedure can be completed simultaneously Comments: The payment of stamp duty can be done certificates and apply for Consent to Transfer from the with previous procedures. at the designated banks—i.e., Kenya Commercial Bank Commissioner of Lands. or the National Bank of Kenya. REGISTERING PROPERTY Procedure 5. File the transfer instrument at Procedure 9. Lodge stamped transfer the Lands Office and obtain appointment Kilifi document for registration and receive duly for valuation Property value: KES 3,029,823 (US$ 39,000) registered documents from Lands Office Data as of: March 2012 Time: 5 days Time: 30 days Cost: No cost Procedure 1. Apply for a search on the title Cost: KES 500 Comments: The draft transfer is prepared by the at the Lands Office Comments: The applicant submits to the Lands Of- buyer’s lawyers and needs to be approved by the fice in Nairobi the following documents: Time: 2 days seller’s counterpart. a. Application for Registration of Transfer; Cost: KES 500 b. Personal Identification Number (PIN) Certificate Procedure 6. Receive site inspection by a Comments: After an application form is submitted, c. Certificate of Incorporation; government valuer and obtain valuation along with a copy of Personal Identification Number report (PIN) Certificate and Certificate of Incorporation, a d. Certificate of Title; Search Certificate is issued confirming the registered e. Rates Clearance Certificate; Time: 27 days owner of the property. Search for land registered f. Land Rent Clearance Certificate; Cost: No cost under the Government Lands Act, Cap. 280, is carried g. Consent to Transfer; Comments: While the draft transfer is being pro- out at Lands Office of Kilifi. cessed at the Lands Office, a government valuer visits h. Valuation of property. the site to assess the value of the property (i.e. land Procedure 2*. Apply, pay and obtain Rates * This procedure can be completed simultaneously and building). Due to lack of transport, in practice, the Clearance Certificate from the County with previous procedures. valuer often has to be picked up in person and driven Council of Kilifi to the site. Time: 2 days REGISTERING PROPERTY Procedure 7. Endorsement of value for Cost: KES 4,500 Kakamega Comments: Rates Clearance Certificate is obtained at stamp duty purposes and assessment of Property value: KES 3,029,823 (US$ 39,000) the County Council of Kilifi. stamp duty by Kenya Revenue Authority Data as of: March 2012 Time: 3 days Procedure 3*. Apply and obtain Land Procedure 1. Apply for a search on the title Cost: No cost Rent Clearance Certificate from the at the Lands Office Comments: The Stamp Duty Assessment Form is Commissioner of Lands Time: 2 days completed, including the purchase price. The stamp Time: 21 days duty assessment officer will then assess the stamp Cost: KES 500 Cost: No cost duty payable and indicate the amount on the forms. Comments: Regarding searches on property regis- Stamping of the document takes on average 3 days. tered under the Registration of Titles Act, a copy of the Procedure 4. Apply and obtain the Consent title document is required to be submitted at the time Procedure 8. Pay stamp duty at a to Transfer from the Commissioner of of applying for the search. Also, one cannot carry out commercial bank and receive confirmation Lands a personal search but must instead apply for an official search. The applicant fills out an official search form of payment from Kenya Revenue Authority Time: 5 days indicating Land Rent Number (LR No.), submits it with Time: 2 days Cost: KES 1,000 a copy of the Company Certificate of Incorporation Cost: KES 121,793 (4% of property value + KES 600 and Personal Identification Number (PIN) and collects bank charge) the official search after 2 days. LIST OF PROCEDURES 73 Comments: Upon obtaining the Land Rent and Rates Procedure 2*. Apply, pay and obtain Rates Procedure 9. Lodge stamped transfer Clearance Certificates, the parties should submit the Clearance Certificate from the Municipal document for registration and receive duly certificates and apply for Consent to Transfer from the Commissioner of Lands. An Application for Consent is Council of Kisumu registered documents from Lands Office filled by both the buyer and the seller and submitted Time: 2 days Time: 14 days with an application fee of KES 1,000. Cost: KES 3,000 Cost: KES 500 Comments: The applicant submits to the Lands Of- Procedure 5. File the transfer instrument at Procedure 3*. Apply and obtain Land fice the following documents: the Lands Office and obtain appointment Rent Clearance Certificate from the a. Application for Registration of Transfer; for valuation Commissioner of Lands b. Personal Identification Number (PIN) Certificate; Time: 5 days Time: 14 days c. Certificate of Incorporation; Cost: No cost Cost: