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COMPARING REGULATION IN 11 LOCALITIES AND 183 ECONOMIES

in Kenya
2010
COMPARING REGULATION IN 11 LOCALITIES AND 183 ECONOMIES

A copublication of the World Bank and the International Finance Corporation


© 2009 The International Bank for Reconstruction and Development / The World Bank
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Doing Business in Kenya 2010 and other subnational and regional Doing Business studies can be downloaded at no
charge at http://subnational.doingbusiness.org

Additional copies of the Doing Business global reports: Doing Business 2010: Reforming through Difficult Times, Doing
Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing
Business in 2005: Removing Obstacles to Growth and Doing Business in 2004: Understanding Regulations, may be pur-
chased at www.doingbusiness.org

About the Investment Climate Advisory Services of the World Bank Group
The Investment Climate Advisory Services of the World Bank Group helps governments implement reforms to improve
their business environment, and encourage and retain investment, thus fostering competitive markets, growth and
job creation. Funding is provided by the World Bank Group (IFC, MIGA, and the World Bank) and over fifteen donor
partners working through the multi-donor FIAS platform.
Contents

Doing Business in Kenya 2010 is a new The indicators are used to analyze
subnational report of the Doing Business economic outcomes and identify what About Doing Business and
series on the sub-Saharan African region, reforms have worked, where, and why. Doing Business in Kenya v
following the subnational Doing Business Other areas important to business—such Overview 1
report on Nigeria. It measures business as a country’s proximity to large mar- Starting a business 6
regulations and their enforcement in 11 kets, the quality of infrastructure services Dealing with construction permits 10
Kenyan localities: Eldoret, Garissa, Isiolo, (other than services related to trading Registering property 14
Kilifi, Kisumu, Malaba, Mombasa, Nai- across borders), the security of property Enforcing contracts 17
robi, Narok, Nyeri, and Thika. The locali- from theft and looting, the transparency
ties can be compared against each other, of government procurement, macro-
Data notes 22
and with 183 economies worldwide. economic conditions, or the underlying
Comparisons with other economies strength of institutions—are not directly
Doing Business indicators 28
are based on the indicators in Doing studied by Doing Business. To make Locality tables 30
Business 2010: Reforming Through Dif- the data comparable across localities, List of procedures
ficult Times, the seventh in a series of the indicators refer to a specific type of Starting a business 35
annual reports published by the World business—generally a small- or medium- Dealing with construction permits 48
Bank and the International Finance Cor- sized limited-liability company. Registering property 58
poration. The indicators in Doing Busi- This project is the result of a request
ness in Kenya 2010 are also comparable from the Government of Kenya to the
Acknowledgments 64
with the data in other subnational Doing Investment Climate Advisory Services of
Business reports. All Doing Business data the World Bank Group. It was produced
and reports are available at http://sub- with the support of the Office of the
national.doingbusiness.org and at www. Prime Minister, the Office of the Deputy
doingbusiness.org. Prime Minister and the Ministry of Local
Doing Business investigates the regu- Government, and with the financial sup-
lations that enhance business activity and port of the Embassy of the Kingdom of
those that constrain it. Regulations af- the Netherlands in Nairobi and the IFC
fecting four stages of the life of a business Funding Mechanisms for Technical As-
are measured at the subnational level in sistance and Advisory Services.
Kenya: starting a business, dealing with
construction permits, registering prop-
erty, and enforcing contracts. These in-
dicators have been selected because they
cover areas of local jurisdiction in prac-
tice. The data in Doing Business in Kenya
2010 are current as of June 2009.
About Doing
Business
and Doing
Business in
Kenya 2010

In 1664 William Petty, an adviser to to stop doing things for which demand and reviewers. The initial goal remains:
England’s Charles II, compiled the first has weakened and to start doing new to provide an objective basis for under-
known national accounts. He made 4 things. Clarification of property rights standing and improving the regulatory
entries. On the expense side, “food, hous- and strengthening of market infrastruc- environment for business.
ing, clothes and all other necessaries” ture (such as credit information and
were estimated at £40 million. National collateral systems) can contribute to con- WHAT DOING BUSINESS IN
income was split among 3 sources: £8 fidence as investors and entrepreneurs KENYA 2010 COVERS
million from land, £7 million from other look to rebuild. Doing Business in Kenya 2010 provides
personal estates and £25 million from Until very recently, however, there a quantitative measure of the national
labor income. were no globally available indicator sets and local regulations for starting a busi-
In later centuries estimates of coun- for monitoring such microeconomic fac- ness, dealing with construction permits,
try income, expenditure and material tors and analyzing their relevance. The registering property and enforcing con-
inputs and outputs became more abun- first efforts, in the 1980s, drew on per- tracts—as they apply to domestic small
dant. But it was not until the 1940s that ceptions data from expert or business and medium-size enterprises.
a systematic framework was developed surveys. Such surveys are useful gauges A fundamental premise of Doing
for measuring national income and ex- of economic and policy conditions. But Business is that economic activity re-
penditure, under the direction of British their reliance on perceptions and their quires good rules. These include rules
economist John Maynard Keynes. As the incomplete coverage of poor countries that establish and clarify property rights
methodology became an international constrain their usefulness for analysis. and reduce the costs of resolving disputes,
standard, comparisons of countries’ fi- The Doing Business project, launched rules that increase the predictability of
nancial positions became possible. Today 8 years ago, goes one step further. It looks economic interactions and rules that
the macroeconomic indicators in national at domestic small and medium-size com- provide contractual partners with core
accounts are standard in every country. panies and measures the regulations ap- protections against abuse. The objective
Governments committed to the eco- plying to them through their life cycle. is: regulations designed to be efficient, to
nomic health of their country and op- Doing Business and the standard cost be accessible to all who need to use them
portunities for its citizens now focus on model initially developed and applied in and to be simple in their implementa-
more than macroeconomic conditions. the Netherlands are, for the present, the tion. Accordingly, some Doing Business
They also pay attention to the laws, regu- only standard tools used across a broad indicators give a higher score for more
lations and institutional arrangements range of jurisdictions to measure the regulation, such as stricter disclosure re-
that shape daily economic activity. impact of government rule-making on quirements in related-party transactions.
The global financial crisis has re- business activity. Some give a higher score for a simplified
newed interest in good rules and regu- The first Doing Business report, pub- way of implementing existing regulation,
lation. In times of recession, effective lished in 2003, covered 5 indicator sets in such as completing business start-up
business regulation and institutions can 133 economies. This year’s report covers formalities in a one-stop shop.
support economic adjustment. Easy 10 indicator sets in 183 economies. The Doing Business in Kenya 2010 en-
entry and exit of firms, and flexibility project has benefited from feedback from compasses 2 types of data. The first
in redeploying resources, make it easier governments, academics, practitioners come from readings of laws and regula-
vi DOING BUSINESS IN KENYA 2010

tions. The second are time and motion important factors in understanding FOCUSED ON THE FORMAL SECTOR
indicators that measure the efficiency some of the underlying causes of the In defining the indicators, Doing Business
in achieving a regulatory goal (such as global financial crisis. in Kenya 2010 assumes that entrepre-
granting the legal identity of a business). r Doing Business does not cover all neurs are knowledgeable about all regu-
Within the time and motion indicators, regulations, or all regulatory goals, lations in place and comply with them.
cost estimates are recorded from official in any locality. As economies and In practice, entrepreneurs may spend
fee schedules where applicable. Here, technology advance, more areas of considerable time finding out where to
Doing Business builds on Hernando de economic activity are being regulated. go and what documents to submit. Or
Soto’s pioneering work in applying the For example, the European Union’s they may avoid legally required proce-
time and motion approach first used body of laws (acquis) has now dures altogether—by not registering for
by Frederick Taylor to revolutionize the grown to no fewer than 14,500 rule social security, for example.
production of the Model T Ford. De Soto sets. Doing Business in Kenya 2010 Where regulation is particularly
used the approach in the 1980s to show measures just 4 phases of a company’s onerous, levels of informality are higher.
the obstacles to setting up a garment fac- life cycle, through 4 specific sets of Informality comes at a cost: firms in
tory on the outskirts of Lima, Peru. indicators. The indicator sets also do the informal sector typically grow more
not cover all aspects of regulation in slowly, have poorer access to credit and
WHAT DOING BUSINESS IN KENYA the particular area. For example, the employ fewer workers—and their work-
2010 DOES NOT COVER indicators on starting a business do ers remain outside the protections of
not cover all aspects of commercial labor law. Doing Business in Kenya 2010
It is important to know the scope and legislation. measures one set of factors that help
limitations of Doing Business in Kenya explain the occurrence of informality
2010 in order to interpret the results of BASED ON STANDARDIZED CASE and give policy makers insights into po-
SCENARIOS
this report. tential areas of reform. Gaining a fuller
The indicators analyzed in Doing Business understanding of the broader business
LIMITED IN SCOPE in Kenya 2010 are based on standardized environment, and a broader perspective
Doing Business in Kenya 2010 focuses case scenarios with specific assumptions, on policy challenges, requires combining
on four topics, with the specific aim of such as that the business is located in one insights from Doing Business in Kenya
measuring the regulation and red tape of the 11 localities benchmarked in the 2010 with data from other sources, such
relevant to the life cycle of a domestic report. Economic indicators commonly as the World Bank Enterprise Surveys.
small to medium-size firm. Accordingly: make limiting assumptions of this kind.
r Doing Business in Kenya 2010 does Inflation statistics, for example, are often WHY THIS FOCUS
not measure all ten indicators based on prices of consumer goods in a
covered in the global Doing Business few urban areas. Such assumptions allow Doing Business in Kenya 2010 functions
report. The report covers only those global coverage and enhance compara- as a kind of cholesterol test for the regu-
4 areas of business regulation that bility, but they inevitably come at the latory environment for domestic busi-
are the provenance of municipal or expense of generality. nesses. A cholesterol test does not tell us
national governments and where local In areas where regulation is com- everything about the state of our health.
differences exist. plex and highly differentiated, the stan- But it does measure something impor-
r Doing Business in Kenya 2010 does dardized case used to construct each tant for our health. And it puts us on
not measure all aspects of the Doing Business in Kenya 2010 indicator watch to change behaviors in ways that
business environment that matter needs to be carefully defined. Where will improve not only our cholesterol rat-
to firms or investors—or all factors relevant, the standardized case assumes ing but also our overall health.
that affect competitiveness. It does a limited liability company. This choice One way to test whether Doing Busi-
not, for example, measure security, is in part empirical: private, limited li- ness serves as a proxy for the broader
macroeconomic stability, corruption, ability companies are the most prevalent business environment and for competi-
the labor skills of the population, the business form in most economies around tiveness is to look at correlations be-
underlying strength of institutions the world. The choice also reflects one tween the Doing Business rankings and
or the quality of infrastructure. Nor focus of Doing Business: expanding op- other major economic benchmarks. The
does it focus on regulations specific to portunities for entrepreneurship. Inves- indicator set closest to Doing Business
foreign investment. tors are encouraged to venture into busi- in what it measures is the Organisation
r Doing Business in Kenya 2010 does ness when potential losses are limited to for Economic Co-operation and Devel-
not assess the strength of the financial their capital participation. opment’s indicators of product market
system or market regulations, both regulation; the correlation here is 0.75.
ABOUT DOING BUSINESS AND DOING BUSINESS IN KENYA 2010 vii

The World Economic Forum’s Global ated with perceptions of greater judicial results. Some localities may rank un-
Competitiveness Index and IMD’s World fairness—suggesting that justice delayed expectedly high on some indicators.
Competitiveness Yearbook are broader in is justice denied. And some localities that have had rapid
scope, but these too are strongly corre- In the current global crisis policy- growth or attracted a great deal of invest-
lated with Doing Business (0.79 and 0.72, makers face particular challenges. Both ment may rank lower than others that
respectively). These correlations suggest developed and developing economies are appear to be less dynamic.
that where peace and macroeconomic seeing the impact of the financial crisis But for reform-minded governments,
stability are present, domestic business flowing through to the real economy, how much their indicators improve mat-
regulation makes an important differ- with rising unemployment and income ters more than their absolute ranking. As
ence in economic competitiveness. loss. The foremost challenge for many localities develop, they strengthen and
A bigger question is whether the governments is to create new jobs and add to regulations to protect investor and
issues on which Doing Business focuses economic opportunities. But many have property rights. Meanwhile, they find
matter for development and poverty re- limited fiscal space for publicly funded more efficient ways to implement exist-
duction. The World Bank study Voices activities such as infrastructure invest- ing regulations and cut outdated ones.
of the Poor asked 60,000 poor people ment or for the provision of publicly One finding of Doing Business: dynamic
around the world how they thought they funded safety nets and social services. and growing economies around the world
might escape poverty. The answers were Reforms aimed at creating a better in- continually reform and update their regu-
unequivocal: women and men alike pin vestment climate, including reforms of lations and their way of implementing
their hopes above all on income from business regulation, can be beneficial for them, while many poor economies still
their own business or wages earned in several reasons. Flexible regulation and work with regulatory systems dating to
employment. Enabling growth—and en- effective institutions, including efficient the late 1800s.
suring that poor people can participate processes for starting a business and effi-
in its benefits—requires an environment cient insolvency or bankruptcy systems, DOING BUSINESS—A USER’S GUIDE
where new entrants with drive and good can facilitate reallocation of labor and Quantitative data and benchmarking can
ideas, regardless of their gender or ethnic capital. And regulatory institutions and be useful in stimulating debate about
origin, can get started in business and processes that are streamlined and acces- policy, both by exposing potential chal-
where good firms can invest and grow, sible can help ensure that, as businesses lenges and by identifying where pol-
generating more jobs. rebuild, barriers between the informal icy makers might look for lessons and
Small and medium-size enterprises and formal sectors are lowered, creating good practices. These data also provide
are key drivers of competition, growth more opportunities for the poor. a basis for analyzing how different policy
and job creation, particularly in develop- approaches—and different policy re-
ing countries. But in these economies up DOING BUSINESS IN KENYA 2010 forms—contribute to desired outcomes
AS A BENCHMARKING EXERCISE
to 80% of economic activity takes place such as competitiveness, growth and
in the informal sector. Firms may be pre- Doing Business in Kenya 2010, in captur- greater employment and incomes.
vented from entering the formal sector ing some key dimensions of regulatory Seven years of Doing Business data
by excessive bureaucracy and regulation. regimes, can be useful for benchmark- have enabled a growing body of research
Where regulation is burdensome ing. Any benchmarking—for individu- on how performance on Doing Busi-
and competition limited, success tends als, firms or economies—is necessarily ness indicators—and reforms relevant
to depend more on whom you know partial: it is valid and useful if it helps to those indicators—relate to desired
than on what you can do. But where sharpen judgment, less so if it substitutes social and economic outcomes. Some
regulation is transparent, efficient and for judgment. 405 articles have been published in
implemented in a simple way, it becomes Doing Business in Kenya 2010 pro- peer-reviewed academic journals, and
easier for any aspiring entrepreneurs, vides 2 approaches on the data it collects: about 1,143 working papers are avail-
regardless of their connections, to oper- it presents “absolute” indicators for each able through Google Scholar. Among the
ate within the rule of law and to benefit locality for each of the 4 regulatory topics findings:
from the opportunities and protections it addresses, and it provides rankings of r Lower barriers to start-up are associ-
that the law provides. localities, both by indicator and in aggre- ated with a smaller informal sector.
In this sense Doing Business values gate. Judgment is required in interpret- r Lower costs of entry encourage
good rules as a key to social inclusion. It ing these measures for any locality and entrepreneurship, enhance firm
also provides a basis for studying effects in determining a sensible and politically productivity and reduce corruption.
of regulations and their application. For feasible path for reform. r Simpler start-up translates into
example, Doing Business 2004 found that Reviewing the Doing Business rank- greater employment opportunities.
faster contract enforcement was associ- ings in isolation may show unexpected
viii DOING BUSINESS IN KENYA 2010

HOW DO GOVERNMENTS USE DOING INFORMATION SOURCES FOR THE DATA tors and calculating rankings. Other ap-
BUSINESS?
Most of the indicators are based on laws proaches were explored, including using
A common first reaction is to doubt the and regulations. In addition, most of the principal components and unobserved
quality and relevance of the Doing Busi- cost indicators are backed by official fee components. The principal components
ness data. Yet the debate typically pro- schedules. Doing Business respondents and unobserved components approaches
ceeds to a deeper discussion exploring the both fill out written surveys and provide turn out to yield results nearly identical to
relevance of the data to the economy and references to the relevant laws, regu- those of simple averaging. The tests show
areas where reform might make sense. lations and fee schedules, aiding data that each set of indicators provides new
Most reformers start out by seeking checking and quality assurance. information. The simple averaging ap-
examples, and Doing Business helps in For some indicators part of the cost proach is therefore robust to such tests.
this. For example, Saudi Arabia used the component (where fee schedules are lack-
company law of France as a model for re- ing) and the time component are based IMPROVEMENTS TO THE METHODOLOGY
AND DATA REVISIONS
vising its own. Many countries in Africa on actual practice rather than the law on
look to Mauritius—the region’s stron- the books. This introduces a degree of The methodology has undergone contin-
gest performer on Doing Business indi- subjectivity. The Doing Business approach ual improvement over the years. Changes
cators—as a source of good practices for has therefore been to work with legal have been made mainly in response to
reform. In the words of Luis Guillermo practitioners or professionals who regu- country suggestions. In accordance with
Plata, the minister of commerce, indus- larly undertake the transactions involved. the Doing Business methodology, these
try and tourism of Colombia, Following the standard methodological changes have been incorporated into the
approach for time and motion studies, Doing Business in Kenya 2010.
It’s not like baking a cake where you follow Doing Business breaks down each pro- For enforcing contracts, for exam-
the recipe. No. We are all different. But we cess or transaction, such as starting and ple, the amount of the disputed claim in
can take certain things, certain key les- legally operating a business, into separate the case study was increased from 50%
sons, and apply those lessons and see how steps to ensure a better estimate of time. to 200% of income per capita after the
they work in our environment. The time estimate for each step is given first year of data collection, as it became
by practitioners with significant and rou- clear that smaller claims were unlikely to
Over the past 7 years there has been tine experience in the transaction. go to court.
much activity by governments in re- The Doing Business approach to Another change relates to starting a
forming the regulatory environment for data collection contrasts with that of business. The minimum capital require-
domestic businesses. Most reforms relat- enterprise or firm surveys, which capture ment can be an obstacle for potential
ing to Doing Business topics were nested often one-time perceptions and experi- entrepreneurs. Initially, Doing Business
in broader programs of reform aimed at ences of businesses. A corporate lawyer measured the required minimum capital
enhancing economic competitiveness. In registering 100–150 businesses a year regardless of whether it had to be paid
structuring their reform programs, gov- will be more familiar with the process up front or not. In many economies only
ernments use multiple data sources and than an entrepreneur, who will register part of the minimum capital has to be
indicators. And reformers respond to a business only once or maybe twice. A paid up front. To reflect the actual po-
many stakeholders and interest groups, bankruptcy judge deciding dozens of tential barrier to entry, the paid-in mini-
all of whom bring important issues and cases a year will have more insight into mum capital has been used since 2004.
concerns into the reform debate. bankruptcy than a company that may All changes in methodology are ex-
World Bank support to these reform undergo the process. plained in the Data notes section of this
processes is designed to encourage criti- report as well as on the Doing Business
cal use of the data, sharpening judgment DEVELOPMENT OF THE METHODOLOGY website. In addition, data time series for
and avoiding a narrow focus on improv- The methodology for calculating each each indicator and locality are available
ing Doing Business rankings. indicator is transparent, objective and on the website. The website also makes
easily replicable. Leading academics col- available all original data sets used for
METHODOLOGY AND DATA laborate in the development of the indi- background papers.
Doing Business in Kenya 2010 covers 11 cators, ensuring academic rigor. Seven Information on data corrections is
localities, including Nairobi. The data of the background papers underlying provided in the Data notes and on the
are based on national and local laws the indicators have been published in website. A transparent complaint proce-
and regulations as well as administrative leading economic journals. One is at an dure allows anyone to challenge the data.
requirements. (For a detailed explana- advanced stage of publication. If errors are confirmed after a verification
tion of the Doing Business in Kenya 2010 Doing Business uses a simple averag- process, they are expeditiously corrected.
methodology, see the Data notes). ing approach for weighting subindica-
Overview

TABLE 1.1
Some paleontologists believe the first reforms were initiated by the national
Doing Business in Kenya—where is it easiest?
humans may have inhabited Kenya more government and implemented first in AGGREGATE
than two million years ago. According to Cairo. Once the reforms proved suc- Locality RANK

recent fossil evidence man was “born” cessful, they were adopted all over the Narok (easiest) 1
on the eastern shores of Lake Rudolf, country. In the case of business start-up, Malaba 2
now Lake Turkana, which would make the one-stop shop reduced the number Thika 3
Kenya the “Biblical Garden of Eden, of required procedures from ten to seven Kisumu 4
from which descendants moved out to and cut start-up costs and time by more Mombasa 5
populate the world.”1 Later on, Kenya than half. Following the success of the Nyeri 6
stood at the crossroad of important trad- one-stop shop in Cairo, the authority Garissa 7
ing routes. Persian and Arab merchants to process business registrations was Eldoret 8
traveled to the African shores to estab- delegated to regional one-stop shops. Kilifi 9
lish commercial ventures. In those days, These replicated the Cairo success story. Nairobi 10
Isiolo (most difficult) 11
they took advantage of the monsoon Second, interagency cooperation is cru-
winds to reach their destination.2 Nowa- cial to bridge administrative gaps. In the Note: The aggregate ranking index is calculated as the ranking on
the simple average of locality percentile rankings on each of the 4
days, if they planned to open a business Arab Republic of Egypt, business start- topics covered in Doing Business in Kenya 2010.
Source: Doing Business database.
in Garissa, for example, they would end up reforms proved successful, because
up catching a bus to Nairobi to submit the different agencies involved assigned Narok, Nyeri, and Thika. The study cov-
the paperwork needed. In addition to employees to the one-stop shops and ers four Doing Business topics—starting
the travel expenses, the trip would be gave them the necessary approval au- a business, dealing with construction
time-consuming, maybe requiring an thority.3 As a result, entrepreneurs in permits, registering property, and en-
overnight stay at a hotel or with rela- Assiut no longer have to travel all the forcing contracts. These indicators were
tives. Why not take care of it in Garissa way from Upper Egypt to Cairo to start selected because they reveal differences
itself? Because many of the necessary their business. in national and local regulatory policies
permits, documents, and authorizations Doing Business studies business and practices. The results are presented
have to be approved in Nairobi. regulations from the perspective of a here (table 1.1).
Until three years ago, an aspiring small- to medium-size domestic firm. Across Kenya, doing business is
entrepreneur in Assiut, Arab Republic Nairobi, the most populous city in easier in Narok, Malaba, and Thika. It
of Egypt, would have faced a similar Kenya, represents the country in the is more difficult in Kilifi, Nairobi, and
situation. Today, she can save time and global Doing Business series. However, Isiolo. While Nairobi has the fastest time
money: opening a business at the new while Kenya is a centralized country, to start a business, it lags behind other
one-stop shop in Assiut is as easy and local business regulations and their en- localities in the time needed to register
almost as fast as it is in Cairo. This ex- forcement differ across localities. This is property or enforce a contract before
ample illustrates two lessons that may why Doing Business in Kenya 2010 goes a court. However, large cities can also
also apply to Kenya. First, as the expe- beyond Nairobi and benchmarks ten perform well. The other major business
rience in the Arab Republic of Egypt additional localities: Eldoret, Garissa, center, Mombasa, ranks fifth overall; it is
shows, decentralization can work. There, Isiolo, Kilifi, Kisumu, Malaba, Mombasa, the best performing locality in register-
2 DOING BUSINESS IN KENYA 2010

TABLE 1.2
The top 10 reformers in 2008/09
Dealing with Trading
Starting a construction Employing Registering Getting Protecting Paying across Enforcing Closing a
Economy business permits workers property credit investors taxes borders contracts business

Rwanda       

Kyrgyz Republic       

Macedonia, FYR       

Belarus      

United Arab Emirates   

Moldova   

Colombia        

Tajikistan     

Egypt, Arab Rep.    