No cost d. Certificate of Title; Comments: The draft transfer is prepared by the e. Rates Clearance Certificate; buyer’s lawyers and needs to be approved by the Procedure 4. Apply and obtain the Consent seller’s counterpart. to Transfer from the Commissioner of f. Land Rent Clearance Certificate; Lands g. Consent to Transfer; Procedure 6. Receive site inspection by a Time: 7 days h. Valuation of property. government valuer and obtain valuation Cost: KES 1,000 * This procedure can be completed simultaneously report with previous procedures. Comments: Upon obtaining the Land Rent and Rates Time: 33 days Clearance Certificates, the parties should submit the Cost: No cost certificates and apply for Consent to Transfer from the REGISTERING PROPERTY Comments: While the draft transfer is being pro- Commissioner of Lands. An Application for Consent is Malaba cessed at the Lands Office, a government valuer visits filled by both the buyer and the seller and submitted Property value: KES 3,029,823 (US$ 39,000) the site to assess the value of the property (i.e. land with an application fee of KES 1,000. and building). Due to lack of transport, in practice, the Data as of: March 2012 valuer often has to be picked up in person and driven Procedure 5. File the transfer instrument at to the site. the Lands Office and obtain appointment Procedure 1. Apply for a search on the title for valuation at the Lands Office Procedure 7. Endorsement of value for Time: 1 day Time: 2 days stamp duty purposes and assessment of Cost: KES 800 (KES 500 search fee + KES 300 trans- Cost: No cost stamp duty by Kenya Revenue Authority portation to and from Busia) Comments: The draft transfer is prepared by the Time: 3 days Comments: In order to collect the official search buyer’s lawyers and needs to be approved by the Cost: No cost results, the applicant has to submit the application seller’s counterpart. form and pay the prescribed fee to the Busia District Comments: The Stamp Duty Assessment Form is Lands Office. completed, including the purchase price. The stamp Procedure 6. Receive site inspection by a duty assessment officer will then assess the stamp government valuer and obtain valuation Procedure 2*. Apply, pay and obtain duty payable and indicate the amount on the forms. report Stamping of the document takes on average 3 days. Rates Clearance Certificate from the Town Time: 2 days Council of Malaba Procedure 8. Pay stamp duty at a Cost: No cost Time: 2 days commercial bank and receive confirmation Comments: While the draft transfer is being pro- Cost: KES 1,500 of payment from Kenya Revenue Authority cessed at the Lands Office, a government valuer visits the site to assess the value of the property (i.e. land Procedure 3*. Apply and obtain Land Time: 3 days and building). Due to lack of transport, in practice, the Cost: KES 121,293 (4% of property value + KES 100 Rent Clearance Certificate from the valuer often has to be picked up in person and driven bank charge) to the site. Commissioner of Lands Time: 3 days Procedure 9. Lodge stamped transfer Procedure 7. Endorsement of value for Cost: KES 2,500 document for registration and receive duly stamp duty purposes and assessment of registered documents from Lands Office stamp duty by Kenya Revenue Authority Procedure 4. Apply and obtain the Consent Time: 4 days Time: 1 day to Transfer from the Commissioner of Cost: KES 500 Cost: No cost Lands Comments: The Stamp Duty Assessment Form is Time: 5 days * This procedure can be completed simultaneously with previous procedures. completed, including the purchase price. The stamp Cost: KES 1,000 duty assessment officer will then assess the stamp Comments: Upon obtaining the Land Rent and Rates REGISTERING PROPERTY duty payable and indicate the amount on the forms. Clearance Certificates, the parties should submit Stamping of the document takes on average 1 day. the certificates and apply for a Consent to Transfer Kisumu from the Commissioner of Lands. An Application for Property value: KES 3,029,823 (US$ 39,000) Procedure 8. Pay stamp duty at a Consent is filled by both the buyer and the seller and Data as of: March 2012 commercial bank and receive confirmation submitted with an application fee of KES 1,000. of payment from Kenya Revenue Authority Procedure 1. Apply for a search on the title Time: 4 days Procedure 5. File the transfer instrument at at the Lands Office the Lands Office and obtain appointment Cost: KES 121,393 (4% of property value + KES 200 Time: 1 day bank charge) for valuation Cost: KES 500 Comments: The applicant has to visit the authorized Time: 4 days Comments: After the Form R.L. 26 Application for bank and make the relevant payment. Once the Cost: No cost Official Search is submitted, the Lands Office issues a banker’s check has been obtained, it is submitted to Comments: The draft transfer is prepared by the certificate confirming the registered owner of the land. the Lands Office. buyer’s lawyers and needs to be approved by the seller’s counterpart. 74 DOING BUSINESS IN KENYA 2012 REGISTERING PROPERTY Procedure 6. Receive site inspection by a Procedure 3*. Apply and obtain Land government valuer and obtain valuation Rent Clearance Certificate from the Nairobi report Commissioner of Lands Property value: KES 3,029,823 (US$ 39,000) Time: 9 days Time: 5 days Data as of: March 2012 Cost: No cost Cost: KES 500 Procedure 1. Apply for a search on the title Comments: While the draft transfer is being pro- Comments: The Land Rent Certificate is obtained at cessed at the Lands Office, a government valuer visits the Lands Office. at the Lands Office the site to assess the value of the property (i.e. land Time: 3 days and building). Due to lack of transport, in practice, the Procedure 4. Apply and obtain the Consent Cost: KES 500 valuer often has to be picked up in person and driven to Transfer from the Commissioner of Comments: Regarding searches on property regis- to the site. Lands tered under the Registered Land Act, a copy of the title Time: 5 days document is required to be submitted at the time of Procedure 7. Endorsement of value for applying for the search. Also, one cannot carry out a stamp duty purposes and assessment of Cost: KES 1,000 personal search but must instead apply for an official stamp duty by Kenya Revenue Authority Comments: Upon obtaining the Land Rent and Rates search. Clearance Certificates, the parties should submit the Time: 2 days certificates and apply for Consent to Transfer from the Procedure 2*. Apply and obtain Land Cost: No cost Commissioner of Lands. An Application for Consent is Rent Clearance Certificate from the Comments: The Stamp Duty Assessment Form is filled by both the buyer and the seller and submitted completed, including the purchase price. The stamp with an application fee of KES 1,000. Commissioner of Lands duty assessment officer will then assess the stamp Time: 19 days duty payable and indicate the amount on the forms. Procedure 5. File the transfer instrument at Cost: No cost the Lands Office and obtain appointment Comments: Seller’s lawyer obtains the Land Rent Procedure 8. Pay stamp duty at a for valuation Clearance Certificate from the Commissioner of Lands commercial bank and receive confirmation Time: 5 days at no cost. of payment from Kenya Revenue Authority Cost: No cost Time: 2 days Procedure 3*. Apply, pay and obtain Rates Cost: KES 121,393 (4% of property value + KES 200 Procedure 6. Receive site inspection by a Clearance Certificate from the City Council bank charge) government valuer and obtain valuation of Nairobi report Time: 5 days Procedure 9. Lodge stamped transfer Cost: KES 7,500 Time: 4 days document for registration and receive duly Comments: Seller’s lawyer obtains the Rates Cost: No cost registered documents from Lands Office Clearance Certificate from the Nairobi City Council. Comments: While the draft transfer is being pro- Time: 5 days This certificate is important proof that there are no cessed at the Lands Office, a government valuer visits Cost: KES 500 outstanding fees to be paid to the city. Lawyers are the site to assess the value of the property (i.e. land not required to be involved in the registration process. Comments: The applicant submits to the Lands Of- and building). Due to lack of transport, in practice, the Lawyers’ fees are calculated based on a fixed scale fice the following documents: valuer often has to be picked up in person and driven depending on the value of the property. a. Application for Registration of Transfer; to the site. b. Personal Identification Number (PIN) Certificate; Procedure 4. Apply and obtain the Consent Procedure 7. Endorsement of value for c. Certificate of Incorporation; to Transfer from the Commissioner of stamp duty purposes and assessment of d. Certificate of Title; Lands stamp duty by Kenya Revenue Authority e. Rates Clearance Certificate; Time: 9 days Time: 3 days f. Land Rent Clearance Certificate Cost: KES 1,000 Cost: No cost g. Consent to Transfer; Comments: The Stamp Duty Assessment Form is Procedure 5. File the transfer instrument at h. Valuation of property. completed, including the purchase price. The stamp the Lands Office and obtain appointment * This procedure can be completed simultaneously duty assessment officer will then assess the stamp duty payable and indicate the amount on the forms. for valuation with previous procedures. Stamping of the document takes on average 3 days. Time: 4 days REGISTERING PROPERTY Cost: No cost Procedure 8. Pay stamp duty at a Comments: The draft transfer is prepared by the Mombasa commercial bank and