Liberia   

Note: Economies are ranked on the number and impact of reforms. First, Doing Business selects the economies that implemented reforms making it easier to do business in 3 or more of the Doing Business topics.
Second, it ranks these economies on the increase in rank on the ease of doing business from the previous year. The larger the improvement, the higher the ranking as a reformer.
Source: Doing Business database.

ing property and ranks third in starting a trend that started 3 years ago. Indeed, these in only 8 weeks. As of November
a business. three-quarters of such economies cov- 2008, 315 licenses have been eliminated,
Doing Business rankings do not tell ered by Doing Business reformed. In 379 simplified, 294 retained, and 26 pri-
the whole story. The indicators do not sub-Saharan Africa 29 of 46 economies oritized for reform.
account for all factors important for reformed in 2008/09, implementing 67 In order to facilitate business entry,
doing business—for example, macro- reforms. As in the previous year, nearly the national government enacted the
economic conditions, infrastructure, half the reforms in the region focused Licensing Laws (Repeals and Amend-
workforce skills, or security. Nor do they on making it easier to start a business ments) Act in 2006, reducing the num-
assess the strength of the financial infra- or trade across borders. And for the first ber of mandatory business permits. In
structure or market regulation, both im- time a sub-Saharan African economy, 2007, the Commercial Registry managed
portant factors in understanding some Rwanda, led the world in Doing Business to improve the quality of its services,
of the underlying causes of the global reforms (table 1.2). thanks to better coordination between
financial crisis. But improvements in Rwanda has steadily reformed its the Ministry of Lands and Housing and
an economy’s ranking do indicate that commercial laws and institutions since the Kenya Revenue Authority. As a result
the government is creating a regulatory 2001. In the past year it introduced a of these reforms, the time to start a busi-
environment that is more conducive to new company law that simplified busi- ness dropped from 54 to 44 days in 2007
business. At the same time, good perfor- ness start-up and strengthened minority and to 34 days in 2009.
mance should not lead to government shareholder protections. Entrepreneurs Property registration also under-
complacency. Both Singapore and New can now start a business in 2 proce- went reforms. Well aware that an afford-
Zealand—ranked 1 and 2 on the ease of dures and 3 days. Reforms also included able and efficient immovable property
doing business—know this well. Despite measures to speed up trade and prop- registration system reduces informality,
being top performers for a number of erty registration. Delays at the borders the Registry Superintendent of the Min-
years, both have introduced several re- were reduced thanks to longer operat- istry of Lands and Housing decided to
forms to ease business entry and opera- ing hours and simpler requirements for allow the private sector to provide prop-
tion in the past two years. documents. Reforms removed bottle- erty valuations in addition to valuations
necks at the property registry and at the available from the public sector; today,
KENYA IS REFORMING— Rwanda Revenue Authority, reducing the time needed for an entrepreneur to
WHAT GETS MEASURED the time required to register property by get a valuation is only 7 days.
GETS DONE 255 days (figure 1.1). Another area of reform is construc-
Since 2004, Doing Business has re- Kenya has been implementing regu- tion permits. In November 2006, the
corded more than 1,000 reforms world- latory reforms across several Doing Busi- Minister of Housing and Lands launched
wide—287 of those took effect between ness topics over various years. In 2005, the Rapid Response Initiative (RRI). As
June 2008 and June 2009 alone. Low- Kenya launched a “guillotine initiative”4 part of the initiative, the Physical Plan-
and lower-middle-income economies to review 1,325 business licenses that ning Department of the City of Nairobi
accounted for two-thirds of reforms re- were crippling business performance. started to look into why the issuance
corded during the last year, continuing In 2006, the first phase eliminated 26 of of building approval and occupancy
OVER VIE W 3
FIGURE 1.1 similar to France. A commercial dispute
Consistent reformers continued reform efforts in 2008/09
Improvement in the ranking on the ease of doing business, DB2009–DB2010
in Nairobi will take 1 year and three
1 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 183
months to resolve. Kenya has a signifi-
cant backlog of cases. Most lawyers and
Georgia
16 TO 11
Colombia
49 TO 37
litigants cite this as a primary source
2 REFORMS 8 REFORMS of delays. This is not a problem that is
unique to courts in Kenya alone. It is
Mauritius Rwanda mainly a consequence of inefficiency
24 TO 17 143 TO 67
6 REFORMS 7 REFORMS and the high number of inactive cases
that accumulate due to lack of action
Macedonia, FYR
69 TO 32 from the litigants. Because courts do not
7 REFORMS
have the power to revive an inactive case
Egypt, Arab Rep.
116 TO 106
4 REFORMS
(this is the prerogative of the parties),
they clog the system and interfere with
139
the court diary, impeding the efficient
SUB-SAHARAN AFRICA allocation of resources.
Source: Doing Business database. DB2010 AVERAGE
These examples show some signifi-
permits took so long. One reason was utilities would take only about 69 days cant variations in the way local govern-
that the fire, water and public health in Narok, placing Narok in fifteenth ment regulations enhance or restrain
clearances required from the various position worldwide just behind Hong business activity across Kenya. While
agencies within the Physical Planning Kong, China and in the same position local governments share the same basic
Department had to be reviewed by an as Denmark. It would take almost one legal framework, they also interpret and
internal committee. Because the com- month and a half longer in Malaba (111 implement national regulations differ-
mittee only convened sporadically, this days) and two more months in Isiolo ently. Some localities have made pro-
review significantly delayed the building (127 days). Getting the construction cesses more efficient with the help of
approval process. The RRI removed the permit is cheapest in Nyeri (132% of technology. Global competition is be-
need for the committee review, shorten- income per capita), but if you want to coming increasingly local. It is not only
ing the time to obtain a building permit construct a warehouse in Kilifi, it will countries that compete with each other,
from 80 to 50 days. In 2009, the time was cost more than twice as much (284% of but increasingly, specific locations—
shortened further to 40 days. Under the income per capita). Mombasa versus Lagos (Nigeria) or Cas-
Physical Planning Act, the Department If you decided to purchase property ablanca (Morocco), rather than Kenya
further administratively consolidated in Mombasa, your new real estate would versus Nigeria or Morocco. Kenyan local
the procedure for obtaining a certificate be registered in 23 days, almost as fast authorities must expedite their pace of
of compliance with the occupancy per- as in Colombia, but 10 times longer than reform to convince investors that it is
mit. Thanks to this consolidation, the in Thailand or Saudi Arabia, the global more profitable to invest scarce capital
average time to obtain an occupancy leaders. If in Garissa, transferring the in such places as Kilifi or Thika rather
permit dropped from 17 to 14 days. The property title would take four times lon- than Lagos or Kampala; without forget-
total time to get a construction permit ger, similar to Nigeria and Sri Lanka. The ting that the National Government has
decreased from 133 to 120 days. cost of transferring property is similar a key role—especially given the high
across the 11 benchmarked localities at degree of centralization in Kenya.
COMPARING BUSINESS REGULATIONS 4.2% of property value. However, if you
IN KENYA—WIDE VARIATIONS want to transfer property in Isiolo, it will LEARNING FROM EACH OTHER—
ACROSS LOCALITIES ADOPTING GOOD LOCAL PRACTICES
cost 24.2%. This is due to a transfer tax
If you were returning to Kenya from in the amount of 20% of property value Publishing comparable data on the ease
studying abroad, with a great idea for levied by the Isiolo County Council. The of doing business inspires governments
a new business, starting your company transfer tax makes Isiolo one of the most to act. Comparisons among localities
would be fastest and least expensive in expensive places in the world; among within the same country are even stron-
Nairobi, where it takes 34 days and costs the 183 economies measured in Doing ger drivers of reform. Local officials have
36% of income per capita. If you tried to Business, Isiolo is cheaper only than the a difficult time explaining why it takes
do the same in Nyeri, it would take 80 Syrian Arab Republic (28%). longer or costs more to comply with ad-
days and cost 6% more (42% of income Resolving a dispute in the courts is ministrative procedures in their town or
per capita). Obtaining all permits to generally time-consuming across locali- state than in their neighbors’—despite
build a new warehouse and hook it up to ties, but is faster in Malaba at 11 months, sharing a similar legal and regulatory
4 DOING BUSINESS IN KENYA 2010

TABLE 1.3
Best practices in Kenya compared internationally
Global rank
Kenya’s performance Best (183 economies)
in DB2010 performing How Kenyan localities
Indicator (represented by Nairobi) city Best local practice would compare globally
Number of procedures to build a warehouse 11 procedures Kisumu 10 procedures 9
Days to build a warehouse 120 days Narok 69 days 15
Days to enforce a contract 465 days Malaba 330 days 23
Days to register property 64 days Mombasa 23 days 51
Cost to register property 4.2% of the property value Thika 4.1% of the property value 78
Cost to build a warehouse 161.7% of income per capita Nyeri 132.4% of income per capita 88
Days to start a business 34 days Nairobi 34 days 124
Cost to start a business 36.5% of income per capita Nairobi 36.5% of income per capita 130
Number of procedures to register property 8 procedures All localities 8 procedures 136
Cost to enforce a contract 47.2% of the claim value Isiolo 38.4% of the claim value 140
Number of procedures to start a business 12 procedures All localities 12 procedures 154
Hypothetical city of “Kenyana” 78
Source: Doing Business database

framework. That was the case in India, eliminate the requirement for a separate What began in 2007/2008 as a finan-
where 10 cities were measured by Doing business permit all together, the ease cial crisis has deteriorated into a global
Business in South Asia 2007 and again in of starting a business could move up 6 economic and employment crisis, posing
2009. The studies created competition places globally, placing the country next major challenges for governments. Early
to reform and the second benchmark- to Vietnam and Poland and ahead of attention has rightly focused on stabili-
ing showed that 9 of the 10 states had Austria and Tanzania. zation of the financial sector, and fiscal
reformed in at least one of the areas The effectiveness of the Munici- stimulus to check recessionary pressures.
measured by Doing Business in India. As pal Council in issuing building permits But as governments look to support re-
a result of the reforms, the average time and the local presence of utility com- covery, the regulatory environment for
to start up a company dropped from panies, make Narok the fastest locality businesses will also be critical. It affects
54 to 35 days and the time to obtain a in dealing with construction permits. how well firms can cope with the reces-
building permit was reduced by 25 days Cutting the time to that of Narok—69 sion, capitalize on new opportunities and
on average. The conclusion: what gets days—would put Kenya into position create jobs as recovery begins. As un-
measured, gets reformed. 15 worldwide on the time to deal with employment and public debt rise, it has
Localities in Kenya can learn from construction permits, ahead of Canada become even more important to create
each other and adopt local best practices and Iceland. Adopting the time to regis- the conditions that encourage businesses
to compete globally. If a hypothetical city ter property from Mombasa, by creating to grow, create productive jobs in the
called “Kenyana” were to adopt the good opportunities for entrepreneurs to take formal sector and stimulate incomes and
practices found in the benchmarked lo- care of their paperwork locally rather potential tax revenues. While the crisis
calities, it would move up 17 positions on than traveling to Nairobi, would cut the originated in the financial sector, it has
the global ranking, placing the country time to 23 days and put the hypothetical brought renewed attention to the need
ahead of Panama or Italy. Implement- city “Kenyana” into position 51 world- for sound and effective regulation in all
ing Kenya’s best practices would allow wide, ahead of South Africa or Lebanon. areas of the economy.
the country to rank 78 out of the 183 Finally, the courts in Bungoma, where
economies measured by Doing Business commercial disputes relating to Malaba
2010. For example, business permits are are heard, tend to be strict on adjourn-
issued by local authorities. If Garissa ments, which contributes to the speed of 1. Muhoho, R. (2006). Kenyan Culture,
History, Food, People, Lifestyle, Tribes
followed the example of Nairobi, it could enforcement in Malaba. As a result, the and Language. Retrieved from http://
speed up the business permit issuance 11 months needed in Malaba to solve a www.buzzle.com/articles/kenya-safaris-
by 3 days and cut the cost by half. If the commercial dispute are faster than the kenyan-culture-history-food-people-
local authorities across Kenya decided to OECD average of 462 days (table 1.3). lifestyle-tribes-language.html
OVER VIE W 5
2. Parkinson, T., Phillips, M. & Gourlay, W.
(2006). Lonely Planet Kenya. History 25-
33. Retrieved from http://books.google.
com
3. World Bank. 2007. Doing Business in
Egypt 2008. Washington D.C.: The World
Bank Group.
4. The “guillotine” or “staged-repeal” is a
process of identifying and then review-
ing a large number of regulations or
licenses against set criteria. Through the
guillotine process the government elimi-
nates those regulations or licenses that
are obsolete or no longer needed, and
streamlines others, without the need for
lengthy and costly legal action on each
regulation.
6 DOING BUSINESS IN KENYA 2010

Starting a FIGURE 2.1


Many procedures to start a business in Kenya

business Kenya
average
12
Kenya
average
67
SUB-SAHARAN
AFRICA 100

SUB-SAHARAN SUB-SAHARAN
AFRICA 9 AFRICA 46
SENEGAL
64
SOUTH
AFRICA Kenya
6 average
49
SENEGAL
4 SOUTH
AFRICA
22
SOUTH
AFRICA
SENEGAL 6
8 Cost
Procedures Time
(days) (% of income
Source: Doing Business database. per capita)

Benedict wants to set up a company to operate. Starting a business in Kenya re- the declaration of compliance with the
sell souvenirs in Mombasa City. Before he quires 12 procedures in the 11 measured Commissioner for Oaths, and separate
can open his doors to potential clients, he localities, takes on average 67 days, and registrations with four different agencies:
will have to wait 72 days and pay 50% of costs 49% of income per capita. The aver- the Tax Department, the National So-
income per capita to complete the 12 pro- age benchmarked city would rank 135th cial-Security Fund (NSSF), the National
cedures required to start his company. In- when compared with the 183 economies Hospital Insurance Fund (NHIF) and
stead of waiting for more than two months measured worldwide, roughly the same the Kenya Revenue Authority (KRA). In
and spending more than KES 30,000 as Accra, Ghana. contrast, Senegal’s one-stop shop merged
(about US$ 385), Benedict decides to sell Doing Business records all proce- seven start-up procedures into one. Time
his merchandise informally on the beach. dures that are officially required to start dropped from 58 days to 8 days. Liberia
His business pays no taxes or social- up and formally operate an industrial also streamlined its business-registration
security contributions. It will also have or commercial small or medium sized process, cutting it by 3 months. Busi-
difficulties accessing credit and growing. business. These include obtaining neces- nesses there can now start operating in
Kenyan entrepreneurs may find that sary licenses and permits and complet- less than 1 month. Liberia also made the
establishing a business in their home- ing required notifications, verifications process more affordable, making the use
town is a lengthy and cumbersome pro- and registrations for the company and its of lawyers optional.2
cess. Not only do they have to worry employees with the relevant authorities.1 Despite a similar regulatory frame-
about location, capital and markets, they New Zealand is the world’s top per- work for business registration, there are
also have to deal with a maze of adminis- former in this area—with only 1 proce- significant differences in time and cost.
trative procedures before they can legally dure, 1 day and a cost of 0.4% of income Nairobi is the easiest city to set up
TABLE 2.1 per capita. Entrepreneurs in New Zea- a business, Garissa the most difficult
Where is it easy to start a business—and land must file all necessary information (table 2.1).
where not? only once, because receiving agencies are The Registrar of Companies has only
Municipality RANK linked through a unified database. Other one office in the entire country, located
Nairobi (easiest) 1 economies in Eastern Europe and North in Nairobi. Entrepreneurs across Kenya
Thika 2 Africa are not far behind: in Georgia, it must travel to Nairobi in order to incor-
Mombasa 3 takes 3 procedures and 3 days to start a porate their companies. The Registrar of
Isiolo 4
business, while in the Arab Republic of Companies approves the company name
Eldoret 5
Egypt the same can be done in 7 days. (procedure 1) and files the incorpora-
Nyeri 5
Kilifi 7 In Kenya, one of the reasons it takes tion deed, the stamped memorandum
Kisumu 7 so long to start a business is the many and articles of association, as well as the
Narok 9 steps required—three more than the re- statement of nominal capital (procedure
Malaba 10 gional average and three times as many 5). Even though the steps that follow
Garissa (most difficult) 11 as in Senegal (figure 2.1). Additional obtaining the approval of the company
Note: The ease of starting a business is a simple average of the procedures not required elsewhere in- name—i.e. stamping the memorandum
locality rankings on the number of procedures, and the associ-
ated time and cost required to start a business. See the Data clude the stamping of the memorandum and articles of association and a state-
notes for details.
Source: Doing Business database. and articles of association, the filing of ment of the nominal capital, paying stamp
STARTING A BUSINESS 7

duty at an authorized bank and signing from out-of-town companies—filing the calities. It takes 8 days in Garissa, 3 days
the declaration of compliance before a deed takes 29 days for a company operat- longer than in Nairobi. Ideally, a company
Commissioner for Oaths—could be done ing in Garissa, as compared to 10 days for registration certificate should suffice as a
locally, the entrepreneur would still have a company operating in Nairobi. license to start any business not subject
to return to Nairobi to file the docu- Stamping the memorandum, ar- to separate licensing requirements for
ments with the Registrar of Companies. ticles of association and a statement of reasons of public safety or environmental
It is hence common practice to get all the nominal capital (procedure 2) is the concerns. Other countries, like Burkina
five procedures done in Nairobi directly source of long delays in Garissa and Faso or Cameroon, do not require busi-
rather than traveling back and forth. This all across Kenya, despite several reform ness licenses at the municipal level. Ke-
significantly increases costs—including efforts to make this process more effi- nyan localities could follow suit.
transportation costs. For instance, an cient. In the past, it was the Stamp Duty The business permit also accounts
entrepreneur from Isiolo has to travel for Office within the Ministry of Housing for the largest component of the business
9 hours by bus in order to get to Nairobi and Lands that collected the stamp duty start up costs—30% on average. The cost
and must pay KES 2,000 (US$ 25) for and processed the stamped documents. is calculated by each municipal govern-
a roundtrip bus fare.3 The rest of the In 2005, the Kenya Revenue Authority ment according to the “Single Business-
incorporation procedures will have to be (KRA) took over stamp-duty collection. Permit Fee Schedule”. This schedule
solved in Meru Town, which requires an- However, the memorandum, articles of establishes the fee ranges municipal gov-
other 1-hour bus trip and KES 400 (US$ association and statement of nominal ernments can charge an entrepreneur
5) for the roundtrip bus fare. capital must still first be submitted to looking to do business in a certain lo-
Opening a business takes 34 days in the Stamp Duty Office of the Ministry cality. There are several categories. On
Nairobi compared with 2½ times longer of Lands and Housing, before payment one hand, companies are categorized by
in Narok (81 days). The cost also varies can be processed by a KRA-designated type of activity: general trade, personal
greatly across localities. In Nairobi and bank. The entire process takes 23 days in services, retail, transport, storage, and
Thika, entrepreneurs spend less than the case of Garissa and 30 days in Narok, communications. On the other hand,
40% of income per capita to open a busi- because the Stamp Duty Office has to re- companies dedicated to general com-
ness; for those in Malaba, Kilifi, or Isiolo ceive confirmation of the bank payment merce are also classified by the number
the cost is above 55% (figure 2.2). after the funds have cleared. On average, of employees:4 megastore or hypermar-
The biggest bottleneck for a business the process takes 20 days across Kenya, ket, large trader, medium trader, or small
from Garissa is filing the deed with the down from 54 days in 2005. trader. Given that municipal fees vary
Registrar of Companies in Nairobi (fig- The third longest procedure is get- from KES 2,500 (US$ 31) to KES 12,000
ure 2.3). Incorporation documents from ting a business permit which is issued (US$ 149) depending upon the locality,
companies based in Nairobi are given pri- locally by the municipal council. The time local governments have ample room for
ority and are processed faster than those needed varies from 5 to 8 days across lo- interpretation in determining the exact

FIGURE 2.2
Time and cost to start a business in Kenya and selected economies and regions
0.4
New Zealand 1 Cost
Denmark 0.0 6 (% of income per capita)
8
Senegal 63.7
21 7.5 24 Time
Middle East and North Africa 34.0 (days)
South Africa 6.0 22
Nairobi 36.5 34
46
Sub-Saharan Africa 100.0
Thika 39.1 47
Isiolo 55.5 62
Kilifi 57.0 68
Malaba 58.9 70
Mombasa 50.3 72
Eldoret 50.8 74
Kisumu 51.8 74
Garissa 52.4 78
Nyeri 42.2 80
Narok 44.3 81

Source: Doing Business database.