receive confirmation buyer’s lawyers and needs to be approved by the Property value: KES 3,029,823 (US$ 39,000) of payment from Kenya Revenue Authority seller’s counterpart. The transfer instrument is filed at Data as of: March 2012 Time: 3 days the Lands Office to be assessed for stamp duty. Cost: KES 121,293 (4% of property value + KES 100 Procedure 1. Apply for a search on the title Procedure 6. Receive site inspection by a bank charge) at the Lands Office government valuer and obtain valuation Comments: After assessment has taken place, the Time: 3 days stamp duty is paid at the designated banks—i.e., Na- report Cost: KES 500 tional Bank of Kenya and Co-operative Bank of Kenya. Time: 20 days Comments: In order to collect the official search Cost: No cost results, the applicant has to submit the Application Procedure 9. Lodge stamped transfer Comments: Once the draft transfer has been filed at Form and pay the prescribed fee at the Lands Office document for registration and receive duly the Lands Office, a valuer visits the site to verify the of Mombasa. registered documents from Lands Office development and state of the property. Due to lack of Time: 1 day transport, in practice, the valuer often has to be picked Procedure 2*. Apply, pay and obtain Rates up in person and driven to the site. Previously, such in- Cost: KES 500 Clearance Certificate from the Municipal spections were conducted on a random basis, but now Council of Mombasa Comments: The applicant lodges all the documents, every transaction requires such an inspection. The including the transfer and original title, at the Lands issues involved are similar to the inspections by the Time: 1 day Office in Mombasa. land officer and, therefore, may take less than 1 day Cost: KES 3,250 or over a month. Once the valuer has inspected the * This procedure can be completed simultaneously Comments: This Rates Clearance Certificate is ob- with previous procedures. tained at the Municipal Council of Mombasa. LIST OF PROCEDURES 75 property to assess its value, a report is compiled after Treasury - Nakuru District Commissioner’s Office. Procedure 8. Pay stamp duty at a which the value is endorsed on the transfer and then it Advocate signs and stamps the Application for Search commercial bank and receive confirmation is submitted for assessment of the stamp duty. Form and must bring a copy of: of payment from Kenya Revenue Authority a. Title Certificate; Procedure 7. Endorsement of value for Time: 2 days b. Advocate’s ID; stamp duty purposes and assessment of Cost: KES 121,793 (4% of property value + KES 500 c. Personal Identification Number (PIN) Certificate. banker’s check + KES 100 bank charge) stamp duty by Kenya Revenue Authority Time: 4 days Procedure 2*. Apply, pay and obtain Rates Comments: The applicant presents the duly filled in Stamp Duty Declaration as well as the Assessment Cost: No cost Clearance Certificate from the Municipal and Payment Form, usually in triplicate, to the desig- Comments: The Stamp Duty Assessment Form is Council of Nakuru nated bank and pays the amounts indicated thereon. completed, including the purchase price (in quadru- Time: 3 days The bank stamps the form and issues a deposit slip. In plet). The stamp duty assessment officer stationed at Nakuru, the parties are allowed to carry all copies of Cost: KES 3,000 the Ministry of Lands banking hall will then assess the the stamp duty to the Lands Office. stamp duty payable and indicate the amount on the Comments: Seller’s lawyer obtain the Rates Clear- forms. Stamping of the document takes on average ance Certificate from the Municipal Council of Nakuru. This certificate is important proof that there are no Procedure 9. Lodge stamped transfer 4 days. outstanding fees to be paid to the municipality. document for registration and receive duly Procedure 8. Pay stamp duty at a registered documents from Lands Office commercial bank and receive confirmation Procedure 3*. Apply and obtain Land Time: 10 days of payment from Kenya Revenue Authority Rent Clearance Certificate from the Cost: KES 500 Commissioner of Lands Comments: The applicant submits to the Lands Of- Time: 4 days Time: 14 days fice the following documents: Cost: KES 121,793 (4% of property value + KES 600 bank charge) Cost: No cost a. Application for Registration of Transfer; Comments: Payment of stamp duty is made at a Comments: Seller’s lawyer obtains the Land Rent b. Personal Identification Number (PIN) Certificate; commercial bank designated by the Ministry of Land. Clearance Certificate from the Commissioner of Lands c. Certificate of Incorporation; If the amount exceeds KES 1,000,000, payment is at no cost. d. Certificate of Title; made by a real time gross settlement (RTGS) bank Procedure 4. Apply and obtain the Consent e. Rates Clearance Certificate; transfer. It takes about 4 days for the Kenya Revenue Authority to confirm receipt of payment after which to Transfer from the Commissioner of f. Land Rent Clearance Certificate; the transfer agreement can be franked or embossed Lands g. Consent to Transfer; evidencing payment of stamp duty. Time: 7 days h. Valuation of property. Cost: KES 1,000 The Certificate of the Registered Transfer is collected Procedure 9. Lodge stamped transfer at the Lands Office. document for registration and receive duly Comments: Upon obtaining the Land Rent and Rates Clearance Certificates, the parties should submit the * This procedure can be completed simultaneously registered documents from Lands Office certificates and apply for Consent to Transfer from the with previous procedures. Time: 12 days Commissioner of Lands. Cost: KES 500 REGISTERING PROPERTY Comments: The stamped transfer documents are Procedure 5. File the transfer instrument at the Lands Office and obtain appointment Narok lodged for registration at the Lands Office. These documents are generally obtained from seller’s law- for valuation Property value: KES 3,029,823 (US$ 39,000) yers, these being: Time: 5 days Data as of: March 2012 a. Original Certificate of Title; Cost: No cost Procedure 1. Apply for a search on the title b. Rates Clearance Certificate; Comments: The draft transfer is prepared by the at the Lands Office c. Land Rent Clearance Certificate; buyer’s lawyers and needs to be approved by the Time: 1 day d. Consent to Transfer. seller’s counterpart. Cost: KES 500 The buyer informs seller’s lawyers of registration and Procedure 6. Receive site inspection by a Comments: Once the application and the receipt of pays balance of the purchase price. The Certificate government valuer and obtain valuation payment are submitted, the applicant obtains a Search of the Registered Transfer is collected at the Lands report Certificate signed and sealed by the District Land Office. Registrar. * This procedure can be completed simultaneously Time: 29 days with previous procedures. Cost: No cost Procedure 2*. Apply, pay and obtain Comments: While the draft transfer is being pro- Rates Clearance Certificate from the Town REGISTERING PROPERTY cessed at the Lands Office, a government valuer visits Council of Narok Nakuru the site to assess the value of the property (i.e. land Time: 2 days and building). Due to lack of transport, in practice, the Property value: KES 3,029,823 (US$ 39,000) valuer often has to be picked up in person and driven Cost: KES 2,500 Data as of: March 2012 to the site. Comments: The Rates Clearance Certificate is ob- tained at the Town Council of Narok. Procedure 1. Apply for a search on the title Procedure 7. Endorsement of value for at the Lands Office stamp duty purposes and assessment of Procedure 3*. Apply and obtain Land Time: 2 days stamp duty by Kenya Revenue Authority Rent Clearance Certificate from the Cost: KES 500 Time: 2 days Commissioner of Lands Comments: Regarding searches on property reg- Cost: No cost Time: 15 days istered under the Registration of Titles Act, a copy Comments: The Stamp Duty Assessment Form is Cost: KES 1,500 of the title document is required to be submitted at completed, including the purchase price. The stamp Comments: The Land Rent Clearance Certificate is the time of applying for the search. Also, one cannot duty assessment officer will then assess the stamp obtained at the Lands Office of Narok. carry out a personal search but must instead apply duty payable and indicate the amount on the forms. for an official search. Search is processed at the Lands Stamping of the document takes on average 2 days. Office while the payment is processed at the District 76 DOING BUSINESS IN KENYA 2012 REGISTERING PROPERTY Procedure 4. Apply and obtain the Consent Procedure 8. Pay stamp duty at a to Transfer from the Commissioner of Nyeri commercial bank and receive confirmation Lands Property value: KES 3,029,823 (US$ 39,000) of payment from Kenya Revenue Authority Time: 7 days Data as of: March 2012 Time: 2 days Cost: KES 1,000 Cost: KES 121,293 (4% of property value + KES 100 Procedure 1. Apply for a search on the title bank charge) Comments: Upon obtaining the Land Rent and Rates Clearance Certificates, the parties should submit the at the Lands Office certificates and apply for Consent to Transfer from the Time: 3 days Procedure 9. Lodge stamped transfer Commissioner of Lands. Cost: KES 500 document for registration and receive duly Comments: The companies requesting the search are registered documents from Lands Office Procedure 5. File the transfer instrument at also required to provide a copy of the title, Personal Time: 8 days the Lands Office and obtain appointment Identification Number (PIN) Certificate and Certificate