8 DOING BUSINESS IN KENYA 2010

FIGURE 2.3 reduce the time to register a company. It


Starting a business in Garissa—the most difficult locality in Kenya
is also currently working on reducing the
Time (days) Cumulative cost (% of income per capita)
time to stamp the memorandum and ar-
Cost 52.4%
80 48 ticles of association by improving the IT
systems between the Stamp Duty Offices,
Time
60 78 days 36 the Kenya Revenue Authority (KRA) and
8 designated banks.
29 days Apply for a business permit
days A fast-track company registration
40 24
option, at an extra charge, is also being
File deed and details with the Registrar of Companies
introduced. For example, it is now pos-
20 at the Attorney General's Chambers 12 sible to have the name search done in 1
23
days Stamp the memorandum and articles and a statement of the nominal capital day, for KES 500 (US$ 6); in 2 days, for
0 0 KES 200 (US$ 3); as opposed to the usual
1 2 5 8 12 3 days at KES 100 (about US$ 1.5). In
Source: Doing Business database.
Procedures
addition, according to the information
provided by the Registrar, the clerks will
fee to charge. For instance, the Nairobi grow larger and contribute to govern- complete the entire company registration
City Council will charge an entrepreneur ment revenues by paying taxes.7 process on behalf of the entrepreneur
KES 5,000 (US$ 62) to incorporate a me- The National Government of Kenya in a maximum of 7 days, instead of the
dium-trader shop that conducts general recognizes the need to develop its formal average of 67 days, for a flat fee of KES
trade activities, whereas the municipal sector, especially its small- and medium- 30,000 (US$ 374). However, this fast-
governments of Garissa, Isiolo and Kilifi sized enterprises, so as to create the basis track option is not widely known. Efforts
will charge KES 12,000 (US$ 149) for the for sustainable economic growth. In 2006, to publicize these alternatives will pro-
same type of company. the Licensing Law (Repeals and Amend- vide entrepreneurs with a choice.
Another expensive item is the com- ments) Act eliminated the requirement The Attorney General’s IT depart-
pany seal, which is still a standard com- to obtain a trading license in addition ment is finalizing the merger of three
mercial practice in Kenya, even though to the business permit. In addition, the separate databases which would make it
it is no longer mandatory by law. The company registry underwent computer- faster to do name searches, from 3 days on
cost ranges between KES 3,000 (US$ ization. Moreover, as the authority to col- average to same-day searches. In addition,
37) in Nairobi to KES 5,000 (US$ 62) in lect stamp duty was transmitted from the Registrar is finalizing the procurement
Kilifi and the time needed for production the Ministry of Land and Housing to the of heavy-duty scanners to speed up the
ranges between 2-10 days. Kenya Revenue Authority (KRA), stamp- scanning of documents, and this, too, is
One reason why governments ing the memorandum, articles of associa- expected to reduce the time to register a
should make business entry easier and tion and Statement of the Nominal Capital business. The target for completing both
more affordable is to encourage the cre- became faster. Since early 2009, the Office activities is late October 2009.
ation of new companies. In the Arab Re- of the Prime Minister is spearheading var-
public of Egypt in 2006, limited liability ious reform initiatives: the Rapid Results WHAT TO REFORM?
companies accounted for only 19% of Initiative (RRI) is a short-term reform
registered firms. In 2008, after reforms, pilot program that focuses on process re- OPEN LOCAL BRANCHES OF THE
REGISTRAR OF COMPANIES
this share rose to 30%.5 And payoffs engineering to reduce the time and proce-
can be large. In Mexico, reforms cut the dures to undertake any activity. So far it Entrepreneurs from across Kenya have
time to start a business from 58 to 28 has been implemented in 67 government to go to Nairobi to start their company.
days in 2008 and from 28 to 13 days in institutions. The RRI is especially focused These trips involve delays and increase
2009. A recent study reports a boom in on decreasing both the time and proce- costs. Furthermore, the demand from
new businesses: the number of regis- dures required to incorporate a company other localities creates additional back-
tered Mexican businesses rose by nearly across the different provinces. logs in the already congested Companies
6%, employment increased by 2.6%, and In addition, the Registrar of Com- Registrar, as well as other agencies in-
prices fell by 1% because of the competi- panies introduced a new management volved in business start-ups in Nairobi.
tion from new entrants.6 Finally, if it is system on March 16th, 2009, which is A possible solution would be to create re-
easy to set up a business, companies that targeted at accelerating administrative gional branches in towns such as Mom-
would otherwise operate in the informal processes and simplifying registration— basa or Kisumu to where entrepreneurs
sector are more likely to legalize their op- eliminating outdated requirements, such of nearby localities could travel instead.
erations. Formally registered businesses as the typing of certificates, in order to
STARTING A BUSINESS 9
PUBLICIZE AND COMMUNICATE public safety or posing environmental
THE BENEFITS OF REFORMS TO
ENTREPRENEURS AND THE PUBLIC concerns—the government of Kenya is
imposing a significant burden on entre- 1. See the detailed description of the stan-
dard case in the Data notes.
Some reformers are bad marketers. El preneurs without an overriding public
2. World Bank. 2008. Doing Business 2009.
Salvador first established a one-stop shop benefit. In the medium term, the single
Washington, D.C. World Bank Group.
in 1999, but local entrepreneurs thought business permit should be phased out.
3. On average, a lawyer from Isiolo will
it was only for foreigners. A lesson was charge KES 49,000 (US$ 610) in order to
learned. The second time around, the CREATE A ONE-STOP SHOP FOR undertake all the incorporation proce-
BUSINESS REGISTRATION dures both in Nairobi and in Meru Town.
president himself inaugurated the im-
proved one-stop shop and widespread The Kenyan government should consider For purposes of the present report, law-
yer fees are not being considered.
media coverage made sure that everyone creating one-stop shops across the coun-
4. “General Commerce” is the type of com-
knew about the new system. try, as it has been the most common and pany we use as a reference.
In the case of Kenya, entrepreneurs relatively straightforward reform in busi- 5. World Bank. 2009. Doing Business 2010:
are often not aware of the ongoing efforts ness start-up around the world. Thirty- Reforming Through Difficult Times. Wash-
of the national government to improve nine countries have created or improved ington, D.C. World Bank Group.
business-incorporation. The fast-track one-stop shops in the past 5 years with 6. Bruhn, Miriam. 2008. “License to Sell:
company registration option, for example, promising results. For example, in Azer- The Effect of Business Registration
Reform on Entrepreneurial Activity in
should be widely promoted. It is also baijan registrations grew by 40% after Mexico.” Policy Research Working Paper
important to communicate when a re- the creation of a one-stop shop between 4538. Washington, D.C.: The World Bank
quirement is no longer necessary. A good January and May 2008, as compared to Group. The results were obtained after
example is the use of the company seal. the same period in the previous year.8 controlling for GDP per capita, number
of economic establishments per capita,
A government communication campaign Often these reforms do not require major fixed assets per capita, and investments
could raise awareness and inform the legislative changes, but require instead per capita in the benchmarked munici-
public that the seal is not legally required. willingness and a capacity to share data- palities.
bases, processes, and often staff. 7. Djankov, Simeon, Rafael La Porta, Flor-
MAKE BUSINESS PERMITS AFFORD- encio Lopez-de-Silanes, and Andrei
ABLE AND TRANSPARENT PROMOTE ONLINE START-UPS Shleifer. 2002. “The Regulation of Entry.”
Quarterly Journal of Economics 117 (1):
Although the fees obtained from the Making registration electronic is one of 1–37.
business permits are a source of revenue the most effective ways to make starting 8. World Bank. 2008. Doing Business 2009.
for local governments, high fees and un- up faster. In the past 4 years, 13 coun- Washington, D.C. World Bank Group.
certainty about the amount that will be tries introduced electronic registration, 9. Ibid.
charged may hinder formal economic ac- including Belgium, Ireland, Mauritius,
tivity. It would be beneficial for entrepre- and Norway, which lowered the average
neurs to have clear expectations of how time to start a business from 40 to 17
much the incorporation process will cost days.9 Kenya is taking steps in that direc-
depending on the location across Kenya. tion. An online portal will soon allow
Efforts should continue to reduce the for online company name search. The
number of different fee categories that a Business Regulatory Reform Unit of the
company can be placed in and lower the Ministry of Finance is posting all neces-
licensing fees across the board. sary operational licenses on the website
While the Licensing Laws (Repeals of the e-Registry. A next step would be to
and Amendments) Act of 2006 elimi- ensure transactions and online approvals
nated the requirement to obtain a trading as well. By allowing digital signatures
license, all new companies must still ob- and standardized articles of incorpora-
tain a business permit. Ideally, a company tion, the entrepreneur would be able to
registration certificate is the license to register online. If all data were validated
start any business activities which are not electronically, as in Denmark, the inter-
subject to separate licensing regulations. actions with public officials would be
By requiring the business permit from all greatly reduced in the process.
businesses—not just those dealing with
10 DOING BUSINESS IN KENYA 2010

Dealing with
construction
permits

Jane and Musa own a bookstore chain in backfire; rather than resulting in fewer average locality, Jane and Musa would
Kenya. Their business has grown rapidly accidents, they may push construction go through 12 procedures that take 104
in recent years and they need extra stor- into the informal economy. On the other days and cost 174.5% of income per cap-
age. Friends advised them to be careful in hand, objectively balanced regulations ita in order to deal with permits related
choosing where to build their warehouses, ensure both public safety and revenue for to the construction of a warehouse. In
since in some localities it can take months the government, while making the entire contrast, in OECD countries, the same
to get a building permit, clearances and construction process easier. process takes 15 procedures, 157 days,
utility connections, and in some instances Doing Business looks at construc- and 56.1% of income per capita on aver-
they may have to pay facilitation fees. tion permits as an example of licens- age—3 additional procedures, 53 days
This is why they search for the cheapest ing regulations that businesses face. It longer, but 118.4% of income per capita
and fastest location in Kenya. measures the procedures, time, and cost cheaper. The good news for Jane and
Finding the right balance between to build a commercial warehouse, hook Musa is that Kenya is the second-best
regulations aimed at protecting the pub- it up to basic utilities, and register it. It performer in the sub-Saharan African
lic and regulations that are accessible, assumes that the new warehouse will be region where a company, on average,
efficient and affordable is challenging. used for storage of nonhazardous goods would spend 259 days and pay 1,925.6%
In Kenya, almost 30% of firms identify and is located in the peri-urban area of of income per capita and go through 17
construction-related permits as a major the benchmarked locality.2 procedures to conclude its construction
constraint when doing business.1 Overly In Kenya, obtaining a construction process (figure 3.1).
rigid building rules and regulations may permit is quite fast, but expensive. In an It is easier to deal with construc-
FIGURE 3.1 tion permits and utility connections in
Best, average and worse practices in dealing with construction permits Narok, Nyeri, and Malaba than in Isiolo,
Thika, and Mombasa (table 3.1). Topping
INDIA SUB-SAHARAN INDIA 2,395 the list is Narok, whose performance is
AFRICA SUB-SAHARAN AFRICA 1,926 comparable to Estonia. Globally, Narok
would rank 21st among 183 economies
KILIFI
INDIA
284 HIGHEST on the ease of dealing with construction
SOUTH
AFRICA permits, ahead of the United States or
ISIOLO OECD Range South Africa, but behind Thailand or
127
in Kenya Singapore.
175 11-LOCALITY
SOUTH AVERAGE
AFRICA 104 In Kisumu, Jane and Musa must go
GARISSA, SUB-SAHARAN 132 LOWEST
MOMBASA AFRICA NYERI through 10 procedures to obtain con-
14 OECD 69
NAROK OECD
struction-related approvals and utility
12
SINGAPORE
SINGAPORE SOUTH connections, the same as in Jamaica. The
10 AFRICA
KISUMU SINGAPORE
same process requires 14 procedures in
Procedures Time Cost Mombasa. The variation in the number
(days) (% of income of procedures among Kenyan localities
per capita)
Source: Doing Business database. is mostly due to requirements to obtain
DEALING WITH CONSTRUC TION PERMITS 11
TABLE 3.1 ing national agencies. In contrast, in to get utility connections would rank
Where is dealing with construction
permits easy—and where not? Mombasa the same entrepreneur must 15th out of 183 economies on the time to
Cost
personally visit several departments to deal with construction permits, ahead of
(% of
Time income get approving signatures, before she can South Africa, India and China.
per
RANK Locality Procedures (days) capita) get the final approval from the Municipal The main bottlenecks are building
1 Narok 11 69 136.5 Council. permits and utility connections (fig-
2 Nyeri 11 100 132.4 In most localities, even though ure 3.2). In most instances, differences
3 Malaba 11 111 137.0 many inspections are mandated by the across localities are administrative rather
4 Kisumu 10 99 237.1 municipal bylaws, they are not strictly than regulatory. The time needed to get a
5 Garissa 14 80 156.9 implemented. The nature of the inspec- building permit depends on the backlog
5 Nairobi 11 120 161.7 tions is rather random. A municipal in municipal offices. Nairobi and Mom-
7 Eldoret 11 117 168.7 inspector stops by the construction site basa, being the cities with the highest
8 Kilifi 11 103 283.6 and checks whether the construction demand, are among the localities where
9 Mombasa 14 96 162.9 is progressing in accordance with the it takes longest. Another factor that in-
10 Thika 11 123 208.4 submitted plans. In Nairobi, a construc- fluences the time involved is the En-
11 Isiolo 13 127 134.8 tion company can fulfill the inspections vironmental Impact Assessment (EIA).
Note: Rankings are the average of the locality rankings on the requirements in-house, provided it has Although regulated nationally, the EIA is
number of procedures, the associated time and cost (% of GNI per
capita) required to deal with construction permits. See the Data a licensed structural engineer and a pro- not implemented correspondingly on the
notes for details. fessional plumber on staff. The engineer ground—6 out of 11 localities apply it,
Source: Doing Business database
and the plumber check every phase of the rest do not. The time required to get
construction and provide approving sig- utility connections depends on whether
the building-plan approval during the natures in the so-called “Physical Plan- the utility providers have a local branch.
preconstruction stage. In most Kenyan ning Act 1 Form (PPA1)”. After conclud- For example, in Isiolo it takes around 3
localities, besides getting approval from ing construction, entrepreneurs must weeks to get an inspection from the elec-
the local council, Jane and Musa must notify the building and planning author- tricity provider because the town must
get their plans approved by the Physi- ity to receive the final inspection in all rely on inspectors from the neighboring
cal Planning, Public Health and Land localities. If the inspection determines town of Meru.
Departments and the National Environ- that the building is in full compliance The average cost to comply with all
ment Management Authority. While the with all requirements, an occupancy cer- requirements to build a warehouse and
requirements are similar, implementa- tificate is issued. obtain utility connections is 174.5% of
tion varies. In Kisumu, all an entrepre- The time needed to get all approvals gross national income per capita. This
neur has to do is submit a building plan to build a commercial warehouse and average cost would rank the 11 Kenyan
to the Kisumu Municipal Council and hook it up to utilities ranges from 69 days localities 96th among 183 economies
wait for it to be approved. The Municipal in Narok to 127 days in Isiolo. Narok, globally. Nyeri is the cheapest, with
Council will forward the plan to all the with 36 days to get a construction permit 132%, while Kisumu and Kilifi are twice
relevant approving authorities, includ- and occupancy certificate, and 33 days as expensive, with 237% and 284% of
income per capita, respectively.
FIGURE 3.2
On average, 63% of total costs ac-
Building permit approvals and utility connections—the biggest bottlenecks
count for utilities, with the electricity
Time (days) 0 30 60 90 120
connection being the most expensive
Narok
(figure 3.3). This is predominantly due
Garissa
Mombasa to the lack of proper infrastructure, es-
Kisumu pecially in smaller localities. In most
Nyeri instances, if an entrepreneur wants to
Kilifi get a three-phase electricity connection,
Malaba as specified in the case study, she has
Eldoret to pay substantially higher fees. If the
Nairobi
warehouse is located in an area beyond
Thika
Isiolo
the radius covered by the transformers
provided by the Kenya Power & Light-
Building Occupancy Utilities and
permit certificate inspections
ing Company (KPLC), the cost increases
approval at least sixfold. The local KPLC office
Source: Doing Business database. in Isiolo calculated the cost for a three-
12 DOING BUSINESS IN KENYA 2010

FIGURE 3.3 company and then forward the plans to


High utility costs in most of the cities
the relevant departments for approval.
Cost (% of income per capita)
0 50 100 150 200 250 This is a good practice, but it is not opti-
Nyeri mal, since many town councils lack the
Isiolo necessary human resources to forward
Narok and follow-up on the documents. The
Malaba challenge is to convince departments
Garissa (both at the national and local level) to
Nairobi
send representatives to a centralized lo-
Mombasa
Eldoret
cation and delegate decision-making au-
Thika thority to them. In some countries, the
Kisumu compromise solution was to work out a
Kilifi part-time system, whereby representa-
Construction-related Utilities
tives from the different agencies work at
approvals the one-stop shop regularly a few times
Source: Doing Business database. a week. For instance, delegated officers
from the physical planning department,
phase connection to be KES 54,000 (US$ WHAT TO REFORM? health department, and other depart-
673) if the warehouse location is within ments could spend agreed-upon hours
a 600-meter radius of the existing trans- CONSOLIDATE CLEARANCES or days at the town-council premises to
former. For connections outside of the In Garissa, Isiolo, and other localities, review and approve building plans.
radius covered by the transformer, the builders have to obtain a number of
cost increases to more than KES 300,000 clearances when applying for building INTRODUCE ON-LINE APPLICATIONS
(US$ 3,736). permits. These require personal visits FOR BUILDING PLAN APPROVAL AND
UTILITIES CONNECTIONS
Although Kenyan localities stand to various agencies, including the town-
out in sub-Saharan Africa, sharing best planning department, the public-health In Singapore, builders submit permit
practices among themselves is crucial. department, and the land department. applications electronically. Developers
“Kenyana,” a hypothetical locality that In Italy, companies had to make separate in Austria, Denmark, Iceland, Malay-
implements best practices that exist in visits to the fire department, worker- sia, Norway, and the United States also
the country, would rank 19th among safety department, water department, complete their applications online. In
183 economies on the ease of dealing sanitation department, health depart- Kenya, building applications and the fil-
with construction permits, comparable ment, and tax department. That process ing of drawings are processed manually.
to Berlin and Paris. This ranking is much took an average of eight months. Now all In the future, it would be advantageous
better than the Kenyan average: 2 proce- project clearances are centralized in one to computerize the system so that build-
dures, 35 days, and 42% of income per office—cutting the time to go through ing information could be stored in an
capita less—which means there is much the bureaucracy to four months. Locali- easily accessible fashion and develop-
room for improvement (figure 3.4). ties like Eldoret, Kilifi and Nairobi receive ment requests could be cross-checked
the building plans from the construction for ownership, compliance, permits, and
inspections. A first step would be to
FIGURE 3.4
offer application forms online. Several
Best practices: high potential for improvement municipalities have websites in place
but they do not offer services related to
11-LOCALITY 11-LOCALITY 11-LOCALITY
AVERAGE 12 AVERAGE 104 AVERAGE 175 building permits online. It is expected
that the electronic registry of licenses
KENYA LOWEST 132 being prepared by the Business Regula-
KENYA LOWEST 10
KENYA LOWEST 69 tory Reform Unit at the Treasury De-
partment will provide key information
on construction permits and related is-
sues. Utility service providers also have
GLOBAL 0.6
LOWEST DENMARK 6 SINGAPORE 25 QATAR well-established websites where an en-
Cost trepreneur can easily access contact in-
Procedures Time (% of income
(days) per capita)
formation and information regarding
Source: Doing Business database. application procedures. As a next step,
DEALING WITH CONSTRUC TION PERMITS 13

making it possible for individuals and RATIONALIZE INSPECTIONS


firms to apply on-line for new connec- While in most Kenyan localities munici-
tions would save applicants and utility pal bylaws require several inspections 1. World Bank. 2007. Enterprise Surveys
Database. Washington, D.C.: The World
companies time. for a construction project, Denmark re- Bank Group.
quires only one. This does not imply
2. See the detailed description of the stan-
PUBLICLY DISPLAY INFORMATION that buildings in Denmark are less safe. dard case in the Data notes.
ABOUT THE CONSTRUCTION-PERMIT Random inspections are not necessarily
PROCESS 3. World Bank. 2005. Doing Business 2006:
the best way to guarantee the safety of Creating Jobs. Washington, D.C.: The
Builders need to understand how the a building. One way to make inspec- World Bank Group.
process works. Flowcharts displayed in tions more efficient is to change from
public places or on the Internet help. In a system of random inspections to one
2001, the municipal authorities in Riga that is risk-based, in which inspections
(Latvia) created a step-by-step guide are performed at critical phases of the
with a list of required documents and construction process. Another popular
flowcharts showing which offices to visit, approach among best-performing econo-
when and with what documents, and mies is the privatization of the inspection
listing the offices’ addresses, working process. The Czech Republic adopted this
hours, and contact numbers. This simple method, creating a new and independent
reform cut two months off the process profession: authorized inspectors. If a
and gave builders confidence and trust in business engages the services of an au-
the construction-permit process.3 thorized inspector, it can speed up the
Utility companies in Kenya fail process of obtaining construction per-
to provide detailed information about mits by five weeks. Nevertheless, effective
application and installation costs. Cur- implementation of this recommendation
rently, in order to find out the cost of a requires that there be safeguards against
utility connection, one has to call the corruption and real accountability for
utility companies, spending a consider- approvals issued by private inspectors.
able amount of time on the phone. Best practices exist within Kenya, too.
In Nairobi, a construction firm can have
all inspections during the construction
phase done by a licensed structural en-
gineer and a professional plumber. Other
Kenyan municipalities could follow suit.
14 DOING BUSINESS IN KENYA 2010