Cost: KES 500 for valuation of Incorporation. Once the application and the receipt Comments: The applicant submits to the Lands Of- Time: 2 days of payment are submitted, the applicant obtains a fice the following documents: Search Certificate signed and sealed by the District Cost: No cost a. Application for Registration of Transfer; Lands Office of Nyeri. Comments: The draft transfer is prepared by the b. Personal Identification Number (PIN) Certificate; buyer’s lawyers and needs to be approved by the Procedure 2*. Apply, pay and obtain Rates c. Certificate of Incorporation; seller’s counterpart. Clearance Certificate from the Municipal d. Certificate of Title; Council of Nyeri e. Rates Clearance Certificate; Procedure 6. Receive site inspection by a government valuer and obtain valuation Time: 1 day f. Land Rent Clearance Certificate; report Cost: KES 5,000 g. Consent to Transfer; Time: 19 days h. Valuation of property. Procedure 3*. Apply and obtain Land Cost: No cost Rent Clearance Certificate from the * This procedure can be completed simultaneously Comments: While the draft transfer is being pro- Commissioner of Lands with previous procedures. cessed at the Lands Office, a government valuer visits the site to assess the value of the property (i.e. land Time: 23 days REGISTERING PROPERTY and building). Due to lack of transport, in practice, the Cost: KES 3,800 valuer often has to be picked up in person and driven Thika to the site. Procedure 4. Apply and obtain the Consent Property value: KES 3,029,823 (US$ 39,000) to Transfer from the Commissioner of Data as of: March 2012 Procedure 7. Endorsement of value for Lands stamp duty purposes and assessment of Time: 5 days Procedure 1. Apply for a search on the title stamp duty by Kenya Revenue Authority Cost: KES 1,000 at the Lands Office Time: 1 day Comments: Upon obtaining the Land Rent and Rates Time: 2 days Cost: No cost Clearance Certificates, the parties should submit the Cost: KES 500 Comments: The Stamp Duty Assessment Form is certificates and apply for Consent to Transfer from the Comments: The applicant fills and submits the completed, including the purchase price. The stamp Commissioner of Lands. prescribed form and pays KES 500. duty assessment officer will then assess the stamp duty payable and indicate the amount on the forms. Procedure 5. File the transfer instrument at Procedure 2*. Apply, pay and obtain Rates Stamping of the document takes on average 1 day. the Lands Office and obtain appointment Clearance Certificate from the Municipal for valuation Council of Thika Procedure 8. Pay stamp duty at a Time: 5 days Time: 3 days commercial bank and receive confirmation Cost: No cost Cost: KES 2,300 (KES 300 application form + KES of payment from Kenya Revenue Authority 2,000 clearance certificate) Comments: The draft transfer is prepared by the Time: 4 days buyer’s lawyers and needs to be approved by the Comments: The Rates Clearance Certificate is ob- Cost: KES 121,293 (4% of property value + KES 100 seller’s counterpart. tained at the Municipal Council of Thika. bank charge) Procedure 6. Receive site inspection by a Procedure 3*. Apply and obtain Land Procedure 9. Lodge stamped transfer government valuer and obtain valuation Rent Clearance Certificate from the document for registration and receive duly report Commissioner of Lands registered documents from Lands Office Time: 8 days Time: 7 days Time: 3 days Cost: No cost Cost: No cost Cost: KES 500 Comments: While the draft transfer is being pro- Comments: The applicant submits to the Lands Of- cessed at the Lands Office, a government valuer visits Procedure 4. Apply and obtain the Consent fice the following documents: the site to assess the value of the property (i.e. land to Transfer from the Commissioner of a. Application for Registration of Transfer; and building). Due to lack of transport, in practice, the Lands b. Personal Identification Number (PIN) Certificate; valuer often has to be picked up in person and driven Time: 5 days to the site. c. Certificate of Incorporation; Cost: KES 1,000 d. Certificate of Title; Procedure 7. Endorsement of value for Comments: Upon obtaining the Land Rent and Rates e. Rates Clearance Certificate; stamp duty purposes and assessment of Clearance Certificates, the parties should submit the stamp duty by Kenya Revenue Authority certificates and apply for Consent to Transfer from the f. Land Rent Clearance Certificate; Commissioner of Lands. g. Consent to Transfer; Time: 3 days h. Valuation of property. Cost: No cost Procedure 5. File the transfer instrument at * This procedure can be completed simultaneously Comments: The Stamp Duty Assessment Form is the Lands Office and obtain appointment with previous procedures. completed, including the purchase price. The stamp for