Registering
property

Felix is one of the best safari guides erty registration is Saudi Arabia, where Although the same procedures are re-
in Kilifi. Since he inherited his father’s an entrepreneur only needs to go through quired across Kenya, there are significant
guesthouse two years ago, he has been 2 procedures that take 2 days. The trans- differences in the time and cost needed
improving the business in order to offer action is free of charge. On average, for registering property among the lo-
more services to his visitors from all over for a Kenyan entrepreneur, it takes 8 calities included in this report. These
the world. His savings are not sufficient procedures, 53 days, and costs 6% of the differences are mainly due to variations
to buy the fully equipped safari jeep he property value to do the same. The same in the administrative efficiency of the
has set his eyes on. But, luckily he owns 8 procedures are required across Kenya. agencies involved, local fees and taxes, as
the guesthouse. He hopes his bank will These involve interactions with agencies well as whether there is a local branch of
accept it as a guarantee for a loan. such as the Lands Office, the local au- the respective national agency present in
An efficient property-registration thority and private banks, among others. the locality (table 4.1).
system allows entrepreneurs such as Felix In neighboring Tanzania and Uganda, an With 23 days needed to register a
to use their property as collateral. Having entrepreneur has to undertake more pro- property, Mombasa is the fastest local-
access to credit is crucial for businesses to cedures—9 and 13, respectively. How- ity (figure 4.1). Internationally, Mom-
grow and generate employment. Because ever, Kenya lags behind the sub-Saharan basa compares favorably with Namibia
the private sector is the main engine of African regional average of 7 procedures. or South Africa (figure 4.2). Registering
growth, improving and facilitating prop-
FIGURE 4.1
erty registration in Kenya will benefit not
Time and cost to register property in Mombasa and Garissa
only individual entrepreneurs but the
Time (days)
whole economy—including government Garissa time
80 Garissa 88 days
functions and services because of an
Mombasa Lodge the completion 30
increase in tax revenues. 70 documents with the Lands Office days
Doing Business records the full se- for registration of the transfer
quence of procedures, time and costs 60
necessary to transfer a property title
from one business to another, when a 50

company purchases a piece of land and Obtain Land Rent


40 Clearance Certificate 30
a building. All procedures are recorded days
until the buyer can house his business on 30
Mombasa time
the property, sell the property to another 23 days
company or use the property as collateral 20
1
to obtain a loan. Every procedure re- Obtain valuation 19 7 day
of the property days days
quired by law or necessary in practice is 10
8
included, whether it is the responsibility days
0
of the seller or the buyer or must be com-
1 8
pleted by a third party on their behalf.1 Procedures
The global best performer in prop- Source: Doing Business database.
REGISTERING PROPERT Y 15
TABLE 4.1 FIGURE 4.2 FIGURE 4.3
Where is registering property easy— Big range in time to register property Expensive to register property in Isiolo
and where not? Days 100 % of property value 25
Cost
(% of Isiolo 24.2%
Time property
RANK Locality Procedures (days) value) 90
20
1 Mombasa 8 23 4.14 Garissa
Nigeria
2 Kisumu 8 30 4.11 80 Sub-Saharan Africa
3 Narok 8 46 4.11 Isiolo regional average
15
4 Thika 8 60 4.09 Kilifi
70
5 Malaba 8 29 4.17
6 Eldoret 8 37 4.29 Nairobi Eldoret 10
7 Kilifi 8 75 4.14 60 Garissa
Thika Kilifi
8 Nyeri 8 53 4.21 Kisumu
9 Nairobi 8 64 4.20 Nyeri Malaba
50 Mombasa 5
10 Garissa 8 87 4.14 Nairobi Between 4.1%
Narok Narok and 4.3%
11 Isiolo 8 77 24.16 India
40 Nyeri
Note: Rankings are the average of the locality rankings on the Thika 0
number of procedures, the associated time and cost (% of property Eldoret
value) required to register property. See the Data notes for details. Ghana Source: Doing Business database.
Source: Doing Business database Kisumu 30
Malaba China
South Africa
sales tax is one of the charges levied by
property is slowest in Garissa and Isiolo, Mombasa
20
Namibia the County Council in order to obtain
Indonesia
with 87 and 77 days—almost 4 times the Council’s consent to register the
Botswana
longer than in Mombasa. Large locali- property with the Nairobi Land Registry.
10
ties like Mombasa and Kisumu benefit In total, an entrepreneur who wants to
United Kingdom
from the fact that all paperwork can be Singapore transfer a property in Isiolo has to pay
taken care of locally. On the other hand, 0 Best performers— 24.2% of the property value, only slightly
New Zealand,
entrepreneurs from lagging localities like Saudi Arabia, below the most expensive country in the
Thailand and
Garissa or Isiolo have to travel to bigger United Arab Emirates world, Syrian Arab Republic, with 28%
towns in their region or even to Nairobi Source: Doing Business database. of property value.
to obtain needed documents, such as “I cannot afford to pay one fourth
the Land Rent Clearance Certificate. “I With the exception of Isiolo, the of the value of the property to register
have to wake up very early in the morn- average cost to transfer property is 4.2% the sale,” says Douglas, who had to put
ing, and the days I spend in Nairobi of property value across the localities on hold his plans to expand his business,
are days I lose money,” says Ben, an measured in this report. Thika, Narok, because the cost of buying a land plot is
entrepreneur in Thika who cannot take and Kisumu are least expensive at 4.1% too high.
care of his business when he is away. In of property value. These localities are On the global ranking, Kenya, rep-
addition, poor customer service at the cheaper than Mexico and Mauritius— resented by Nairobi, is ranked 125th
Lands Registry demands a permanent with 5.2% and 10.7%, respectively—but among 183 economies, on the ease of
personal follow-up from the client. “You still need to improve to compete against registering property. If Nairobi adopted
have to constantly make sure that your Brazil and China—2.7% and 3.2%, re- Mombasa’s practice regarding the time
file is being processed, otherwise you spectively. Costs stem largely from the to register property and Thika’s practice
come back the next week and find your stamp duty—4% of property value—and regarding the cost, Kenya would jump 36
documents in the same place you left from the fees paid to obtain the Land positions on this indicator.
them,” says Andy, another entrepreneur Rent Clearance Certificate at the Lands
from Thika. Office and the Rates Clearance Certificate WHAT TO REFORM?
Another source of delays comes from the local government.
from obtaining the property valuation Isiolo is the town with the highest COMPUTERIZE LAND REGISTRIES
from a government assessor. This pro- cost for registering property—6 times Title searches and registration are still
cedure alone can slow down the process more expensive than the others. On done manually at the Land Offices in
for more than one month, especially in top of the 4% of property value paid for Kenya. This causes delays. Computer-
towns like Isiolo, where the entrepreneur stamp duty, an entrepreneur in Isiolo ization would digitalize files and these
has to wait for a government assessor must pay a separate sales tax, worth 20% would no longer have to be physically
from Meru—a town 45 kilometers away. of the property value (figure 4.3). This handled. This would expedite property
16 DOING BUSINESS IN KENYA 2010

registration and reduce the danger of INTRODUCE A FLAT FEE FOR STAMP
DUTY INSTEAD OF A PERCENTAGE
losing documents. This would also be OF THE PROPERTY VALUE
the first step in a more ambitious reform
linking all registries in the country and Replacing the current fee system with
allowing users to make online registra- a fixed fee reduces the incentive for
tions. Zambia computerized its land reg- property owners to either undervalue
istry and set up a customer service center their plots or not register their property
to eliminate the backlog of registration altogether. In 2007, the Arab Republic
requests. The time to register property of Egypt introduced a low fixed fee for
fell from 70 days to 39 days between 2007 stamp duty replacing the 3% registra-
and 2008. Saudi Arabia became the best tion fee. This led to a boom of property
performer in the world by computerizing registrations that increased government
procedures in 2007, making it possible revenues by 39% six months after the re-
to register property with 2 procedures form.3 In 2008, Rwanda replaced the 6%
and 2 days.2 stamp duty with a low flat fee. In Kenya,
the introduction of a flat fee would go
OPEN LOCAL BRANCHES beyond simply cutting the cost to register
Entrepreneurs from small localities have property: with a flat fee, there would be
to go to regional centers or even Nairobi no need to have the property assessed by
to complete procedures, such as obtain- the government at the time of sale. This
ing the Land Rent Clearance Certifi- would be reflected in significant time
cate. Having to travel to other localities savings, since obtaining the valuation
involves delays and higher registration alone may take more than one month in
costs. Furthermore, the demand from some cases.
other localities affects the already con-
gested Nairobi offices such as the Ardhi
House, which is in charge of issuing
clearances. Having local branches, in- 1. See the detailed description of the stan-
dard case in the Data notes.
dependent and authorized to process
2. World Bank. 2008. Doing Business 2009.
applications on site, would also help the
Washington, D.C.: The World Bank
national government to have better con- Group.
trol of property transactions and reduce 3. World Bank. 2007. Doing Business 2008.
tax evasion. Washington, D.C.: The World Bank
Group.
Enforcing
contracts

Makini, a litigation lawyer in Nyeri, has availability, as the afternoon has been ized commercial dispute. It looks at the
spent the entire morning sitting in the reserved for judgments and rulings. This time, cost, and procedural steps needed
courtroom waiting for his suit to be is exasperating for Makini and his client, to enforce a contract through the courts.2
heard. Lawyers from both sides are ready as the lawyers check their diaries for The process of resolving commer-
to proceed and both witnesses are in mutual availability and proceed to the cial disputes in Kenyan courts is regu-
court. The unexpected injunctions oc- registry to apply for another trial date. lated mainly by the Civil Procedure Act,
casioned by his opponent in the past will Makini’s frustrations are shared by Chapter (Cap) 21 of the Laws of Kenya,
therefore clearly not be an issue this time his colleagues in the various localities, together with the Civil Procedure Rules.
around. His case is fourth on the list, where on average, it takes 418 days to A number of other statutes come into
and since it is pretty straightforward, enforce an identical contract at a cost play for substantive law, for example the
with only four witnesses, should be fully of 40% of the claim value and requires Evidence Act, Cap 80; the Auctioneers’
heard today. But alas, that is not to be. It 40 procedural steps. Overall, in the sub- Act, Act No. 5 of 1996; and the Law of
has been five hours and the first case is Saharan African region, it takes on aver- Contract Act, Cap 23.
still proceeding. The magistrate has to age 644 days, costs 49.26% of the claim Despite the identical body of laws
take down all the evidence by longhand, value, and requires 39 procedural steps and regulations and the central manage-
painstakingly writing down everything to enforce an identical contractual dis- ment of the court system in Kenya, the
under the watchful eyes of the lawyers, pute. In this region, as in many other time to enforce a contract varies among
so that nothing is left out of the record. developing parts of the world, a common the different localities. An entrepreneur
Given that it is now one o’clock, the court obstacle to doing business is the absence would have to wait for 11 months to
adjourns and the remaining matters are of strong courts. As a result, 80% of the enforce the contract in Malaba—two
allocated for other days, depending on people turn to informal institutions to months more than in Namibia. In Ga-
TABLE 5.1 seek justice.1 rissa, where contract enforcement is eas-
Where is enforcing contracts easiest— An open, efficient, and globally in- iest (table 5.1) and Narok he would have
and where is it the most difficult? tegrated business environment requires to wait for an additional 3 weeks (a total
Locality RANK
an effective contract-enforcement re- of 351 days) before getting the judgment
Garissa (easiest) 1 gime and a well-functioning judiciary. satisfied, which is exactly the same time
Narok 2
In their absence, firms undertake fewer that it takes in Antigua and Barbuda. In
Malaba 3
Isiolo 4 investments and business transactions. Nairobi, the waiting period would be at
Eldoret 5 Weak judicial systems undermine com- least 15-and-a-half months, the longest
Kilifi 6 mercial trust because firms and people time among the localities measured in
Thika 7 will prefer to interact only with those Kenya, and almost twice the amount of
Kisumu 8
whose trust they have gained through time that it takes in Hong Kong, China.
Mombasa 9
Nyeri 10 past interactions, inevitably reducing the In measuring the time it takes to
Nairobi (most difficult) 11 scope of commercial activity. enforce the contract, Doing Business
Note: Rankings are the average of the locality rankings on the num- The Doing Business enforcing con- analyses the entire commercial litigation
ber of procedures, the associated time and cost to resolve a com-
mercial dispute through the courts. See the Data notes for details.
tracts indicator measures the efficiency of process for a standardized case, from fil-
Source: Doing Business database the judicial system to resolve a standard- ing and serving court papers; the pretrial
18 DOING BUSINESS IN KENYA 2010

and trial process, including judgment; FIGURE 5.1


The lengthiest delays occur during the trial and judgment phase
up to the satisfaction of the judgment
Time (days)
through enforcement processes. Through 0 100 200 300 400
this analysis, various points emerge as Malaba 240
the time-consuming elements of the dis- Garissa 300

pute-resolution process. Narok 270


Average 339
The filing and service period var-
Kilifi 365
ies across localities, although the upper
Kisumu 365
time limits are established by the Civil Eldoret 365
Procedure Rules. In some cities, it takes Isiolo 365
a shorter period to serve the initial docu- Mombasa 365
ments once they are filed. In Garissa and Nyeri 365

Narok, it takes 21 days for filing and Thika 365


Nairobi 365
service, 6% of the total time to enforce
the contract. The process takes longest in Service and filing Trial and judgement Enforcement
Nairobi—40 days for filing and service Source: Doing Business database.
of initial court documents—almost six
times longer than in Accra, Ghana. various guidelines have been issued to of time is spent in the trial and judgment
After the filing and service period, limit the number of injunctions. Some phase. The reasons for this are mainly
the first hurdle that many lawyers have magistrates tend to grant more injunc- the adjournments and delays in getting
to jump is that of obtaining a hearing tions than others. This is a problem that the trial date. In Malaba, the trial and
date, once all relevant court documents cuts across all the localities covered. judgement time takes 72.7% of the total
have been filed and exchanged between Moreover, adjournments are a dou- time to enforce a contract. This amounts
the parties. The availability of a trial date ble-edged sword. Not only do they cause to 240 days, 50 days more than in Mexico
depends upon how congested the court unnecessary costs and inconvenience, City. In Kisumu and Kilifi, it takes about
diary is. In Nairobi, the diary for the but they may also delay the trial signifi- 85.9% of the total time, amounting to
entire year is typically full by the end of cantly. Once an adjournment is granted, 365 days each, 7 months longer than
the first quarter of the year. This means the suit falls off the diary track and must in Singapore. On average, the trial and
that if the parties are ready to apply for a be allocated a new date. If the court diary judgment period for a contractual dis-
hearing date at the beginning of May, the is full for the next months, this piles pute takes about 339 days or 80.9% of
earliest date that they would get would be delay on top of delay. In some courts, the the total time to enforce the contract
in January of the following year. The same magistrates may grant another hearing (figure 5.1).
applies in Thika. In Kisumu and Nyeri, date for adjournments while in court. Many of the enforcement proce-
the delay is much shorter; parties can This is typically easier and is done for dures are provided for in the Civil Pro-
typically get a date within two to three example in Narok. In most other courts, cedure Rules as well as the Auctioneers’
months of closure of pleadings. Courts one would have to get a date in the regis- Act. Delays may be occasioned by the
in Mombasa have a unique closed-diary try. The courts in Bungoma, where com- fact that parties need to obtain court
system, in which the court diary is open mercial disputes relating to Malaba are dates to have ‘mention’ proceedings in
in quarters according to the calendar heard, tend to be strict on adjournments. court as a prerequisite for confirma-
year. This makes the fixing of hearing This contributes to the speed of enforce- tion of the judgment execution by auc-
dates much faster. This is a practice that ment in Malaba. tion. The period ranges from 30 days in
the other courts could consider adopting. Once the hearing has been con- Kisumu, Kilifi, and Garissa, to 60 days in
Adjournments also slow down the cluded, parties may spend a significant Nairobi, Thika, Nyeri, Narok, Mombasa,
trial period considerably. The nature of amount of time awaiting judgment. The Malaba, and Isiolo.
the judicial process being an adversarial law does not provide for a mandatory A number of reforms are being dis-
one means that the progress of the suit is period during which judgments must cussed or implemented. These include
for the most part at the pace of the parties be delivered at the lower (magistrates’) the pending amendments to the Civil
and their lawyers. The role of judges is to courts. There is a 42-day guideline pro- Procedure Act and Rules. Part of the
neutrally referee the trial. Often lawyers vided for High Court matters, which problem has been the complexity of
take advantage of this latitude to delay the magistrates’ courts are by implication these provisions of law and the goal is to
trial through obtaining injunctions. The expected to follow. Rarely is this done in simplify them for faster judicial process
law does not limit the number of injunc- practice, however. as well as to modernize them so that they
tions that a party may be given. However, In all the localities covered, the bulk are in line with contemporary commer-
ENFORCING CONTRAC TS 19
FIGURE 5.2 court interest rates by the winning party.
Cost of enforcing a commercial contract in court across Kenya
Cost (% of claim)
It is much higher than in Tanzania (0%),
0 10 20 30 Namibia (0.8%) and Botswana (1.5%).
Isiolo 38.4 If one were to create a hypotheti-
Garissa 38.7 cal city, “Kenyana,” composed of the
Narok 38.9 best contract-enforcement features, one
Eldoret 39.0
would combine the total time required
Malaba 39.2
in Malaba (330 days) and the cost in-
Thika 39.5
Kilifi 39.8
volved in Isiolo (38.4%). It would rank
Mombasa 39.9 as 92nd overall in enforcing contracts,
Average 40.2 rather than 126th, as Kenya now does
Nyeri 40.3 (table 5.2).
Kisumu 41.2
Nairobi 47.2
WHAT TO REFORM?
Attorney fees Court fees Enforcement
fees Running an efficient court system is by no
Source: Doing Business database.
means an easy task; it poses a continuous
cial realities. There are also discussions matter of agreement between the parties. challenge even to more industrialized
to increase paralegal staff in courts and Expert fees as a percentage of court costs countries. Kenya is certainly no excep-
to set procedural time limits. are the lowest at 38.5% in Garissa, and tion. Economies that score well on the
The fees and costs related to lawsuits highest at 47.3% in Kisumu. The main ease of enforcing contracts keep courts
are regulated by standard laws across the reasons for the differences are the avail- efficient by streamlining case-processing
country. As a result, the variances be- ability of experts and the extent to which from filing through appeals. They make
tween the cities are not significant. In they are flexible in their fees. enforcement of judgments faster and
Malaba, where enforcement takes the Enforcement costs include reg- cheaper by introducing early-settlement
least time, it costs 39.23% of the claim istering the judgment, organizing for options, case-management systems,
value, proving that efficiency in con- the public sale of the goods, and other strict procedural time limits, and special-
tract enforcement does not necessarily enforcement costs. In Kenya, the costs ized commercial courts. Kenya can learn
go hand-in-hand with lower costs. The of extracting the decree are regulated from some of these reforms.
cost in Malaba is comparable to that in and standardized under the law. The
Zambia. The highest cost in enforcing auctioneers’ fees are also regulated5 al- INTRODUCE SMALL CLAIMS COURTS
contracts is in Nairobi, at 47.2% of the though depending on the competition, A major contributor to the backlog of
claim value. The average of the cost in there is room for negotiation with the cases is the large number of small claims
the 11 localities is 40.2% almost double client. In Malaba, the auctioneer’s fee filed. Given that it takes an average of
the cost in Australia (figure 5.2). amounts to 72.1% of the enforcement 418 days at a cost of 40.2% of the claim
Lawyers’ fees are regulated under costs while in Mombasa, it amounts to value to prosecute a commercial dispute
specific guidelines, as a result of which 83.9%. Auctioneers’ fees generally tend through the courts, it would be more cost
these do not vary across the different lo- to relate in direct proportion to the size and time effective to establish a separate
calities.3 The law sets the minimum fees of the locality. It is less than 80% of stream of courts to handle disputes below
chargeable for specific services, thereby the enforcement costs in Malaba, Isiolo, a certain threshold. Such a court could be
preventing undercutting. It is also im- Garissa, and Kilifi whereas it is above regulated under a simplified procedural
portant to note that the law allows for 80% in Kisumu, Mombasa, Narok, Nyeri, regime, so that parties could file and
winning parties to recover the costs of and Thika. In some towns, for example, handle matters without the need for
the suit including attorney’s fees, court Narok, the main issue is the availability lawyers, which would further reduce the
costs, and enforcement costs. of auctioneers. Because there is only one costs. In Africa, this reform has recently
Court costs include case filing fees, auctioneer, litigants are forced to travel been undertaken in Botswana, where
expert fees, and other court costs. The to Nakuru, about three hours away by small-claims courts have been added as
filing fees are regulated by law4 and are road. Because auctioneers are licensed to an additional layer in the magistrates’
computed in the various registries upon practice by province, litigants cannot use courts, with a threshold of BWP 7,000
filing the claim. The main variations in auctioneers outside the province6 even equivalent to KES 78,309 (USD 1,035).
court costs are related to expert fees. where these may be nearer. The average South Africa, Mauritius and Zambia are
The experts may be members of differ- total enforcement costs amount to 5% other sub-Saharan African countries
ent professions and the fee is therefore a of the claim. These can be recovered at with small-claims courts.
20 DOING BUSINESS IN KENYA 2010

TABLE 5.2 FIGURE 5.3


How do Kenyan localities compare Specialized commercial courts in Africa help to reduce delays in enforcing contracts
globally and regionally in enforcing Time to enforce a contract (days)
contracts? 800 Democratic
(selected economies) Nigeria Republic
2004 of Congo
Economy Region Ranking
Singapore EAP 13 600 Ghana Burkina
Tanzania SSA 31 Faso
Namibia SSA 41
2009 Mauritania Rwanda
Ghana SSA 47 400
Malaysia EAP 59
Mauritius SSA 66
South Africa SSA 85 200
“Kenyana” SSA 92
Kenya (Nairobi) SSA 126 Source: Doing Business database.
Jamaica LAC 128
United Arab Emirates MENA 134 KEEP STATISTICS AND MEASURE THE
Egypt, Arab Republic MENA 148 IMPACT OF REFORMS for progress to be measured. In Macedo-
India SA 182 Statistical information helps assess court nia, FYR, the number of cases pending
EAP: East Asia and Pacific; LAC: Latin America and the Caribbean performance. Statistics are already being for more than three years was reduced by
OECD: OECD high income; SA: South Asia; SSA: Sub-Saharan
Africa. kept on the number of commercial cases 46%. Litigants in longstanding disputes
Source: Doing Business database. being handled and disposed of, the clear- were summoned to appear in court on
ance rate on how long cases take to be set days and if neither appeared, the case
INCREASE PROCEDURAL EFFICIENCY
BY STREAMLINING THE TRIAL AND resolved, and the appeals rate. What was dismissed. The reform cut the time
JUDGMENT PROCESS is currently missing is a more detailed to enforce a contract in court from 509
The trial process revolves around how tracking of the time it takes for differ- days to 385 days.8
proactive the litigating parties are and ent types of commercial cases to move
the availability of the magistrate to ref- through the court process. Such statis- INTRODUCE SPECIALIZED
eree the process. When magistrates go on tics will inform management decisions COMMERCIAL COURTS
leave or when they are transferred to new and the development of improved poli- Most magistrates’ courts in Kenya oper-
duty stations, the trial process is put on cies and recommendations for legislative ate both as civil and criminal courts. In
hold. Not only does this add to the back- changes. Improved statistical capacities some, like in Nyeri, specific days are al-
log, it considerably drives up the time will also allow for careful analysis of the located to civil and to criminal matters.
and cost involved for the parties. Matters actual impact of the ongoing reforms to This slows down the process of commer-
become more complicated if the hearing guide the direction of future policies of cial dispute resolution. In Nairobi, there
is closed and all that is awaited is the judicial reform. are specialized commercial courts at the
judgment. Often a magistrate transferred magistrate level. The government can
to a new duty station has to be called REDUCE BACKLOG OF CASES consider introducing the same to other
back to his or her old duty station to The backlog of cases in the Kenyan judi- localities, beginning with those with the
pronounce judgments of cases that they cial system is related to the adversarial higher number of filed cases, and gradu-
were handling. Only in extreme cases is nature of the system, which requires the ally expanding to others. This requires
the file passed on to another magistrate. action of the parties to proceed. Many in- significant planning and structuring.
Because magistrates have to transcribe active, long-unprosecuted cases lie dor- Countries that have specialized courts
all the evidence by hand, often there is mant, taking up space in the registries or specialized commercial sections in
a need to have the proceedings typed and hampering efficient case allocation the general courts resolve commercial
in order for the appointed magistrate among magistrates. Macedonia, FYR and disputes about 40% faster than countries
to read them and write a judgment. The Botswana are examples of countries that that do not. A number of African econo-
court administration can address such is- faced similar problems and introduced mies have seen reductions in the time to
sues by setting up a changeover system to bold measures to tackle the problem. enforce contracts after introducing these
ensure smooth continuation of matters In Botswana, judicial officers set aside a courts (figure 5.3). If reforms in the spe-
even with the movement of the magis- number of days to conduct roll calls on cialized courts yield satisfied users, they
trates handling them. aged matters and dismissed the unre- embolden governments to implement
sponsive ones.7 The reform is too recent broader reforms.9
ENFORCING CONTRAC TS 21

1. Wojkowska, Ewa. 2006. “Doing Justice:


How Informal Justice Systems Can Con-
tribute.” Oslo, Norway: Oslo Governance
Centre, United Nations Development
Programme.
2. See the detailed description of the stan-
dard case in the Data notes.
3. The Advocates (Remuneration) (Amend-
ment) Order, 2009.
4. The Judicature Act, Cap 8 of the Laws of
Kenya.
5. The Auctioneers’ Act, Act No. 5 of 1996.
6. Both Narok and Nakuru are in the Rift
Valley Province, one of the eight prov-
inces in the country.
7. Case Management System introduced in
Botswana on February 1, 2008.
8. World Bank. 2006. Doing Business 2007:
How to Reform. Washington, D.C.: The
World Bank Group.
9. World Bank. 2007. Doing Business 2008.
Washington, D.C.: The World Bank
Group.
22 DOING BUSINESS 2010

Data notes Economy characteristics


GROSS NATIONAL INCOME (GNI) EXCHANGE RATE
PER CAPITA The exchange rate used in this report is
Doing Business in Kenya 2010 reports 2008 1 US$ = 80.29 KES (Kenyan Shillings)
income per capita and population as pub-
lished in the World Bank’s World Develop- POPULATION
ment Indicators 2009. Income is calculated Doing Business uses the World Bank re-
using the Atlas method (current US$). For gional and income group classifications,
cost indicators expressed as a percentage available at http://www
of income per capita, 2008 GNI in local cur- .worldbank.org/data/countryclass.
rency units is used as the denominator.
Kenya’s GNI per capita in 2008 = US$ 767

The indicators presented and analyzed case of Kenya. Surveys are administered comparisons and benchmarks are valid
in Doing Business in Kenya 2010 mea- through more than 115 local experts, across economies. Finally, the data not
sure business regulation and the pro- including lawyers, business consultants, only highlight the extent of specific regu-
tection of property rights—and their accountants, government officials and latory obstacles to doing business but
effect on businesses, especially small other professionals routinely administer- also identify their source and point to
and medium-size domestic firms. First, ing or advising on legal and regulatory what might be reformed.
the indicators document the degree of requirements. These experts have sev-
regulation, such as the number of pro- eral rounds of interaction with the Sub- LIMITS TO WHAT IS MEASURED
cedures to start a business, to construct national Doing Business team, through The Doing Business methodology applied
a warehouse or to register and transfer face-to-face interviews, conference calls, to Doing Business in Kenya 2010 has 4
commercial property. Second, they gauge written correspondence and visits by the limitations that should be considered
regulatory outcomes, such as the time team. For Doing Business in Kenya 2010 when interpreting the data. First, the
and cost to enforce a contract. For details the team members visited Kenya two data often focus on a specific business
on how the rankings on these indicators times to recruit respondents, verify data form—generally a limited liability com-
are constructed, see Aggregate Ranking and meet with local government officials. pany (or its legal equivalent) of a speci-
at the end of this section. The team also invited local government fied size—and may not be representative
In this project, Doing Business indi- officials and judges to review the prelimi- of the regulation on other businesses, for
cators have been created for 11 Kenyan nary results and offered them a right of example, sole proprietorships. Second,
localities—the complete list is available reply period. The data from surveys are transactions described in a standardized
on page 29. The data for all sets of indica- subjected to numerous tests for robust- case scenario refer to a specific set of is-
tors in Doing Business in Kenya 2010 are ness, which lead to revisions or expan- sues and may not represent the full set
current as of June 2009. sions of the information collected. of issues a business encounters. Third,
The Doing Business methodology of- the measures of time involve an ele-
METHODOLOGY fers several advantages. It is transparent, ment of judgment by the expert respon-
using factual information about what dents. When sources indicate different
The Doing Business in Kenya 2010 data laws and regulations say and allowing estimates, the time indicators reported in
are collected in a standardized way, fol- multiple interactions with local respon- Doing Business represent the median val-
lowing the methodology developed by dents to clarify potential misinterpreta- ues of several responses given under the
the Doing Business team. To start, the tions of questions. Having representative assumptions of the standardized case.
Doing Business team, with academic ad- samples of respondents is not an issue, Finally, the methodology assumes
visers, designs a survey. The survey uses as the texts of the relevant laws and that a business has full information on
a simple business case to ensure com- regulations are collected and answers what is required and does not waste
parability across economies and over checked for accuracy. The methodology time when completing procedures. In
time—with assumptions about the legal is inexpensive and easily replicable, so practice, completing a procedure may
form of the business, its size, its location data can be collected in a large sample take longer if the business lacks informa-
and the nature of its operations. Then, of economies. Because standard assump- tion or is unable to follow up promptly.
the survey is customized to the particular tions are used in the data collection, Alternatively, the business may choose
DATA NOTES 23

to disregard some burdensome proce- r Operates in the economy’s selected same website but require separate filings,
dures. For both reasons the time delays localities. they are counted as 2 procedures.
reported in Doing Business in Kenya r Is 100% domestically owned and has Both pre- and post-incorporation
2010 would differ from the recollection 5 owners, none of whom is a legal procedures that are officially required
of entrepreneurs reported in the World entity. for an entrepreneur to formally operate a
Bank Enterprise Surveys or other percep- r Has start-up capital of 10 times business are recorded.
tion surveys. income per capita at the end of 2008, Procedures required for official cor-
paid in cash. respondence or transactions with public
STARTING A BUSINESS r Performs general industrial or com- agencies are also included. For example,
mercial activities, such as the produc- if a company seal or stamp is required
Doing Business in Kenya 2010 records all tion or sale to the public of products on official documents, such as tax dec-
procedures that are officially required or services. The business does not larations, obtaining the seal or stamp is
for an entrepreneur to start up and for- perform foreign trade activities and counted. Similarly, if a company must
mally operate an industrial or commer- does not handle products subject to a open a bank account before registering
cial business. These include obtaining all special tax regime, for example, liquor for sales tax or value added tax, this
necessary licenses and permits and com- or tobacco. It is not using heavily pol- transaction is included as a procedure.
pleting any required notifications, verifi- luting production processes. Shortcuts are counted only if they fulfill 4
cations or inscriptions for the company r Leases the commercial plant and criteria: they are legal, they are available
and employees with relevant authorities. offices and is not a proprietor of real to the general public, they are used by
After a study of laws, regulations estate. the majority of companies, and avoiding
and publicly available information on r Does not qualify for investment them causes substantial delays.
business entry, a detailed list of proce- incentives or any special benefits. Only procedures required of all busi-
dures is developed, along with the time r Has at least 10 and up to 50 employees nesses are covered. Industry-specific pro-
and cost of complying with each proce- 1 month after the commencement of cedures are excluded. For example, pro-
dure under normal circumstances and operations, all of them nationals. cedures to comply with environmental
the paid-in minimum capital require- r Has a turnover of at least 100 times regulations are included only when they
ments. Subsequently, local incorpora- income per capita. apply to all businesses conducting gen-
tion lawyers and government officials r Has a company deed 10 pages long. eral commercial or industrial activities.
complete and verify the data. Procedures that the company undergoes
Information is also collected on the PROCEDURES to connect to electricity, water, gas and
sequence in which procedures are to A procedure is defined as any interaction waste disposal services are not included.
be completed and whether procedures of the company founders with external
may be carried out simultaneously. It is parties (for example, government agen- TIME
assumed that any required information cies, lawyers, auditors or notaries). In- Time is recorded in calendar days. The
is readily available and that all agencies teractions between company founders or measure captures the median duration
involved in the start-up process function company officers and employees are not that incorporation lawyers indicate is
without corruption. If answers by local counted as procedures. Procedures that necessary to complete a procedure with
experts differ, inquiries continue until must be completed in the same build- minimum follow-up with government
the data are reconciled. ing but in different offices are counted agencies and no extra payments. It is as-
To make the data comparable across as separate procedures. If founders have sumed that the minimum time required
economies, several assumptions about the to visit the same office several times for for each procedure is 1 day. Although
business and the procedures are used. different sequential procedures, each is procedures may take place simultane-
counted separately. The founders are as- ously, they cannot start on the same day
ASSUMPTIONS ABOUT THE BUSINESS sumed to complete all procedures them- (that is, simultaneous procedures start
The business: selves, without middlemen, facilitators, on consecutive days). A procedure is
r Is a limited liability company. If there accountants or lawyers, unless the use considered completed once the company
is more than one type of limited of such a third party is mandated by has received the final document, such
liability company in the economy, the law. If the services of professionals are as the company registration certificate
limited liability form most popular required, procedures conducted by such or tax number. It is assumed that the
among domestic firms is chosen. professionals on behalf of the company entrepreneur does not waste time and
Information on the most popular are counted separately. Each electronic commits to completing each remaining
form is obtained from incorporation procedure is counted separately. If 2 pro- procedure without delay. The time that
lawyers or the statistical office. cedures can be completed through the the entrepreneur spends on gathering
24 DOING BUSINESS 2010

information is ignored. It is assumed The data details on starting a business r Has 5 owners, none of whom is a legal
that the entrepreneur is aware of all entry can be found for each economy at http:// entity.
regulations and their sequence from the www.doingbusiness.org by selecting the r Is fully licensed and insured to carry
beginning but has had no prior contact economy in the drop-down list. This meth- out construction projects, such as
with any of the officials. odology was developed in Djankov and building warehouses.
others (2002) and is adopted here with r Has 60 builders and other employees,
COST minor changes. all of them nationals with the
Cost is recorded as a percentage of the technical expertise and professional
economy’s income per capita. It includes DEALING WITH CONSTRUCTION experience necessary to obtain
all official fees and fees for legal or pro- PERMITS construction permits and approvals.
fessional services if such services are r Has at least 1 employee who is a
required by law. Fees for purchasing and Doing Business in Kenya 2010 records all licensed architect and registered with
legalizing company books are included procedures required for a business in the the local association of architects.
if these transactions are required by law. construction industry to build a stan- r Has paid all taxes and taken out all
The company law, the commercial code dardized warehouse. These procedures necessary insurance applicable to its
and specific regulations and fee sched- include submitting all relevant project- general business activity (for example,
ules are used as sources for calculating specific documents (for example, build- accidental insurance for construction
costs. In the absence of fee schedules, a ing plans and site maps) to the authori- workers and third-person liability
government officer’s estimate is taken ties; obtaining all necessary clearances, insurance).
as an official source. In the absence of a licenses, permits and certificates; com- r Owns the land on which the
government officer’s estimate, estimates pleting all required notifications; and re- warehouse is built.
of incorporation lawyers are used. If ceiving all necessary inspections. Doing
several incorporation lawyers provide Business in Kenya 2010 also records pro- ASSUMPTIONS ABOUT THE
WAREHOUSE
different estimates, the median reported cedures for obtaining connections for
value is applied. In all cases the cost ex- electricity, water, sewerage and a fixed The warehouse:
cludes bribes. land line. Procedures necessary to regis- r Will be used for general storage
ter the property so that it can be used as activities, such as storage of books or
PAID-IN MINIMUM CAPITAL collateral or transferred to another entity stationery. The warehouse will not be
The paid-in minimum capital require- are also counted. The survey divides the used for any goods requiring special
ment reflects the amount that the entre- process of building a warehouse into dis- conditions, such as food, chemicals or
preneur needs to deposit in a bank or tinct procedures and calculates the time pharmaceuticals.
with a notary before registration and up to and cost of completing each procedure in r Has 2 stories, both above ground,
3 months following incorporation and is practice under normal circumstances. with a total surface of approximately
recorded as a percentage of the economy’s Information is collected from experts 1,300.6 square meters (14,000 square
income per capita. The amount is typi- in construction licensing, including ar- feet). Each floor is 3 meters (9 feet, 10
cally specified in the commercial code or chitects, construction lawyers, construc- inches) high.
the company law. Many economies have a tion firms, utility service providers and r Has road access and is located in
minimum capital requirement but allow public officials who deal with building the periurban area of the economy’s
businesses to pay only a part of it before regulations, including approvals and in- selected localities (that is, on the
registration, with the rest to be paid after spections. To make the data comparable fringes of the localities but still within
the first year of operation. In Italy in across economies, several assumptions their official limits).
June 2009, the minimum capital require- about the business, the warehouse project r Is not located in a special economic
ment for limited liability companies was and the utility connections are used. or industrial zone. The zoning
€10,000, of which at least €2,500 was requirements for warehouses are met
payable before registration. The paid-in ASSUMPTIONS ABOUT THE by building in an area where similar
minimum capital recorded for Italy is CONSTRUCTION COMPANY warehouses can be found.
therefore €2,500, or 9.7% of income per The business (BuildCo): r Is located on a land plot of 929 square
capita. In Mexico the minimum capital r Is a limited liability company. meters (10,000 square feet) that
requirement was 50,000 pesos, of which r Operates in the economy’s selected is 100% owned by BuildCo and is
one-fifth needed to be paid before reg- localities. accurately registered in the cadastre
istration. The paid-in minimum capital r Is 100% domestically and privately and land registry.
recorded for Mexico is therefore 10,000 owned. r Is a new construction (there was no
pesos, or 8.9% of income per capita. previous construction on the land).
DATA NOTES 25

r Has complete architectural and The telephone connection: dures to legally build a warehouse are
technical plans prepared by a licensed r Is 10 meters (32 feet, 10 inches) from recorded, including those associated
architect. the main telephone network. with obtaining land use approvals and
r Will include all technical equipment r Is a fixed land line. preconstruction design clearances; re-
required to make the warehouse fully ceiving inspections before, during and
operational. PROCEDURES after construction; getting utility con-
A procedure is any interaction of the nections; and registering the warehouse
ASSUMPTIONS ABOUT THE UTILITY company’s employees or managers with property. Nonrecurring taxes required
CONNECTIONS external parties, including government for the completion of the warehouse
The electricity connection: agencies, notaries, the land registry, the project also are recorded. The building
r Is 10 meters (32 feet, 10 inches) from cadastre, utility companies, public and code, information from local experts and
the main electricity network. private inspectors and technical experts specific regulations and fee schedules are
r Is a medium-tension, 3-phase, 4-wire apart from in-house architects and en- used as sources for costs. If several local
Y, 140-kVA connection. Three-phase gineers. Interactions between company partners provide different estimates, the
service is available in the construction employees, such as development of the median reported value is used.
area. warehouse plans and inspections con-
r Will be delivered by an overhead ducted by employees, are not counted The data details on dealing with con-
service, unless overhead service is not as procedures. Procedures that the com- struction permits can be found for each
available in the periurban area. pany undergoes to connect to electricity, economy at http://www.doingbusiness.org
r Consists of a simple hookup unless water, sewerage and telephone services by selecting the economy in the drop-
installation of a private substation are included. All procedures that are down list.
(transformer) or extension of network legally or in practice required for build-
is required. ing a warehouse are counted, even if they REGISTERING PROPERTY
r Requires the installation of only one may be avoided in exceptional cases.
electricity meter. Doing Business in Kenya 2010 records
BuildCo is assumed to have a licensed TIME the full sequence of procedures neces-
electrician on its team to complete the Time is recorded in calendar days. The sary for a business (buyer) to purchase a
internal wiring for the warehouse. measure captures the median duration property from another business (seller)
that local experts indicate is necessary to and to transfer the property title to the
The water and sewerage connection: complete a procedure in practice. It is as- buyer’s name so that the buyer can use
r Is 10 meters (32 feet, 10 inches) from sumed that the minimum time required the property for expanding its business,
the existing water source and sewer for each procedure is 1 day. Although use the property as collateral in taking
tap. procedures may take place simultane- new loans or, if necessary, sell the prop-
r Does not require water for ously, they cannot start on the same day erty to another business. The process
fire protection reasons; a fire (that is, simultaneous procedures start starts with obtaining the necessary docu-
extinguishing system (dry system) on consecutive days). If a procedure can ments, such as a copy of the seller’s title if
will be used instead. If a wet fire be accelerated legally for an additional necessary, and conducting due diligence
protection system is required by law, cost, the fastest legal procedure available if required. The transaction is considered
it is assumed that the water demand and used by the majority of construc- complete when it is opposable to third
specified below also covers the water tion companies is chosen. It is assumed parties and when the buyer can use the
needed for fire protection. that BuildCo does not waste time and property, use it as collateral for a bank
r Has an average water use of 662 liters commits to completing each remaining loan or resell it.
(175 gallons) a day and an average procedure without delay. The time that Every procedure required by law
wastewater flow of 568 liters (150 BuildCo spends on gathering information or necessary in practice is included,
gallons) a day. is ignored. It is assumed that BuildCo is whether it is the responsibility of the
r Has a peak water use of 1,325 liters aware of all building requirements and seller or the buyer or must be completed
(350 gallons) a day and a peak their sequence from the beginning. by a third party on their behalf. Local
wastewater flow of 1,136 liters (300 property lawyers, notaries and property
gallons) a day. COST registries provide information on pro-
r Will have a constant level of water Cost is recorded as a percentage of the cedures as well as the time and cost to
demand and wastewater flow economy’s income per capita. Only of- complete each of them.
throughout the year. ficial costs are recorded. All the fees To make the data comparable across
associated with completing the proce- economies, several assumptions about
26 DOING BUSINESS 2010

the parties to the transaction, the prop- PROCEDURES agencies or lawyers. Other taxes, such as
erty and the procedures are used. A procedure is defined as any interaction capital gains tax or value added tax, are
of the buyer or the seller, their agents (if excluded from the cost measure. Both
ASSUMPTIONS ABOUT THE PARTIES an agent is legally or in practice required) costs borne by the buyer and those borne
The parties (buyer and seller): or the property with external parties, by the seller are included. If cost esti-
r Are limited liability companies. including government agencies, inspec- mates differ among sources, the median
r Are located in the periurban area of tors, notaries and lawyers. Interactions reported value is used.
the economy’s selected localities. between company officers and employ-
r Are 100% domestically and privately ees are not considered. All procedures The data details on registering property
owned. that are legally or in practice required for can be found for each economy at http://
r Have 50 employees each, all of whom registering property are recorded, even www.doingbusiness.org by selecting the
are nationals. if they may be avoided in exceptional economy in the drop-down list.
r Perform general commercial cases. It is assumed that the buyer fol-
activities. lows the fastest legal option available and ENFORCING CONTRACTS
used by the majority of property owners.
ASSUMPTIONS ABOUT THE PROPERTY Although the buyer may use lawyers or Indicators on enforcing contracts mea-
The property: other professionals where necessary in sure the efficiency of the judicial system
r Has a value of 50 times income per the registration process, it is assumed in resolving a commercial dispute. The
capita. The sale price equals the value. that it does not employ an outside fa- data are built by following the step-by-
r Is fully owned by the seller. cilitator in the registration process unless step evolution of a commercial sale dis-
r Has no mortgages attached and has legally or in practice required to do so. pute before local courts. The data are col-
been under the same ownership for lected through study of the codes of civil
the past 10 years. TIME procedure and other court regulations as
r Is registered in the land registry or Time is recorded in calendar days. The well as surveys completed by local litiga-
cadastre, or both, and is free of title measure captures the median duration tion lawyers as well as by judges.
disputes. that property lawyers, notaries or registry
r Is located in a periurban commercial officials indicate is necessary to complete Assumptions about the case:
zone, and no rezoning is required. a procedure. It is assumed that the mini- r The value of the claim equals 200% of
r Consists of land and a building. The mum time required for each procedure the economy’s income per capita.
land area is 557.4 square meters is 1 day. Although procedures may take r The dispute concerns a lawful trans-
(6,000 square feet). A 2-story place simultaneously, they cannot start action between 2 businesses (Seller
warehouse of 929 square meters on the same day. It is assumed that the and Buyer), located in the economy’s
(10,000 square feet) is located on the buyer does not waste time and commits selected localities. Seller sells goods
land. The warehouse is 10 years old, is to completing each remaining procedure worth 200% of the economy’s income
in good condition and complies with without delay. If a procedure can be accel- per capita to Buyer. After Seller deliv-
all safety standards, building codes erated for an additional cost, the fastest ers the goods to Buyer, Buyer refuses
and other legal requirements. The legal procedure available and used by the to pay for the goods on the grounds
property of land and building will be majority of property owners is chosen. If that the delivered goods were not of
transferred in its entirety. procedures can be undertaken simultane- adequate quality.
r Will not be subject to renovations ously, it is assumed that they are. It is as- r Seller (the plaintiff) sues Buyer (the
or additional building following the sumed that the parties involved are aware defendant) to recover the amount
purchase. of all regulations and their sequence from under the sales agreement (that is,
r Has no trees, natural water sources, the beginning. Time spent on gathering 200% of the economy’s income per
natural reserves or historical information is not considered. capita). Buyer opposes Seller’s claim,
monuments of any kind. saying that the quality of the goods is
r Will not be used for special purposes, COST not adequate. The claim is disputed
and no special permits, such as for Cost is recorded as a percentage of the on the merits.
residential use, industrial plants, property value, assumed to be equiva- r A court in the economy’s largest
waste storage or certain types of lent to 50 times income per capita. Only business city with jurisdiction over
agricultural activities, are required. official costs required by law are re- commercial cases worth 200% of
r Has no occupants (legal or illegal), corded, including fees, transfer taxes, income per capita decides the dispute.
and no other party holds a legal stamp duties and any other payment to r Seller attaches Buyer’s movable assets
interest in it. the property registry, notaries, public (for example, office equipment,
DATA NOTES 27

vehicles) prior to obtaining a TIME AGGREGATE RANKING


judgment because Seller fears that Time is recorded in calendar days,
Buyer may become insolvent. counted from the moment the plaintiff The aggregate ranking index ranks local-
r Expert opinions are given on the files the lawsuit in court until payment. ities from 1 to 11. The index is calculated
quality of the delivered goods. If it This includes both the days when ac- as the ranking on the simple average of
is standard practice in the economy tions take place and the waiting peri- locality percentile rankings on each of
for each party to call its own expert ods between. The average duration of the 4 topics covered in Doing Business in
witness, the parties each call one different stages of dispute resolution is Kenya 2010. The ranking on each topic is
expert witness. If it is standard recorded: the completion of service of the simple average of the percentile rank-
practice for the judge to appoint an process (time to file the case), the issu- ings on its component indicators.
independent expert, the judge does ance of judgment (time for the trial and The aggregate ranking index is lim-
so. In this case the judge does not obtaining the judgment) and the mo- ited in scope. It does not account for an
allow opposing expert testimony. ment of payment (time for enforcement economy's proximity to large markets,
r The judgment is 100% in favor of of judgment). the quality of its infrastructure services
Seller: the judge decides that the (other than services related to trading
goods are of adequate quality and that COST across borders or construction permits),
Buyer must pay the agreed price. Cost is recorded as a percentage of the the security of property from theft and
r Buyer does not appeal the judgment. claim, assumed to be equivalent to 200% looting, macroeconomic conditions or
The judgment becomes final. of income per capita. No bribes are re- the strength of underlying institutions.
r Seller takes all required steps for corded. Three types of costs are recorded: There remains a large unfinished agenda
prompt enforcement of the judgment. court costs, enforcement costs and aver- for research into what regulation consti-
The money is successfully collected age attorney fees. tutes binding constraints, what package
through a public sale of Buyer’s Court costs include all costs Seller of reforms is most effective and how
movable assets (for example, office (plaintiff) must advance to the court these issues are shaped by the context
equipment, vehicles). regardless of the final cost to Seller. Ex- of an economy. The Doing Business in-
pert fees, if required by law or necessary dicators provide a new empirical data
PROCEDURES in practice, are included in court costs. set that may improve understanding of
The list of procedural steps compiled Enforcement costs are all costs Seller these issues.
for each economy traces the chronol- (plaintiff) must advance to enforce the
ogy of a commercial dispute before the judgment through a public sale of Buyer’s
relevant court. A procedure is defined movable assets, regardless of the final
as any interaction between the parties, cost to Seller. Average attorneys fees are
or between them and the judge or court the fees Seller (plaintiff) must advance to
officer. This includes steps to file the case, a local attorney to represent Seller in the
steps for trial and judgment and steps standardized case.
necessary to enforce the judgment.
The survey allows respondents to The data details on enforcing contracts
record procedures that exist in civil law can be found for each economy at http://
but not common law jurisdictions, and www.doingbusiness.org by selecting the
vice versa. For example, in civil law economy in the drop-down list. This meth-
countries the judge can appoint an in- odology was developed in Djankov and
dependent expert, while in common law others (2003) and is adopted here with
countries each party submits a list of minor changes.
expert witnesses to the court. To indicate
overall efficiency, 1 procedure is sub-
tracted from the total number for econo-
mies that have specialized commercial
courts, and 1 procedure for economies
that allow electronic filing of court cases.
Some procedural steps that take place
simultaneously with or are included in
other procedural steps are not counted in
the total number of procedures.
28 DOING BUSINESS IN KENYA 2010