valuation duty assessment officer will then assess the stamp Time: 9 days duty payable and indicate the amount on the forms. Stamping of the document takes on average 3 days. Cost: No cost LIST OF PROCEDURES 77 Comments: The draft transfer is prepared by the buyer’s lawyers and needs to be approved by the seller’s counterpart. Procedure 6. Receive site inspection by a government valuer and obtain valuation report Time: 18 days Cost: No cost Comments: While the draft transfer is being pro- cessed at the Lands Office, a government valuer visits the site to assess the value of the property (i.e. land and building). Due to lack of transport, in practice, the valuer often has to be picked up in person and driven to the site. Procedure 7. Endorsement of value for stamp duty purposes and assessment of stamp duty by Kenya Revenue Authority Time: 5 days Cost: No cost Comments: The Stamp Duty Assessment Form is completed, including the purchase price. The stamp duty assessment officer will then assess the stamp duty payable and indicate the amount on the forms. Stamping of the document takes on average 5 days. Procedure 8. Pay stamp duty at a commercial bank and receive confirmation of payment from Kenya Revenue Authority Time: 2 days Cost: KES 121,393 (4% of property value + KES 200 bank charge) Procedure 9. Lodge stamped transfer document for registration and receive duly registered documents from Lands Office Time: 15 days Cost: KES 500 Comments: The applicant submits to the Lands Of- fice the following documents: a. Application for Registration of Transfer; b. Personal Identification Number (PIN) Certificate; c. Certificate of Incorporation; d. Certificate of Title; e. Rates Clearance Certificate; f. Land Rent Clearance Certificate; g. Consent to Transfer; h. Valuation of property. * This procedure can be completed simultaneously with previous procedures. 79 Acknowledgments Doing Business in Kenya 2012 was produced by a team The project team is grateful and extends special thanks led by Trimor Mici and Madalina Papahagi. The team to Prof. Karega Mutahi, Permanent Secretary at the comprised Pilar Sanchez-Bella, Nan Jiang and Mahat Office of the Deputy Prime Minister and Ministry of Somane. The report was prepared under the general Local Government; Dr. Mohamed Isahakia, Permanent direction of Mierta Capaul. The report was produced Secretary at the Office of the Prime Minister; Angeline as a component of the IFC Kenya Investment Climate Hongo, Programme Coordinator of the Kenya Local Program led by Sarah Ruth Ochieng, Frank Abner Government Reform Programme; Martin Anyango and Twagira, and Fred Zake, under the direction of Peter Micah Kilonzo from Kenya Local Government Reform Ladegaard. Programme; and Martin Mutuku from KenInvest. The team is grateful for valuable comments provided by More than 240 business consultants, lawyers, prop- colleagues across the World Bank Group. Peer review erty experts, architects, engineers, utility providers, comments were received from Dobromir Christow, and public officials and magistrates contributed to Xiaofeng Hua, Pilar Salgado Otonel, Julien Vilquin, the Doing Business in Kenya 2012 report. Data collec- Barry Raymond Walsh, Alejandro Espinoza-Wang, tion for the starting a business, registering property and Cesar Chaparro Yedro. Karim Belayachi, Claudia and enforcing contracts indicators was coordinated Contreras, Marie-Lily Delion, Julio Fuster, Nadine by Deborah Bubi, Daniel Mutisya, and Paras Shah Shamounki Ghannam, Joyce Antone Ibrahim, Markus from Hamilton Harrison & Mathews (HH&M). Data Kimani, Aikaterini Leris, Aidah Bunoro Makokha, collection for the dealing with construction permits Frederic Meunier, Lawrence Henri Christian Mensah, indicator was coordinated by Mairura Omwenga from Sushmitha Malini Narsiah, Nuria De Oca, Obed Pandit, the Architectural Association of Kenya. Romain Svartzman, and Alessio Zanelli provided valu- able assistance at various stages of the project. The The team wants to extend its special gratitude to the website (http://www.doingbusiness.org/Kenya) was national and local government officials and members developed by Preeti Endlaw, Graeme Littler, Hashim of the judiciary who participated in the project and Zia and Kunal Patel. The report was edited by Cintra who made valuable comments during the consultation Scott and designed by G. Quinn Information Design. and data-review period. Their names are listed on the following pages. 