Doing
Business
Indicators
DOING BUSINESS INDICATORS 29

Starting a business Dealing with construction permits

Paid-in Ease of
minimum Ease of Cost dealing with
Cost capital starting a (% of construction
Procedures Time (% of income (% of income business Procedures Time income permits
(number) (days) per capita) per capita) (rank) (number) (days) per capita) (rank)

Eldoret 12 74 50.8 0 5 11 117 168.7 7

Garissa 12 78 52.4 0 11 14 80 156.9 5

Isiolo 12 62 55.5 0 4 13 127 134.8 11

Kilifi 12 68 57.0 0 7 11 103 283.6 8

Kisumu 12 74 51.8 0 7 10 99 237.1 4

Malaba 12 70 58.9 0 10 11 111 137.0 3

Mombasa 12 72 50.3 0 3 14 96 162.9 9

Nairobi 12 34 36.5 0 1 11 120 161.7 5

Narok 12 81 44.3 0 9 11 69 136.5 1

Nyeri 12 80 42.2 0 5 11 100 132.4 2

Thika 12 47 39.1 0 2 11 123 208.4 10

Registering property Enforcing contracts

Ease of Ease of
Cost registering enforcing
Procedures Time (% of property property Procedures Time Cost contracts
(number) (days) value) (rank) (number) (days) (% of claim) (rank)

Eldoret 8 37 4.3 6 40 435 39.0 5

Garissa 8 87 4.1 10 40 351 38.7 1

Isiolo 8 77 24.2 11 40 455 38.4 4

Kilifi 8 75 4.1 7 40 425 39.8 6

Kisumu 8 30 4.1 2 40 425 41.2 8

Malaba 8 29 4.2 5 40 330 39.2 3

Mombasa 8 23 4.1 1 40 455 39.9 9

Nairobi 8 64 4.2 9 40 465 47.2 11

Narok 8 46 4.1 3 40 351 38.9 2

Nyeri 8 53 4.2 8 40 455 40.3 10

Thika 8 60 4.1 4 40 455 39.5 7


30 DOING BUSINESS IN KENYA 2010

Locality
tables
LOCALIT Y TABLES 31

ELDORET
Aggregate rank 8
Starting a business (rank) 5 Registering property (rank) 6
Procedures (number) 12 Procedures (number) 8
Time (days) 74 Time (days) 37
Cost (% of income per capita) 50.8 Cost (% of property value) 4.3
Paid in Min. Capital (% of income per capita) 0
Enforcing contracts (rank) 5
Dealing with construction permits (rank) 7 Procedures (number) 40
Procedures (number) 11 Time (days) 435
Time (days) 117 Cost (% of claim) 39.0
Cost (% of income per capita) 168.7

GARISSA
Aggregate rank 7
Starting a business (rank) 11 Registering property (rank) 10
Procedures (number) 12 Procedures (number) 8
Time (days) 78 Time (days) 87
Cost (% of income per capita) 52.4 Cost (% of property value) 4.1
Paid in Min. Capital (% of income per capita) 0
Enforcing contracts (rank) 1
Dealing with construction permits (rank) 5 Procedures (number) 40
Procedures (number) 14 Time (days) 351
Time (days) 80 Cost (% of claim) 38.7
Cost (% of income per capita) 156.9

ISIOLO
Aggregate rank 11
Starting a business (rank) 4 Registering property (rank) 11
Procedures (number) 12 Procedures (number) 8
Time (days) 62 Time (days) 77
Cost (% of income per capita) 55.5 Cost (% of property value) 24.2
Paid in Min. Capital (% of income per capita) 0
Enforcing contracts (rank) 4
Dealing with construction permits (rank) 11 Procedures (number) 40
Procedures (number) 13 Time (days) 455
Time (days) 127 Cost (% of claim) 38.4
Cost (% of income per capita) 134.8

KILIFI
Aggregate rank 9
Starting a business (rank) 7 Registering property (rank) 7
Procedures (number) 12 Procedures (number) 8
Time (days) 68 Time (days) 75
Cost (% of income per capita) 57.0 Cost (% of property value) 4.1
Paid in Min. Capital (% of income per capita) 0
Enforcing contracts (rank) 6
Dealing with construction permits (rank) 8 Procedures (number) 40
Procedures (number) 11 Time (days) 425
Time (days) 103 Cost (% of claim) 39.8
Cost (% of income per capita) 283.6
32 DOING BUSINESS IN KENYA 2010

KISUMU
Aggregate rank 4
Starting a business (rank) 7 Registering property (rank) 2
Procedures (number) 12 Procedures (number) 8
Time (days) 74 Time (days) 30
Cost (% of income per capita) 51.8 Cost (% of property value) 4.1
Paid in Min. Capital (% of income per capita) 0
Enforcing contracts (rank) 8
Dealing with construction permits (rank) 4 Procedures (number) 40
Procedures (number) 10 Time (days) 425
Time (days) 99 Cost (% of claim) 41.2
Cost (% of income per capita) 237.1

MALABA
Aggregate rank 2
Starting a business (rank) 10 Registering property (rank) 5
Procedures (number) 12 Procedures (number) 8
Time (days) 70 Time (days) 29
Cost (% of income per capita) 58.9 Cost (% of property value) 4.2
Paid in Min. Capital (% of income per capita) 0
Enforcing contracts (rank) 3
Dealing with construction permits (rank) 3 Procedures (number) 40
Procedures (number) 11 Time (days) 330
Time (days) 111 Cost (% of claim) 39.2
Cost (% of income per capita) 137.0

MOMBASA
Aggregate rank 5
Starting a business (rank) 3 Registering property (rank) 1
Procedures (number) 12 Procedures (number) 8
Time (days) 72 Time (days) 23
Cost (% of income per capita) 50.3 Cost (% of property value) 4.1
Paid in Min. Capital (% of income per capita) 0
Enforcing contracts (rank) 9
Dealing with construction permits (rank) 9 Procedures (number) 40
Procedures (number) 14 Time (days) 455
Time (days) 96 Cost (% of claim) 39.9
Cost (% of income per capita) 162.9

NAIROBI
Aggregate rank 10
Starting a business (rank) 1 Registering property (rank) 9
Procedures (number) 12 Procedures (number) 8
Time (days) 34 Time (days) 64
Cost (% of income per capita) 36.5 Cost (% of property value) 4.2
Paid in Min. Capital (% of income per capita) 0
Enforcing contracts (rank) 11
Dealing with construction permits (rank) 5 Procedures (number) 40
Procedures (number) 11 Time (days) 465
Time (days) 120 Cost (% of claim) 47.2
Cost (% of income per capita) 161.7
LOCALIT Y TABLES 33

NAROK
Aggregate rank 1
Starting a business (rank) 9 Registering property (rank) 3
Procedures (number) 12 Procedures (number) 8
Time (days) 81 Time (days) 46
Cost (% of income per capita) 44.3 Cost (% of property value) 4.1
Paid in Min. Capital (% of income per capita) 0
Enforcing contracts (rank) 2
Dealing with construction permits (rank) 1 Procedures (number) 40
Procedures (number) 11 Time (days) 351
Time (days) 69 Cost (% of claim) 38.9
Cost (% of income per capita) 136.5

NYERI
Aggregate rank 6
Starting a business (rank) 5 Registering property (rank) 8
Procedures (number) 12 Procedures (number) 8
Time (days) 80 Time (days) 53
Cost (% of income per capita) 42.2 Cost (% of property value) 4.2
Paid in Min. Capital (% of income per capita) 0
Enforcing contracts (rank) 10
Dealing with construction permits (rank) 2 Procedures (number) 40
Procedures (number) 11 Time (days) 455
Time (days) 100 Cost (% of claim) 40.3
Cost (% of income per capita) 132.4

THIKA
Aggregate rank 3
Starting a business (rank) 2 Registering property (rank) 4
Procedures (number) 12 Procedures (number) 8
Time (days) 47 Time (days) 60
Cost (% of income per capita) 39.0 Cost (% of property value) 4.0
Paid in Min. Capital (% of income per capita) 0
Enforcing contracts (rank) 7
Dealing with construction permits (rank) 10 Procedures (number) 40
Procedures (number) 11 Time (days) 455
Time (days) 123 Cost (% of claim) 39.5
Cost (% of income per capita) 208.4
List of
procedures
Starting a business

Dealing with
construction permits

Registering property
LIST OF PROCE%63&4t STARTING A BUSINESS 35
a. Stamped memorandum and articles of association;
LIST OF PROCEDURES
b. Statement of capital;
Starting a business c. Form 201, Particulars of directors and secretary;
d. Form 203, Notice of proposed registered office;
e. Form 208, Declaration of compliance and the prescribed registration fees;
Eldoret
f. Copy of the company name approval.
Standard company legal form: Private Corporation Fee schedule for registration is the following:
Paid-in-minimum capital requirement: none
a. For the first KES 100,000 of nominal capital: KES 2,200;
Data as of: June 2009
b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120,
Procedure: 1. Obtain approval for the company name from the subject to a maximum of KES 60,000;
Registrar of Companies c. Filing fee for three forms: KES 600.
Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days) The common practice is for the company's founder to hire a lawyer to undertake the
administrative incorporation procedures in Nairobi. Given that the use of lawyers
Cost: KES 2,100 (filing fee: KES 100 + transportation: KES 2,000)
for such purposes is not mandatory in Eldoret, lawyer fees are not accounted on the
Comments: The company name reservation lasts 30 days but can be renewed for overall incorporation costs. On average, a lawyer will charge KES 15,000 for the entire
a similar period. This procedure can only be done in Nairobi. Usually, the company's incorporation process.
promoters will hire an Eldoret lawyer whose agent will travel to Nairobi to undertake
the necessary procedures. The common practice is that procedures one to five are Procedure: 6. Register with the Tax Department for a PIN
performed in Nairobi given that the applicant, or the company's agent, is already in
town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How- Time: 1 day
ever, it takes 1 day to travel from Eldoret to Nairobi and 1 day to go back. Travel time Cost: No cost
is considered within this procedure. The cost of this procedure is KES 100. The bus Comments: Registration for a personal and a company identification number
fare from Eldoret to Nairobi is KES 2,000 and is also considered within this procedure. (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2
shareholders or a director and the secretary are required), the local service tax, and
Procedure: 2. Stamp the memorandum and articles and a the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration
statement of the nominal capital and a copy of the memorandum and articles of association. This procedure is done
Time: 16 days in Eldoret town.
Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum
Procedure: 7. Register with the VAT office
and articles of association)
Time: 3 days
Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over
stamp duty collection from the Ministry of Lands and Housing. As an administrative Cost: No cost
requirement, the KRA now requires the personal identification numbers (PINs) of Comments: The application for a VAT certificate must be supported with application
all parties on whose behalf duty-stamped documents are submitted. Documents form, copies of the certificate of incorporation, the PIN certificates for the company
must be first assessed by the Stamp Duty Office before payment can be processed and 2 of its directors and memorandum and articles of association. The VAT depart-
by the KRA-designated banks. The process was lengthened initially to about 2 weeks ment is under the KRA. This procedure can be done at the KRA offices in Eldoret
because the Stamp Duty Office waited to receive confirmation of bank payment town.
after clearance of funds. However, the time was reduced in 2008 as a result of better
communication between the Ministry of Lands and Housing and Kenya Revenue Procedure: 8. Apply for a business permit
Authority (KRA) to 5-10 days. Time: 5 days
This procedure is usually done in Nairobi since the applicant is already in town. How- Cost: KES 10,000
ever, this procedure can also be undertaken in Eldoret since there are KRA offices in
Eldoret Town. Comments: The fee to apply for a business permit varies by type of business,
number of employees, and size of the company’s premises. The fee is payable to the
Eldoret Municipal Council. The Municipal Council will issue a business permit.
Procedure: 3. Pay stamp duty at bank
Fee schedule for business permit is the following:
Time: 1 day
a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises
Cost: KES 100
50–300 square meters (fair location): KES 10,000 on average;
Comments: This procedure can be done either in Eldoret or in Nairobi. The common
b. Mid-size business of 50 employees and premises 300 square meters: about KES
practice is for applicants to stay in Nairobi since the applicant is already in the city to
20,000 to KES 50,000 depending on the nature of the business.
perform the previous procedures. KES 100 relates to the cost of the banker’s check
which is the mode of payment of the stamp duty. The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem-
ber 2006 and came into effect on May 1, 2007), amends the Local Government Act
Procedure: 4. Declaration of compliance (Form 208) is signed (Cap. 265) by reducing the number of business permits required for a distributor of
goods or provider of services to carry on its business activities. Applicants having
before a Commissioner for Oaths
obtained a business permit to operate from one local authority will not be required
Time: 1 day to obtain another business permit in another local authority. In addition, business
Cost: KES 500 permit applicants will have an opportunity to elect whether to apply for a 1- or
Comments: According to the Companies Act (Cap. 486), an advocate engaged in 2-year permit. The 2006 law also eliminated the requirement to obtain a trading
the formation of the company or a director or company secretary named in the license in addition to the permit. For a first time business permit, the process takes,
Articles must sign Form 208, the declaration of compliance, which accompanies the on average 5 days.
registration documents to be submitted to the Registrar of Companies. The common
practice is for this procedure to be done by a private lawyer with the power to com- Procedure: 9. Register with the National Social Security Fund
mission documents. (NSSF)
Time: 1 day
Procedure: 5. File deed and details with the Registrar of Cost: No cost
Companies at the Attorney General's Chamber in Nairobi (Sheria
Comments: The National Social Security Fund provides the employee with a lump-
House) sum retirement benefit. Historically, the rate of return paid by the state is consider-
Time: 30 days ably less than that achieved by private schemes, but participation is mandatory. The
Cost: KES 5,893 employer pays a standard contribution of about 1% of salary, subject to a maximum
Comments: The applicant must file with the Registrar of Companies the incorpora- of KES 400 per month. Half of the contribution is deductible from the employee’s
tion deed and the required documents and forms, which include: salary. The precise amount of the contribution (where less than the maximum) is de-
termined by reference to salary bands. This procedure is commonly done is Eldoret.
36 DOING BUSINESS IN KENYA 2010

Procedure: 10. Register with the National Hospital Insurance Procedure: 4. Declaration of compliance (Form 208) is signed
Fund (NHIF) before a Commissioner for Oaths
Time: 1 day Time: 1 day
Cost: No cost Cost: KES 200
Comments: The employee contributes a fixed sum to the National Hospital Insur- Comments: According to the Companies Act (Cap. 486), an advocate engaged in
ance Fund (NHIF), which must be deducted by the employer from the employees’ the formation of the company or a director or company secretary named in the
salary. The maximum contribution is KES 320 per month. The contributions are used Articles must sign Form 208, the declaration of compliance, which accompanies the
to offset the costs of medical treatment, but they only cover a fraction of actual costs. registration documents to be submitted to the Registrar of Companies. The common
Hence, most companies provide employees with medical insurance. This procedure practice is for this procedure to be done by a private lawyer with the power to com-
is done at the Eldoret NHIF office. mission documents.

Procedure: 11. Register for PAYE Procedure: 5. File deed and details with the Registrar of
Time: 1 day Companies at the Attorney General's Chamber in Nairobi (Sheria
Cost: No cost House)
Comments: This procedure is commonly done in Eldoret Town. Time: 29 days
Cost: KES 5,893
Procedure: 12. Make a company seal after a certificate of Comments: The applicant must file with the Registrar of Companies the incorpora-
incorporation has been issued tion deed and the required documents and forms, which include:
Time: 10 days a. Stamped memorandum and articles of association;
Cost: KES 4,500 (company's seal: KES 4,000 + courier: KES 500) b. Statement of capital;
Comments: Seals are made by private entities who require sight of a copy of the c. Form 201, Particulars of directors and secretary;
certificate of incorporation. The average price of the company seal is KES 4,000. The d. Form 203, Notice of proposed registered office;
common practice is for applicants to obtain the company seal in Nairobi. Applicants
order this seal after filing the incorporation deed and before returning to Eldoret. e. Form 208, Declaration of compliance and the prescribed registration fees;
Once the company seal is ready, private providers will send the seal by courier. The f. Copy of the company name approval.
average cost of mailing the seal is KES 500. Fee schedule for registration is the following:
a. For the first KES 100,000 of nominal capital: KES 2,200;
* This procedure can be completed simultaneously with previous procedures b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120,
subject to a maximum of KES 60,000;
STARTING A BUSINESS c. Filing fee for three forms: KES 600.
Garissa The common practice is for the company's founder to hire a lawyer to undertake the
administrative incorporation procedures in Nairobi. Given that the use of lawyers
Standard company legal form: Private Corporation for such purposes is not mandatory in Garissa, lawyer fees are not accounted on the
Paid-in-minimum capital requirement: none overall incorporation costs. On average, a lawyer will charge KES 25,000 for the entire
Data as of: June 2009 incorporation process.

Procedure: 1. Obtain approval for the company name from the Procedure: 6. Register with the Tax Department for a PIN
Registrar of Companies Time: 1 day
Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days) Cost: No cost
Cost: KES 1,100 (filing fee: KES 100 + transportation: KES 1,000) Comments: Registration for a personal and a company identification number
Comments: The company name reservation lasts 30 days but can be renewed for a (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2
similar period. The time to do this procedure is 2 days, once the applicant is in Nai- shareholders or a director and the secretary are required), the local service tax, and
robi. However, it takes one day to travel from Garissa to Nairobi and 1 day to go back. the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration
Travel time is considered within this procedure. The cost of this procedure is KES 100. and a copy of the memorandum and articles of association. This procedure is done
The bus fare from Garissa to Nairobi is KES 1,000 (roundtrip) and is considered within in Garissa.
the cost of this procedure.
Procedure: 7. Register with the VAT office
Procedure: 2. Stamp the memorandum and articles and a Time: 1 day
statement of the nominal capital
Cost: No cost
Time: 23 days
Comments: The application for a VAT certificate must be supported with application
Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum form, copies of the certificate of incorporation, the PIN certificates for the company
and articles of association) and 2 of its directors and memorandum and articles of association. The VAT depart-
Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over ment is under the KRA. This procedure can be done at the KRA offices in Garissa.
stamp duty collection from the Ministry of Lands and Housing. As an administrative
requirement, the KRA now requires the personal identification numbers (PINs) of Procedure: 8. Apply for a business permit
all parties on whose behalf duty-stamped documents are submitted. Documents Time: 8 days
must be first assessed by the Stamp Duty Office before payment can be processed
by the KRA-designated banks. The process was lengthened initially to about 2 weeks Cost: KES 12,000
because the Stamp Duty Office waited to receive confirmation of bank payment Comments: The fee to apply for a business permit varies by type of business,
after clearance of funds. However, the time was reduced in 2008 as a result of better number of employees, and size of the company’s premises. The fee is payable to the
communication between the Ministry of Lands and Housing and Kenya Revenue Garissa Municipal Council. The Municipal Council will issue a business permit.
Authority (KRA) to 5-10 days. Fee schedule for business permit is the following:
This procedure is usually done in Nairobi since the applicant is already in town. a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises
However, this procedure can also be undertaken in Garissa since there are KRA 50–300 square meters (fair location): KES 12,000 on average;
offices in Garissa. b. Mid-size business of 50 employees and premises 300 square meters: about KES
20,000 to KES 50,000 depending on the nature of the business;
Procedure: 3. Pay stamp duty at bank The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem-
Time: 1 day ber of 2006 and came into effect on May 1, 2007), amends the Local Government
Cost: KES 100 Act (Cap. 265) by reducing the number of business permits required for a distributor
Comments: The cost relates to the banker's check which is the mode of payment of of goods or provider of services to carry on its business activities. Applicants having
the stamp duty. obtained a business permit to operate from one local authority will not be required
LIST OF PROCE%63&4t STARTING A BUSINESS 37
to obtain another business permit in another local authority. In addition, business Procedure: 2. Stamp the memorandum and articles and a
permit applicants will have an opportunity to elect whether to apply for a 1- or
2-year permit. The 2006 law also eliminated the requirement to obtain a trading statement of the nominal capital
license in addition to the permit. For a first time business permit, the process takes, Time: 21 days
on average 8 days. Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum
and articles of association)
Procedure: 9. Register with the National Social Security Fund Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over
(NSSF) stamp duty collection from the Ministry of Lands and Housing. As an administrative
Time: 1 day requirement, the KRA now requires the personal identification numbers (PINs) of
Cost: No cost all parties on whose behalf duty-stamped documents are submitted. Documents
must be first assessed by the Stamp Duty Office before payment can be processed
Comments: The National Social Security Fund provides the employee with a lump- by the KRA-designated banks. The process was lengthened initially to about 2 weeks
sum retirement benefit. Historically, the rate of return paid by the state is consider- because the Stamp Duty Office waited to receive confirmation of bank payment
ably less than that achieved by private schemes, but participation is mandatory. The after clearance of funds. However, the time was reduced in 2008 as a result of better
employer pays a standard contribution of about 1% of salary, subject to a maximum communication between the Ministry of Lands and Housing and Kenya Revenue
of KES 400 per month. Half of the contribution is deductible from the employee’s Authority (KRA) to 5-10 days.
salary. The precise amount of the contribution (where less than the maximum) is de-
termined by reference to salary bands. This procedure is commonly done is Garissa. This procedure is usually done in Nairobi since the applicant is already in town.
However, this procedure can also be undertaken in Meru town, one hour away from
Isiolo, since there are KRA offices in Meru.
Procedure: 10. Register with the National Hospital Insurance
Fund (NHIF) Procedure: 3. Pay stamp duty at bank
Time: 1 day
Time: 1 day
Cost: No cost
Cost: KES 100
Comments: The employee contributes a fixed sum to the National Hospital Insur-
Comments: The cost of this procedure relates to the banker's check which is the
ance Fund (NHIF), which must be deducted by the employer from the employees’
mode of payment of stamp duty.
salary. The maximum contribution is KES 320 per month. The contributions are used
to offset the costs of medical treatment, but they only cover a fraction of actual costs.
Hence, most companies provide employees with medical insurance. This procedure Procedure: 4. Declaration of compliance (Form 208) is signed
is done at the Garissa NHIF office. before a Commissioner for Oaths
Time: 1 day
Procedure: 11. Register for PAYE Cost: KES 200
Time: 1 day Comments: According to the Companies Act (Cap. 486), an advocate engaged in
Cost: No cost the formation of the company or a director or company secretary named in the
Comments: This procedure is commonly done is Garissa. Articles must sign Form 208, the declaration of compliance, which accompanies
the registration documents to be submitted to the Registrar of Companies. The
common practice is for this procedure to be done by a private lawyer with the power
Procedure: 12. Make a company seal after a certificate of
to commission documents immediately after procedures 2 and 3, since the person
incorporation has been issued incorporating the company is already in town. The minimum cost provided by the
Time: 7 days Advocates Remuneration Order is KES 200. However, advocates charge on average
Cost: KES 4,800 (company's seal: KES 4,000 + courier: KES 800) KES 400 to perform this procedure. Lawyer fees are not considered since the use of
Comments: Seals are made by private entities who require sight of a copy of the lawyers is not mandatory.
certificate of incorporation. The average price of the company seal is KES 4,000. The
common practice is for applicants to obtain the company seal in Nairobi. Applicants Procedure: 5. File deed and details with the Registrar of
order this seal after filing the incorporation deed and before returning to Garissa. Companies at the Attorney General's Chamber in Nairobi (Sheria
Once the company seal is ready, private providers will send the seal by courier. The House)
average cost of mailing the seal is KES 800. Time: 14 days
Cost: KES 5,893
* This procedure can be completed simultaneously with previous procedures Comments: The applicant must file with the Registrar of Companies the incorpora-
tion deed and the required documents and forms, which include:
STARTING A BUSINESS a. Stamped memorandum and articles of association;
Isiolo b. Statement of capital;
Standard company legal form: Private Corporation c. Form 201, Particulars of directors and secretary;
Paid-in-minimum capital requirement: none d. Form 203, Notice of proposed registered office;
Data as of: June 2009 e. Form 208, Declaration of compliance and the prescribed registration fees;
f. Copy of the company name approval.
Procedure: 1. Obtain approval for the company name from the
Fee schedule for registration is the following:
Registrar of Companies
a. For the first KES 100,000 of nominal capital: KES 2,200;
Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days)
b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120,
Cost: KES 2,100 (filing fee: KES 100 + transportation: KES 2,000) subject to a maximum of KES 60,000;
Comments: The company name reservation lasts 30 days but can be renewed for a c. Filing fee for three forms: KES 600.
similar period. This procedure can only be done in Nairobi. In Isiolo, there are few law
firms and the common practice is to use the main branches in Nairobi to carry out The common practice is for the company's founder to hire a lawyer to undertake the
procedures one to five. The time to do this procedure is 2 days, once the applicant is administrative incorporation procedures in Nairobi. Given that the use of lawyers
in Nairobi. However, it takes one day to travel from Isiolo to Nairobi and 1 day to go for such purposes is not mandatory in Isiolo, lawyer fees are not accounted on the
back. Travel time is considered within this procedure. The cost of this procedure is overall incorporation costs. On average, a lawyer will charge KES 25,000 for the entire
KES 100. The bus fare to Nairobi is KES 2,000 roundtrip. incorporation process.

Procedure: 6. Register with the Tax Department for a PIN


Time: 1 day (time to register: 1 day + roundtrip: 2 hours)
Cost: KES 400 (transportation)
38 DOING BUSINESS IN KENYA 2010

Comments: Registration for a personal and a company identification number Procedure: 12. Make a company seal after a certificate of
(PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 incorporation has been issued
shareholders or a director and the secretary are required), the local service tax, and
Time: 7 days
the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration
and a copy of the memorandum and articles of association. Cost: KES 4,900 (company's seal: KES 4,000 + courier: KES 900)
This procedure is done in Meru, 1 hour away from Isiolo. Given the proximity be- Comments: Seals are made by private entities who require sight of a copy of the
tween these localities, additional time is not considered. The bus fare from Meru to certificate of incorporation. The average price of the company seal is KES 4,000. The
Isiolo is KES 400 roundtrip. This procedure has no cost. However, transportation costs common practice is for applicants to obtain the company seal in Nairobi. Applicants
are considered within the cost of this procedure. Procedures 6 and 7 are performed order this seal after filing the incorporation deed and before returning to Isiolo. Once
in Meru since the applicant is already in town. the company seal is ready, private providers will send the seal by courier. The average
cost of mailing the seal is KES 900.
Procedure: 7. Register with the VAT office
Time: 1 day * This procedure can be completed simultaneously with previous procedures
Cost: No cost
Comments: The application for a VAT certificate must be supported with application STARTING A BUSINESS
form, copies of the certificate of incorporation, the PIN certificates for the company Kilifi
and 2 of its directors and memorandum and articles of association. The VAT depart-
ment is under the KRA. This procedure can be done at the KRA offices in Meru. Standard company legal form: Private Corporation
Paid-in-minimum capital requirement: none
Procedure: 8. Apply for a business permit Data as of: June 2009
Time: 6 days Procedure: 1. Obtain approval for the company name from the
Cost: KES 12,000 Registrar of Companies
Comments: The fee to apply for a business permit varies by type of business, num- Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days)
ber of employees, and size of the company’s premises. The fee is payable to the Isiolo
County Council. The County Council will issue a business permit. Cost: KES 2,700 (filing fee: KES 100 + transportation: KES 2,600)
Fee schedule for business permit is the following: Comments: The company name reservation lasts 30 days but can be renewed for
a similar period. This procedure can only be done in Nairobi. Usually, the company's
a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises promoters will hire a Kilifi lawyer whose agent will travel to Nairobi to undertake
50–300 square meters (fair location): KES 12,000 on average; the necessary procedures. The common practice is that procedures one to five are
b. Mid-size business of 50 employees and premises 300 square meters: about KES performed in Nairobi given that the applicant, or the company's agent, is already in
20,000 to KES 50,000 depending on the nature of the business. town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How-
The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- ever, it takes 1 day to travel from Kilifi to Nairobi and 1 day to go back. Travel time is
ber of 2006 and came into effect on May 1, 2007), amends the Local Government considered within this procedure. The cost of this procedure is KES 100. The bus fare
Act (Cap. 265) by reducing the number of business permits required for a distributor from Kilifi to Nairobi is KES 2,600 and is also considered within this procedure.
of goods or provider of services to carry on its business activities. Applicants having Given that the use of lawyers is not mandatory for company incorporation around all
obtained a business permit to operate from one local authority will not be required the localities in Kenya, lawyer fees are not considered in the present report.
to obtain another business permit in another local authority. In addition, business
permit applicants will have an opportunity to elect whether to apply for a 1- or Procedure: 2. Stamp the memorandum and articles and a
2-year permit. The 2006 law also eliminated the requirement to obtain a trading statement of the nominal capital
license in addition to the permit. For a first time business permit, the process takes,
on average 6 days. Time: 21 days
Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum
Procedure: 9. Register with the National Social Security Fund and articles of association)
(NSSF) Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over
stamp duty collection from the Ministry of Lands and Housing. As an administrative
Time: 1 day (time to register: 1 day + roundtrip: 2 hours)
requirement, the KRA now requires the personal identification numbers (PINs) of
Cost: KES 400 (registration fee: No cost + transportation: KES 400) all parties on whose behalf duty-stamped documents are submitted. Documents
Comments: The National Social Security Fund provides the employee with a lump- must be first assessed by the Stamp Duty Office before payment can be processed
sum retirement benefit. Historically, the rate of return paid by the state is consider- by the KRA-designated banks. The process was lengthened initially to about 2 weeks
ably less than that achieved by private schemes, but participation is mandatory. The because the Stamp Duty Office waited to receive confirmation of bank payment
employer pays a standard contribution of about 1% of salary, subject to a maximum after clearance of funds. However, the time was reduced in 2008 as a result of better
of KES 400 per month. Half of the contribution is deductible from the employee’s communication between the Ministry of Lands and Housing and Kenya Revenue
salary. The precise amount of the contribution (where less than the maximum) is Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction
determined by reference to salary bands. This procedure is commonly done is Meru. are also due.
This procedure is usually done in Nairobi since the applicant is already in town.
Procedure: 10. Register with the National Hospital Insurance However, this procedure can also be undertaken in Malindi or Mombasa since there
Fund (NHIF) are KRA offices in both localities.
Time: 4 days
Cost: No cost Procedure: 3. Pay stamp duty at bank
Comments: The employee contributes a fixed sum to the National Hospital Insur- Time: 3 days
ance Fund (NHIF), which must be deducted by the employer from the employees’ Cost: KES 100
salary. The maximum contribution is KES 320 per month. The contributions are used Comments: The cost relates to the banker's check which is the mode of payment of
to offset the costs of medical treatment, but they only cover a fraction of actual the stamp duty.
costs. Hence, most companies provide employees with medical insurance. There is a
branch of the NHIF that recently opened in Isiolo. However, the common practice is Procedure: 4. Declaration of compliance (Form 208) is signed
for applicants to perform this procedure in Meru Town since they register to the NSSF before a Commissioner for Oaths
in Meru Town too.
Time: 1 day
Procedure: 11. Register for PAYE Cost: KES 200
Time: 1 day Comments: According to the Companies Act (Cap. 486), an advocate engaged in
the formation of the company or a director or company secretary named in the
Cost: No cost
Articles must sign Form 208, the declaration of compliance, which accompanies
Comments: This procedure commonly done at the KRA Offices in Meru Town. the registration documents to be submitted to the Registrar of Companies. The
common practice is for this procedure to be done by a private lawyer with the power
LIST OF PROCE%63&4t STARTING A BUSINESS 39

to commission documents immediately after procedures 2 and 3, since the person permit applicants will have an opportunity to elect whether to apply for a 1- or
incorporating the company is already in town. The minimum cost provided by the 2-year permit. The 2006 law also eliminated the requirement to obtain a trading
Advocates Remuneration Order is KES 200. However, advocates charge on average license in addition to the permit. For a first time business permit, the process takes,
KES 400 to perform this procedure. Lawyer fees are not considered since the use of on average 7 days.
lawyers is not mandatory.
Procedure: 9. Register with the National Social Security Fund
Procedure: 5. File deed and details with the Registrar of (NSSF)
Companies at the Attorney General's Chamber in Nairobi (Sheria Time: 1 day (time to register: 1 day + roundtrip: 2 hours)
House) Cost: KES 500 (registration fee: No cost + transportation: KES 500)
Time: 21 days Comments: The National Social Security Fund provides the employee with a lump-
Cost: KES 5,893 sum retirement benefit. Historically, the rate of return paid by the state is consider-
Comments: The applicant must file with the Registrar of Companies the incorpora- ably less than that achieved by private schemes, but participation is mandatory. The
tion deed and the required documents and forms, which include: employer pays a standard contribution of about 1% of salary, subject to a maximum
a. Stamped memorandum and articles of association; of KES 400 per month. Half of the contribution is deductible from the employee’s sal-
ary. The precise amount of the contribution (where less than the maximum) is deter-
b. Statement of capital; mined by reference to salary bands. This procedure is commonly done is Mombasa.
c. Form 201, Particulars of directors and secretary;
d. Form 203, Notice of proposed registered office; Procedure: 10. Register with the National Hospital Insurance
e. Form 208, Declaration of compliance and the prescribed registration fees; Fund (NHIF)
f. Copy of the company name approval. Time: 1 day
Fee schedule for registration is the following: Cost: No cost
a. For the first KES 100,000 of nominal capital: KES 2,200; Comments: The employee contributes a fixed sum to the National Hospital Insur-
b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, ance Fund (NHIF), which must be deducted by the employer from the employees’
subject to a maximum of KES 60,000; salary. The maximum contribution is KES 320 per month. The contributions are used
to offset the costs of medical treatment, but they only cover a fraction of actual costs.
c. Filing fee for three forms: KES 600.
Hence, most companies provide employees with medical insurance. This procedure
The common practice is for the company's founder to hire a lawyer to undertake the is done at the Mombasa NHIF office.
administrative incorporation procedures in Nairobi. Given that the use of lawyers
for such purposes is not mandatory in Kilifi, lawyer fees are not accounted on the Procedure: 11. Register for PAYE
overall incorporation costs. On average, a lawyer will charge KES 50,000 for the entire
incorporation process. Time: 1 day
Cost: No cost
Procedure: 6. Register with the Tax Department for a PIN Comments: This procedure is commonly done is Mombasa.
Time: 1 day (time to register: 1 day + roundtrip: 4 hours)
Cost: KES 500 (transportation)
Procedure: 12. Make a company seal after a certificate of
incorporation has been issued
Comments: Registration for a personal and a company identification number
(PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 Time: 6 days
shareholders or a director and the secretary are required), the local service tax, and Cost: KES 5,000
the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration Comments: Seals are made by private entities who require sight of a copy of the
and a copy of the memorandum and articles of association. certificate of incorporation. The average price of the company seal is KES 5,000. The
This procedure is done in Mombasa, 2 hours away from Kilifi. Given the proximity common practice is for applicants from Kilifi to obtain the company seal in Mom-
between these localities, additional time is not considered. The bus fare from Mom- basa. This seal is a way to make documents formal and legally solid. The seal provides
basa to Kilifi is KES 500 roundtrip. This procedure has no cost. However, transporta- the directors of the company a tool to control what are the contracts the company
tion costs are considered within the cost of this procedure. Procedures 6 and 7 are honors and what are the ones the company will not honor.
performed in Mombasa since the applicant is already in town.
* This procedure can be completed simultaneously with previous procedures
Procedure: 7. Register with the VAT office
Time: 1 day STARTING A BUSINESS
Cost: No cost
Kisumu
Comments: The application for a VAT certificate must be supported with application
form, copies of the certificate of incorporation, the PIN certificates for the company Standard company legal form: Private Corporation
and 2 of its directors and memorandum and articles of association. The VAT depart- Paid-in-minimum capital requirement: none
ment is under the KRA. This procedure can be done at the KRA offices in Mombasa. Data as of: June 2009

Procedure: 8. Apply for a business permit Procedure: 1. Obtain approval for the company name from the
Time: 7 days Registrar of Companies
Cost: KES 12,000 Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days)
Comments: The fee to apply for a business permit varies by type of business, num- Cost: KES 2,500 (filing fee: KES 100 + transportation: KES 2,400)
ber of employees, and size of the company’s premises. The fee is payable to the Kilifi Comments: The company name reservation lasts 30 days but can be renewed for
County Council. The County Council will issue a business permit. a similar period. This procedure can only be done in Nairobi. Usually, the company's
Fee schedule for business permit is the following: promoters will hire a Kisumu lawyer whose agent will travel to Nairobi to undertake
the necessary procedures. The common practice is that procedures one to five are
a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises
performed in Nairobi given that the applicant, or the company's agent, is already in
50–300 square meters (fair location): KES 12,000 on average;
town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How-
b. Mid-size business of 50 employees and premises 300 square meters: about KES ever, it takes 1 day to travel from Kisumu to Nairobi and 1 day to go back. Travel time
20,000 to KES 50,000 depending on the nature of the business. is considered within this procedure. The cost of this procedure is KES 100. The bus
The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- fare from Kisumu to Nairobi is KES 2,400 and is also considered within this procedure.
ber of 2006 and came into effect on May 1, 2007), amends the Local Government Given that the use of lawyers is not mandatory for company incorporation around all
Act (Cap. 265) by reducing the number of business permits required for a distributor the localities in Kenya, lawyer fees are not considered in the present report.
of goods or provider of services to carry on its business activities. Applicants having
obtained a business permit to operate from one local authority will not be required Procedure: 2. Stamp the memorandum and articles and a
to obtain another business permit in another local authority. In addition, business
statement of the nominal capital
Time: 25 days
40 DOING BUSINESS IN KENYA 2010

Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum Comments: Registration for a personal and a company identification number
and articles of association) (PIN) is required to register for the VAT (PIN certificates of at least two directors or 2
Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over shareholders or a director and the secretary are required), the local service tax, and
stamp duty collection from the Ministry of Lands and Housing. As an administrative the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration
requirement, the KRA now requires the personal identification numbers (PINs) of and a copy of the memorandum and articles of association. This procedure is done
all parties on whose behalf duty-stamped documents are submitted. Documents in Kisumu.
must be first assessed by the Stamp Duty Office before payment can be processed
by the KRA-designated banks. The process was lengthened initially to about 2 weeks Procedure: 7. Register with the VAT office
because the Stamp Duty Office waited to receive confirmation of bank payment Time: 1 day
after clearance of funds. However, the time was reduced in 2008 as a result of better Cost: No cost
communication between the Ministry of Lands and Housing and Kenya Revenue
Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction Comments: The application for a VAT certificate must be supported with application
are also due. form, copies of the certificate of incorporation, the PIN certificates for the company
and 2 of its directors and memorandum and articles of association. The VAT depart-
This procedure is usually done in Nairobi since the applicant is already in town. ment is under the KRA. This procedure can be done at the KRA offices in Kisumu.
However, this procedure can also be undertaken in Kisumu since there are KRA
offices in Kisumu. Procedure: 8. Apply for a business permit
Procedure: 3. Pay stamp duty at bank Time: 5 days
Time: 1 day Cost: KES 10,000
Cost: KES 100 Comments: The fee to apply for a business permit varies by type of business,
number of employees, and size of the company’s premises. The fee is payable to the
Comments: The cost relates to the banker's check which is the mode of payment of Kisumu City Council. The City Council will issue a business permit.
the stamp duty.
Fee schedule for business permit is the following:
Procedure: 4. Declaration of compliance (Form 208) is signed a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises
before a Commissioner for Oaths 50–300 square meters. (fair location): KES 10,000 on average;
Time: 5 days b. Mid-size business of 50 employees and premises 300 square meters: about KES
20,000 to KES 50,000 depending on the nature of the business.
Cost: KES 200
The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem-
Comments: According to the Companies Act (Cap. 486), an advocate engaged in ber of 2006 and came into effect on May 1, 2007), amends the Local Government
the formation of the company or a director or company secretary named in the Act (Cap. 265) by reducing the number of business permits required for a distributor
Articles must sign Form 208, the declaration of compliance, which accompanies of goods or provider of services to carry on its business activities. Applicants having
the registration documents to be submitted to the Registrar of Companies. The obtained a business permit to operate from one local authority will not be required
common practice is for this procedure to be done by a private lawyer with the power to obtain another business permit in another local authority. In addition, business
to commission documents immediately after procedures 2 and 3, since the person permit applicants will have an opportunity to elect whether to apply for a 1- or
incorporating the company is already in town. The minimum cost provided by the 2-year permit. The 2006 law also eliminated the requirement to obtain a trading
Advocates Remuneration Order is KES 200. However, advocates charge on average license in addition to the permit. For a first time business permit, the process takes,
KES 400 to perform this procedure. Lawyer fees are not considered since the use of on average 5 days.
lawyers is not mandatory.
Procedure: 9. Register with the National Social Security Fund
Procedure: 5. File deed and details with the Registrar of (NSSF)
Companies at the Attorney General's Chamber in Nairobi (Sheria
Time: 1 day
House)
Cost: No cost
Time: 21 days
Comments: The National Social Security Fund provides the employee with a lump-
Cost: KES 5,893
sum retirement benefit. Historically, the rate of return paid by the state is consider-
Comments: The applicant must file with the Registrar of Companies the incorpora- ably less than that achieved by private schemes, but participation is mandatory. The
tion deed and the required documents and forms, which include: employer pays a standard contribution of about 1% of salary, subject to a maximum
a. Stamped memorandum and articles of association; of KES 400 per month. Half of the contribution is deductible from the employee’s
b. Statement of capital; salary. The precise amount of the contribution (where less than the maximum) is de-
termined by reference to salary bands. This procedure is commonly done is Kisumu.
c. Form 201, Particulars of directors and secretary;
d. Form 203, Notice of proposed registered office; Procedure: 10. Register with the National Hospital Insurance
e. Form 208, Declaration of compliance and the prescribed registration fees; Fund (NHIF)
f. Copy of the company name approval. Time: 1 day
Fee schedule for registration is the following: Cost: No cost
a. For the first KES 100,000 of nominal capital: KES 2,200; Comments: The employee contributes a fixed sum to the National Hospital Insur-
b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, ance Fund (NHIF), which must be deducted by the employer from the employees’
subject to a maximum of KES 60,000; salary. The maximum contribution is KES 320 per month. The contributions are used
c. Filing fee for three forms: KES 600. to offset the costs of medical treatment, but they only cover a fraction of actual costs.
The common practice is for the company's founder to hire a lawyer to undertake the Hence, most companies provide employees with medical insurance. This procedure
administrative incorporation procedures in Nairobi. Given that the use of lawyers is done at the Kisumu NHIF office.
for such purposes is not mandatory in Kisumu, lawyer fees are not accounted on the
overall incorporation costs. On average, a lawyer will charge KES 20,000 for the entire Procedure: 11. Register for PAYE
incorporation process. Time: 3 days
Cost: No cost
Procedure: 6. Register with the Tax Department for a PIN Comments: This procedure is commonly done is Kisumu.
Time: 1 day
Cost: No cost Procedure: 12. Make a company seal after a certificate of
incorporation has been issued
Time: 6 days
Cost: KES 5,000 (company's seal: KES 4,000 + courier: KES 1000)
LIST OF PROCE%63&4t STARTING A BUSINESS 41

Comments: Seals are made by private entities who require sight of a copy of the Procedure: 5. File deed and details with the Registrar of
certificate of incorporation. The average price of the company seal is KES 4,000. The Companies at the Attorney General's Chamber in Nairobi (Sheria
common practice is for applicants to obtain the company seal in Nairobi. Applicants House)
order this seal after filing the incorporation deed and before returning to Kisumu.
Once the company seal is ready, private providers will send the seal by courier. The Time: 22 days
average cost of mailing the seal is KES 1,000. Cost: KES 5,893
Comments: The applicant must file with the Registrar of Companies the incorpora-
* This procedure can be completed simultaneously with previous procedures tion deed and the required documents and forms, which include:
a. Stamped memorandum and articles of association;
STARTING A BUSINESS b. Statement of capital;
c. Form 201, Particulars of directors and secretary;
Malaba
d. Form 203, Notice of proposed registered office;
Standard company legal form: Private Corporation
e. Form 208, Declaration of compliance and the prescribed registration fees;
Paid-in-minimum capital requirement: none
f. Copy of the company name approval.
Data as of: June 2009
Fee schedule for registration is the following:
Procedure: 1. Obtain approval for the company name from the a. For the first KES 100,000 of nominal capital: KES 2,200;
Registrar of Companies b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120,
Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days) subject to a maximum of KES 60,000;
Cost: KES 4,100 (filing fee: KES 100 + transportation: KES 4,000) c. Filing fee for three forms: KES 600.
Comments: The company name reservation lasts 30 days but can be renewed for The common practice is for the company's founder to hire a lawyer to undertake the
a similar period. This procedure can only be done in Nairobi. Usually, the company's administrative incorporation procedures in Nairobi. Given that the use of lawyers
promoters will hire a Malaba lawyer whose agent will travel to Nairobi to undertake for such purposes is not mandatory in Malaba, lawyer fees are not accounted on the
the necessary procedures. The common practice is that procedures one to five are overall incorporation costs. On average, a lawyer will charge KES 25,000 for the entire
performed in Nairobi given that the applicant, or the company's agent, is already in incorporation process.
town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How-
ever, it takes 1 day to travel from Malaba to Nairobi and 1 day to go back. Travel time Procedure: 6. Register with the Tax Department for a PIN
is considered within this procedure. The cost of this procedure is KES 100. The bus Time: 1 day (time to register: 1 day + roundtrip: 2 hours)
fare from Malaba to Nairobi is KES 4,000 and is also considered within this procedure.
Cost: KES 400 (transportation)
Given that the use of lawyers is not mandatory for company incorporation around all
the localities in Kenya, lawyer fees are not considered in the present report. Comments: Registration for a personal and a company identification number
(PIN) is required to register for the VAT (PIN certificates of at least two directors or 2
shareholders or a director and the secretary are required), the local service tax, and
Procedure: 2. Stamp the memorandum and articles and a the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration
statement of the nominal capital and a copy of the memorandum and articles of association.
Time: 22 days This procedure is done in Bungoma, 1 hour away from Malaba. Given the proximity
Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum between these localities, additional time is not considered. The bus fare is from
and articles of association) Bungoma to Malaba is KES 400 roundtrip. This procedure has no cost. However,
Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over transportation costs are considered within the cost of this procedure. Procedures 6
stamp duty collection from the Ministry of Lands and Housing. As an administrative and 7 are performed in Mombasa since the applicant is already in town.
requirement, the KRA now requires the personal identification numbers (PINs) of
all parties on whose behalf duty-stamped documents are submitted. Documents Procedure: 7. Register with the VAT office
must be first assessed by the Stamp Duty Office before payment can be processed Time: 1 day
by the KRA-designated banks. The process was lengthened initially to about 2 weeks
Cost: No cost
because the Stamp Duty Office waited to receive confirmation of bank payment
after clearance of funds. However, the time was reduced in 2008 as a result of better Comments: The application for a VAT certificate must be supported with application
communication between the Ministry of Lands and Housing and Kenya Revenue form, copies of the certificate of incorporation, the PIN certificates for the company
Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction and 2 of its directors and memorandum and articles of association. The VAT depart-
are also due. ment is under the KRA. This procedure can be done at the KRA offices in Bungoma.
This procedure is usually done in Nairobi since the applicant is already in town.
However, this procedure can also be undertaken in Malaba since there are KRA
Procedure: 8. Apply for a business permit
offices in Malaba. Time: 8 days
Cost: KES 12,000
Procedure: 3. Pay stamp duty at bank Comments: The fee to apply for a business permit varies by type of business,
Time: 1 day number of employees, and size of the company’s premises. The fee is payable to the
Cost: KES 100 Malaba County Council. The County Council will issue a business permit.
Comments: The cost relates to the banker's check which is the mode of payment of Fee schedule for business permit is the following:
the stamp duty. a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises
50–300 square meters (fair location): KES 12,000 on average;
Procedure: 4. Declaration of compliance (Form 208) is signed b. Mid-size business of 50 employees and premises 300 square meters: about KES
before a Commissioner for Oaths 20,000 to KES 50,000 depending on the nature of the business.
Time: 1 day The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem-
Cost: KES 200 ber of 2006 and came into effect on May 1, 2007), amends the Local Government
Act (Cap. 265) by reducing the number of business permits required for a distributor
Comments: According to the Companies Act (Cap. 486), an advocate engaged in of goods or provider of services to carry on its business activities. Applicants having
the formation of the company or a director or company secretary named in the obtained a business permit to operate from one local authority will not be required
Articles must sign Form 208, the declaration of compliance, which accompanies to obtain another business permit in another local authority. In addition, business
the registration documents to be submitted to the Registrar of Companies. The permit applicants will have an opportunity to elect whether to apply for a 1- or
common practice is for this procedure to be done by a private lawyer with the power 2-year permit. The 2006 law also eliminated the requirement to obtain a trading
to commission documents immediately after procedures 2 and 3, since the person license in addition to the permit. For a first time business permit, the process takes,
incorporating the company is already in town. The minimum cost provided by the on average 8 days.
Advocates Remuneration Order is KES 200. However, advocates charge on average
KES 400 to perform this procedure. Lawyer fees are not considered since the use of
lawyers is not mandatory.
42 DOING BUSINESS IN KENYA 2010