80 DOING BUSINESS IN KENYA 2012 PUBLIC OFFICIALS ELDORET KILIFI MOMBASA KENINVEST Henry Manoti MUNICIPAL COUNCIL OF ELDORET COUNTY COUNCIL OF KILIFI MUNICIPAL COUNCIL OF MOMBASA Benson Kathure Pius Mutemi James Arap Tanui Henry Iha Zubeida Ali KENYA REVENUE AUTHORITY Joseph Nkadado Aaron Chrichir Antony Kingi Jimmy Kiamba Alice Owuor Johnson Palmeris Ntete Nalika Fraincis Henry Mitsanteiha Plan Masaka MINISTRY OF FINANCE Stanley Suuji Jennifer Koske Muthoni Mwangi Jane Mungai Doris Olutende Edward Tikane Stanislas Ondimu Michael Ngala Rose Munupe MINISTRY OF INFORMATION AND MINISTRY OF LANDS David Rogonyo Saidi Unda Peninah Munuri COMMUNICATION Mr. Mengi Wabuko Wilberforce KILIFI MARIAKANI WATER AND Elipida Mwakumba Guantai Kirimi SEWERAGE CO. LTD. Masaka Nimrod MINISTRY OF LOCAL GOVERNMENT NYERI GARISSA Samuel Kombe Mathias Odongo Karega Mutahi MUNICIPAL COUNCIL OF NYERI MUNICIPAL COUNCIL OF GARISSA Charles Gachanja KISUMU Tubmun Otieno NATIONAL ENVIRONMENTAL Mohamed A. Birik MANAGEMENT AUTHORITY John Maina Ahmed Bashir Abdi MUNICIPAL COUNCIL OF KISUMU NAIROBI Bakari Mangale G. W. Mungai Ismail Garat Ayany Absalom CITY COUNCIL OF NAIROBI OFFICE OF THE PRIME MINISTER Edward Muteru Erastus Karani Oscar Adede Wambui Cassell Emmanuel A. Lubembe Rehema Salim S. M. Thuku Michael Aura Odongo DI Soraiya Shariff Maurice Matunga THIKA JUDICIARY Pamella Eboyi Wanjiku Wainaina Peter Kamutu Bernard Muga Jaffar Kassam MUNICIPAL COUNCIL OF THIKA VISION 2030 SECRETARIAT Wiiliam Gachogu Patrick Nyamita Nancy Kiruri Emmanuel Nzai ISIOLO Ben Odondi Jeremiah Kobia Ndegwa Mukaburu Issac Gitone COUNTY COUNCIL OF ISIOLO Sam Okello Julius Koni Domenic Mutegi Amina Abdullahi W. Karugu Daniel Ole Nkere Elizabeth Kyarungu Bedan Ndegwa Bidu Ibrahim Jackson Mukunji Isyaya Onyango Denis Muganga John Wandui Sharack Mwithali Muthoni Oriale THIKA WATER & SEWARAGE COMPANY Jeremiah Munyao NAKURU E. K. Nduati KISUMU WATER & SEWARAGE COMPANY LIMITED Rosslyn Ngeno MUNICIPAL COUNCIL OF NAKURU Ronald Satar Jura Moses Peter Kamau John Ngugi Evans Lavusa Philip Nyanumba Damaris Mbuthia KAKAMEGA MALABA John Ojwang Gilbert Njihia MUNICIPAL COUNCIL OF KAKAMEGA MALABA TOWN COUNCIL Joseph Amenya Nixon Otieno Mbalwa Philip Boniface Erute Branice Atsinya Robinson Otindo Keter Willy Richard Kidindo Patrick Mahulo Olga Oyier Abiud Ochilangole NAROK Victor Maleche Muema R.K Bonventure Okaroi NAROK TOWN COUNCIL Job Matias Nicholas Waikithiru Joseph Okole Walter Chanua David Odero Dan Orapidi GOVERNMENT OF KENYA Sosten Cheruiyot Kennedy Opiyo Emmanuel Wanjala Charles Mungai Godfrey Kweya PRIVATE PROFESSIONALS ABOGE & CO. ADVOCATES BUBBLE ENGINEERING CO. LTD. EMKAY CONSTRUCTION COMPANY JODIEKA COMPANY LTD. KIMARU KIPLAGAT & CO. ADVOCATES Aloys Aboge William O. Owuor John Kamau Joseph Odima Amos Songok AMIT GADHIA & ASSOCIATES C. K. NZILI & CO. ADVOCATES ENTAWUO CONTRACTORS JUNO CONSULT KINYUA, MUYAA & CO. ADVOCATES William Ochuka Christopher Kyania Mwangi Johnson Njoroge Junius Orwa Damaris Muyaa William Onyuro CAPITAL ARCHITECTS FOPA CONSTRUCTION COMPANY LTD KAGUCIA & CO. ADVOCATES KIPTOO K. & CO. ADVOCATES ANYEGAH WESONGA & CO. Daniel Mwaura Fredrick Okademi Papa Loice Kagucia William Kiptoo ADVOCATES CELL ARC SYSTEMS GATHARA MAHINDA & CO. ADVOCATES KAIRU & MCCOURT ADVOCATES KISHORE NANJI ADVOCATE Ondieki Anyegah Paul Abuor Alice Nyagah Edith Gathara Arafa Omar ARCHITECTURAL ASSOCIATION OF KENYA CERTIFIED ENVIRONMENTAL EXPERT GELOEM DEVELOPERS AND CONTRACTORS John Hosea Muruka KIZAZIKIPYA BUILDING AND Waweru Gathecha Beatrice Nafoyo Juma Geoffrey Nyangi Sofie Mohammed CONSTRUCTION COMPANY Nathaniel Matalanga Rosslyne Murugi Mohamed Muyonga CHRISTINE KIPSANG & CO. ADVOCATES David O. Odiango Haron Nyakundi Leo Odidi John Muruka Ronald Oshialoi Christine Kipsang Mairura Omwenga Grace Mutungu Oduor Oyengo COAST BUILDING & GENERAL GICHURE & CO. ADVOCATES ARCHITRONIC CONTRACTORS LTD. Joseph Mwangi Peter Mwangi MAGARE & CO. ADVOCATES Joe Mugo Hussein Adhmani Geoffrey Onsarigo Dennis Magare GITHIRU & CO. ADVOCATES Steven Ogwapit Anderson Maghanga Concepta Muingi Mark Githiru KANG'EA & ASSOCIATES BALALA & ABED ADVOCATES Michael Masha Wilson Kariuki MAINA MUIRURI & CO. ADVOCATES HAMILTON HARRISON & MATHEWS Mohammed Balala Kuldip Singh Patrick Maina Muiruri Deborah Bubi KEBUKA WACHIRA & CO. ADVOCATES BENAI CONSTRUCTORS LTD. CRADDLE Daniel Mutisya Kebuka Wachira MALABA KEYA AND PARTNERS, Benson Mukoto Lutsachi Miriam Njoroge ARCHITECTS, ENGINEERS AND PLANNERS Paras Shah KENYA NATIONAL COMMISSION ON LTD. BENMAN CONTRACTORS CREATIVE APTITUDE HUMAN RIGHTS INTER-ARCH CONSULTANTS Malaba R. Keya Bernard Muganga Samson Chewe Mohamed Jaafar Julius Matasyo Margaret Malaba BOSLIKA CONSTRUCTION CO. LTD. E. K. OWINYI & CO. ADVOCATES KIBICHIY & CO. ADVOCATES JESSE KARIUKI & CO. ADVOCATES MBILA BUILDING CONTRACTORS John Bosco Muinde Carlestous Shifwoka Cornelius Kibichiy Jesse Kariuki Richard Kakwili BOWEN BUILDING CONTRACTORS EDG & ATELIER ARCHITECTS Isaac Kazungu JOAN NDORONGO & CO. ADVOCATES MILLIMO, MUTHOMI & CO. ADVOCATES Clement Bowen Koskei Horace Collins Joan Ndorongo KIGET & CO. 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