Procedure: 9. Register with the National Social Security Fund Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over
(NSSF) stamp duty collection from the Ministry of Lands and Housing. As an administrative
requirement, the KRA now requires the personal identification numbers (PINs) of
Time: 1 day (time to register: 1 day + roundtrip: 2 hours)
all parties on whose behalf duty-stamped documents are submitted. Documents
Cost: KES 400 (transportation) must be first assessed by the Stamp Duty Office before payment can be processed
Comments: The National Social Security Fund provides the employee with a lump- by the KRA-designated banks. The process was lengthened initially to about 2 weeks
sum retirement benefit. Historically, the rate of return paid by the state is consider- because the Stamp Duty Office waited to receive confirmation of bank payment
ably less than that achieved by private schemes, but participation is mandatory. The after clearance of funds. However, the time was reduced in 2008 as a result of better
employer pays a standard contribution of about 1% of salary, subject to a maximum communication between the Ministry of Lands and Housing and Kenya Revenue
of KES 400 per month. Half of the contribution is deductible from the employee’s sal- Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction
ary. The precise amount of the contribution (where less than the maximum) is deter- are also due.
mined by reference to salary bands. This procedure is commonly done is Bungoma. This procedure is usually done in Nairobi since the applicant is already in town.
However, this procedure can also be undertaken in Mombasa since there are KRA
Procedure: 10. Register with the National Hospital Insurance offices in Mombasa.
Fund (NHIF)
Time: 1 day Procedure: 3. Pay stamp duty at bank
Cost: No cost Time: 1 day
Comments: The employee contributes a fixed sum to the National Hospital Insur- Cost: KES 100
ance Fund (NHIF), which must be deducted by the employer from the employees’ Comments: This procedure can be done either in Mombasa or in Nairobi. The com-
salary. The maximum contribution is KES 320 per month. The contributions are used mon practice is for applicants to stay in Nairobi since the applicant is already in the
to offset the costs of medical treatment, but they only cover a fraction of actual costs. city to perform the previous procedures. KES 100 relates to the cost of the banker’s
Hence, most companies provide employees with medical insurance. This procedure check which is the mode of payment of the stamp duty.
is done at the Bungoma NHIF office.
Procedure: 4. Declaration of compliance (Form 208) is signed
Procedure: 11. Register for PAYE before a Commissioner for Oaths
Time: 3 days Time: 1 day
Cost: No cost Cost: KES 200
Comments: This procedure is commonly done is Bungoma. Comments: According to the Companies Act (Cap. 486), an advocate engaged in
the formation of the company or a director or company secretary named in the
Procedure: 12. Make a company seal after a certificate of Articles must sign Form 208, the declaration of compliance, which accompanies
incorporation has been issued the registration documents to be submitted to the Registrar of Companies. The
Time: 5 days common practice is for this procedure to be done by a private lawyer with the power
to commission documents immediately after procedures 2 and 3, since the person
Cost: KES 5,000 (company's seal: KES 4,000 + courier: KES 1000)
incorporating the company is already in town. The minimum cost provided by the
Comments: Seals are made by private entities who require sight of a copy of the Advocates Remuneration Order is KES 200. However, advocates charge on average
certificate of incorporation. The average price of the company seal is KES 4,000. The KES 400 to perform this procedure. Lawyer fees are not considered since the use of
common practice is for applicants to obtain the company seal in Nairobi. Applicants lawyers is not mandatory.
order this seal after filing the incorporation deed and before returning to Malaba.
Once the company seal is ready, private providers will send the seal by courier. The Procedure: 5. File deed and details with the Registrar of
average cost of mailing the seal is KES 1,000.
Companies at the Attorney General's Chamber in Nairobi (Sheria
House)
* This procedure can be completed simultaneously with previous procedures
Time: 28 days
Cost: KES 5,893
STARTING A BUSINESS
Comments: The applicant must file with the Registrar of Companies the incorpora-
Mombasa tion deed and the required documents and forms, which include:
Standard company legal form: Private Corporation a. Stamped memorandum and articles of association;
Paid-in-minimum capital requirement: none b. Statement of capital;
Data as of: June 2009 c. Form 201, Particulars of directors and secretary;
d. Form 203, Notice of proposed registered office;
Procedure: 1. Obtain approval for the company name from the
Registrar of Companies e. Form 208, Declaration of compliance and the prescribed registration fees;
f. Copy of the company name approval.
Time: 4 days (time to obtain approval: 2 days + roundtrip: 2 days)
Fee schedule for registration is the following:
Cost: KES 3,100 (filing fee: KES 100 + transportation: KES 3,000)
a. For the first KES 100,000 of nominal capital: KES 2,200;
Comments: The company name reservation lasts 30 days but can be renewed for
a similar period. This procedure can only be done in Nairobi. Usually, the company's b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120,
promoters will hire a Mombasa lawyer whose agent will travel to Nairobi to under- subject to a maximum of KES 60,000;
take the necessary procedures. The common practice is that procedures one to five c. Filing fee for three forms: KES 600.
are performed in Nairobi given that the applicant, or the company's agent, is already The common practice is for the company's founder to hire a lawyer to undertake the
in town. The time to do this procedure is 2 days, once the applicant is in Nairobi. administrative incorporation procedures in Nairobi. Given that the use of lawyers for
However, it takes 1 day to travel from Mombasa to Nairobi and 1 day to go back. such purposes is not mandatory in Mombasa, lawyer fees are not accounted on the
Travel time is considered within this procedure. The cost of this procedure is KES 100. overall incorporation costs. On average, a lawyer will charge KES 10,000 for the entire
The bus fare from Mombasa to Nairobi is KES 3,000 and is also considered within this incorporation process.
procedure.
Given that the use of lawyers is not mandatory for company incorporation around all Procedure: 6. Register with the Tax Department for a PIN
the localities in Kenya, lawyer fees are not considered in the present report. Time: 1 day
Cost: No cost
Procedure: 2. Stamp the memorandum and articles and a
statement of the nominal capital
Time: 23 days
Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum
and articles of association)
LIST OF PROCE%63&4t STARTING A BUSINESS 43

Comments: Registration for a personal and a company identification number Comments: Providers are hired in Mombasa. This seal is a way to make documents
(PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 formal and legally solid. The seal provides the directors of the company a tool to
shareholders or a director and the secretary are required), the local service tax, and control what are the contracts the company honors and what are the ones the
the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration company will not honor.
and a copy of the memorandum and articles of association. This procedure is done
in Mombasa.
* This procedure can be completed simultaneously with previous procedures
Procedure: 7. Register with the VAT office
STARTING A BUSINESS
Time: 1 day
Cost: No cost Nairobi
Comments: The application for a VAT certificate must be supported with application Standard company legal form: Private Corporation
form, copies of the certificate of incorporation, the PIN certificates for the company Paid-in-minimum capital requirement: none
and 2 of its directors and memorandum and articles of association. The VAT depart- Data as of: June 2009
ment is under the KRA. This procedure can be done at the KRA offices in Mombasa.
Procedure: 1. Obtain approval for the company name from the
Procedure: 8. Apply for a business permit Registrar of Companies
Time: 5 days Time: 3 days
Cost: KES 8,500 Cost: KES 100
Comments: The fee to apply for a business permit varies by type of business, Comments: The company name reservation lasts 30 days but can be renewed for a
number of employees, and size of the company’s premises. The fee is payable to the similar period.
Mombasa City Council. The City Council will issue a business permit.
Fee schedule for business permit is the following: Procedure: 2. Stamp the memorandum and articles and a
a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises statement of the nominal capital
50–300 square meters (fair location): KES 8,500 on average; Time: 8 days
b. Mid-size business of 50 employees and premises 300 square meters: about KES Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum
20,000 to KES 50,000, depending on the nature of the business. and articles of association)
The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem- Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over
ber of 2006 and came into effect on May 1, 2007), amends the Local Government stamp duty collection from the Ministry of Lands and Housing. As an administrative
Act (Cap. 265) by reducing the number of business permits required for a distributor requirement, the KRA now requires the personal identification numbers (PINs) of
of goods or provider of services to carry on its business activities. Applicants having all parties on whose behalf duty-stamped documents are submitted. Documents
obtained a business permit to operate from one local authority will not be required must be first assessed by the Stamp Duty Office before payment can be processed
to obtain another business permit in another local authority. In addition, business by the KRA-designated banks. The process was lengthened initially to about 2 weeks
permit applicants will have an opportunity to elect whether to apply for a 1- or because the Stamp Duty Office waited to receive confirmation of bank payment
2-year permit. The 2006 law also eliminated the requirement to obtain a trading after clearance of funds. However, the time was reduced in 2008 as a result of better
license in addition to the permit. For a first time business permit, the process takes, communication between the Ministry of Lands and Housing and Kenya Revenue
on average 5 days. Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction
are also due.
Procedure: 9. Register with the National Social Security Fund
(NSSF) Procedure: 3*. Pay stamp duty at bank
Time: 1 day Time: 1 day
Cost: No cost Cost: KES 100
Comments: The National Social Security Fund provides the employee with a lump- Comments: KES 100 relates to the cost of the banker’s check which is the mode of
sum retirement benefit. Historically, the rate of return paid by the state is consider- payment of the stamp duty.
ably less than that achieved by private schemes, but participation is mandatory. The
employer pays a standard contribution of about 1% of salary, subject to a maximum Procedure: 4. Declaration of compliance (Form 208) is signed
of KES 400 per month. Half of the contribution is deductible from the employee’s sal- before a Commissioner for Oaths
ary. The precise amount of the contribution (where less than the maximum) is deter- Time: 1 day
mined by reference to salary bands. This procedure is commonly done is Mombasa.
Cost: KES 200
Procedure: 10. Register with the National Hospital Insurance Comments: According to the Companies Act (Cap. 486), an advocate engaged in
Fund (NHIF) the formation of the company or a director or company secretary named in the
Articles must sign Form 208, the declaration of compliance, which accompanies
Time: 1 day the registration documents to be submitted to the Registrar of Companies. The
Cost: No cost common practice is for this procedure to be done by a private lawyer with the power
Comments: The employee contributes a fixed sum to the National Hospital Insur- to commission documents immediately after procedures 2 and 3, since the person
ance Fund (NHIF), which must be deducted by the employer from the employees’ incorporating the company is already in town. The minimum cost provided by the
salary. The maximum contribution is KES 320 per month. The contributions are used Advocates Remuneration Order is KES 200. However, advocates charge on average
to offset the costs of medical treatment, but they only cover a fraction of actual costs. KES 400 to perform this procedure. Lawyer fees are not considered since the use of
Hence, most companies provide employees with medical insurance. This procedure lawyers is not mandatory.
is done at the Mombasa NHIF office.
Procedure: 5. File deed and details with the Registrar of
Procedure: 11. Register for PAYE Companies at the Attorney General's Chamber in Nairobi (Sheria
Time: 1 day House)
Cost: No cost Time: 10 days
Comments: This procedure is commonly done is Mombasa. Cost: KES 5,893
Comments: The applicant must file with the Registrar of Companies the incorpora-
Procedure: 12. Make a company seal after a certificate of tion deed and the required documents and forms, which include:
incorporation has been issued a. Stamped memorandum and articles of association;
Time: 5 days b. Statement of capital;
Cost: KES 5,000 c. Form 201, Particulars of directors and secretary;
d. Form 203, Notice of proposed registered office;
44 DOING BUSINESS IN KENYA 2010

e. Form 208, Declaration of compliance and the prescribed registration fees; Comments: The employee contributes a fixed sum to the National Hospital Insur-
f. Copy of the company name approval. ance Fund (NHIF), which must be deducted by the employer from the employees’
salary. The maximum contribution is KES 320 per month. The contributions are used
Fee schedule for registration is the following:
to offset the costs of medical treatment, but they only cover a fraction of actual costs.
a. For the first KES 100,000 of nominal capital: KES 2,200; Hence, most companies provide employees with medical insurance.
b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120,
subject to a maximum of KES 60,000; Procedure: 11. Register for PAYE
c. Filing fee for three forms: KES 600. Time: 1 day
The common practice is for the company's founder to hire a lawyer to undertake the Cost: No cost
administrative incorporation procedures in Nairobi. Given that the use of lawyers
for such purposes is not mandatory in Nairobi, lawyer fees are not accounted on the Procedure: 12. Make a company seal after a certificate of
overall incorporation costs. On average, a lawyer will charge KES 15,000 for the entire incorporation has been issued
incorporation process.
Time: 2 days
Procedure: 6. Register with the Tax Department for a PIN Cost: KES 3,000
Time: 1 day Comments: Seals are made by private entities that require sight of a copy of the
certificate of incorporation. The average price of the company seal is KES 3,000.
Cost: No cost
Comments: Registration for a personal and a company identification number
(PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 * This procedure can be completed simultaneously with previous procedures
shareholders or a director and the secretary are required), the local service tax, and
the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration STARTING A BUSINESS
and a copy of the memorandum and articles of association.
Narok
Procedure: 7. Register with the VAT office Standard company legal form: Private Corporation
Time: 1 day Paid-in-minimum capital requirement: none
Cost: No cost Data as of: June 2009
Comments: The application for a VAT certificate must be supported with application Procedure: 1. Obtain approval for the company name from the
form, copies of the certificate of incorporation, the PIN certificate for the company Registrar of Companies
and 2 of its directors and memorandum and articles of association. The VAT depart-
ment is under the KRA. Time: 2 days (time to obtain approval: 2 days + roundtrip: 4 hours)
Cost: KES 900 (filing fee: KES 100 + transportation: KES 800)
Procedure: 8. Apply for a business permit Comments: The company name reservation lasts 30 days but can be renewed for
Time: 5 days a similar period. This procedure can only be done in Nairobi. Usually, the company's
Cost: KES 5,000 promoters will hire a Narok lawyer whose agent will travel to Nairobi to undertake
the necessary procedures. The common practice is that procedures one to five are
Comments: The fee to apply for a business permit varies by type of business, performed in Nairobi given that the applicant, or the company's agent, is already in
number of employees, and size of the company’s premises. The fee is payable to the town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How-
Nairobi City Council. The City Council will issue a business permit. ever, it takes 2 hours to travel from Narok to Nairobi and 2 hours to go back. Given
Fee schedule for business permit is the following: the proximity between these localities, travel time is not considered within this
a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises procedure. The cost of this procedure is KES 100. The bus fare from Narok to Nairobi
50–300 square meters (fair location): KES 5,000 on average; is KES 800 and is also considered within this procedure.
b. Mid-size business of 50 employees and premises 300 square meters: about KES Given that the use of lawyers is not mandatory for company incorporation around all
20,000 to KES 50,000 depending on the nature of the business. the localities in Kenya, lawyer fees are not considered in the present report.
The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem-
ber of 2006 and came into effect on May 1, 2007), amends the Local Government Procedure: 2. Stamp the memorandum and articles and a
Act (Cap. 265) by reducing the number of business permits required for a distributor statement of the nominal capital
of goods or provider of services to carry on its business activities. Applicants having Time: 30 days
obtained a business permit to operate from one local authority will not be required Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum
to obtain another business permit in another local authority. In addition, business and articles of association)
permit applicants will have an opportunity to elect whether to apply for a 1- or
2-year permit. The 2006 law also eliminated the requirement to obtain a trading Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over
license in addition to the permit. For a first time business permit, the process takes, stamp duty collection from the Ministry of Lands and Housing. As an administrative
on average 5 days. requirement, the KRA now requires the personal identification numbers (PINs) of
all parties on whose behalf duty-stamped documents are submitted. Documents
must be first assessed by the Stamp Duty Office before payment can be processed
Procedure: 9. Register with the National Social Security Fund
by the KRA-designated banks. The process was lengthened initially to about 2 weeks
(NSSF) because the Stamp Duty Office waited to receive confirmation of bank payment
Time: 1 day after clearance of funds. However, the time was reduced in 2008 as a result of better
Cost: No cost communication between the Ministry of Lands and Housing and Kenya Revenue
Comments: The National Social Security Fund provides the employee with a lump- Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction
sum retirement benefit. Historically, the rate of return paid by the state is consider- are also due.
ably less than that achieved by private schemes, but participation is mandatory. The This procedure is usually done in Nairobi since the applicant is already in town.
employer pays a standard contribution of about 1% of salary, subject to a maximum However, this procedure can also be undertaken in Narok since there are KRA offices
of KES 400 per month. Half of the contribution is deductible from the employee’s in Narok.
salary. The precise amount of the contribution (where less than the maximum) is
determined by reference to salary bands. Procedure: 3. Pay stamp duty at bank
Time: 1 day
Procedure: 10. Register with the National Hospital Insurance Cost: KES 100
Fund (NHIF)
Comments: The cost relates to the banker's check which is the mode of payment of
Time: 1 day the stamp duty.
Cost: No cost
LIST OF PROCE%63&4t STARTING A BUSINESS 45
The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem-
Procedure: 4. Declaration of compliance (Form 208) is signed
ber of 2006 and came into effect on May 1, 2007), amends the Local Government
before a Commissioner for Oaths Act (Cap. 265) by reducing the number of business permits required for a distributor
Time: 3 days of goods or provider of services to carry on its business activities. Applicants having
Cost: KES 200 obtained a business permit to operate from one local authority will not be required
Comments: According to the Companies Act (Cap. 486), an advocate engaged in to obtain another business permit in another local authority. In addition, business
the formation of the company or a director or company secretary named in the permit applicants will have an opportunity to elect whether to apply for a 1- or
Articles must sign Form 208, the declaration of compliance, which accompanies 2-year permit. The 2006 law also eliminated the requirement to obtain a trading
the registration documents to be submitted to the Registrar of Companies. The license in addition to the permit. For a first time business permit, the process takes,
common practice is for this procedure to be done by a private lawyer with the power on average 8 days.
to commission documents immediately after procedures 2 and 3, since the person
incorporating the company is already in town. The minimum cost provided by the Procedure: 9. Register with the National Social Security Fund
Advocates Remuneration Order is KES 200. However, advocates charge on average (NSSF)
KES 400 to perform this procedure. Lawyer fees are not considered since the use of Time: 1 day
lawyers is not mandatory. Cost: No cost
Comments: The National Social Security Fund provides the employee with a lump-
Procedure: 5. File deed and details with the Registrar of
sum retirement benefit. Historically, the rate of return paid by the state is consider-
Companies at the Attorney General's Chamber in Nairobi (Sheria ably less than that achieved by private schemes, but participation is mandatory. The
House) employer pays a standard contribution of about 1% of salary, subject to a maximum
Time: 28 days of KES 400 per month. Half of the contribution is deductible from the employee’s
Cost: KES 5,893 salary. The precise amount of the contribution (where less than the maximum) is
determined by reference to salary bands. This procedure is commonly done is Narok.
Comments: The applicant must file with the Registrar of Companies the incorpora-
tion deed and the required documents and forms, which include:
Procedure: 10. Register with the National Hospital Insurance
a. Stamped memorandum and articles of association;
Fund (NHIF)
b. Statement of capital;
Time: 1 day
c. Form 201, Particulars of directors and secretary;
Cost: No cost
d. Form 203, Notice of proposed registered office;
Comments: The employee contributes a fixed sum to the National Hospital Insur-
e. Form 208, Declaration of compliance and the prescribed registration fees; ance Fund (NHIF), which must be deducted by the employer from the employees’
f. Copy of the company name approval. salary. The maximum contribution is KES 320 per month. The contributions are used
Fee schedule for registration is the following: to offset the costs of medical treatment, but they only cover a fraction of actual costs.
a. For the first KES 100,000 of nominal capital: KES 2,200; Hence, most companies provide employees with medical insurance. This procedure
is done at the Narok NHIF office.
b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120,
subject to a maximum of KES 60,000;
Procedure: 11. Register for PAYE
c. Filing fee for three forms: KES 600.
Time: 1 day
The common practice is for the company's founder to hire a lawyer to undertake the
Cost: No cost
administrative incorporation procedures in Nairobi. Given that the use of lawyers
for such purposes is not mandatory in Narok, lawyer fees are not accounted on the Comments: This procedure is commonly done is Narok.
overall incorporation costs. On average, a lawyer will charge KES 25,000 for the entire
incorporation process. Procedure: 12. Make a company seal after a certificate of
incorporation has been issued
Procedure: 6. Register with the Tax Department for a PIN Time: 4 days
Time: 1 day Cost: KES 4,500 (company's seal: KES 4,000 + courier: KES 500)
Cost: No cost Comments: Seals are made by private entities who require sight of a copy of the
Comments: Registration for a personal and a company identification number certificate of incorporation. The average price of the company seal is KES 4,000. The
(PIN) is required to register for the VAT (PIN certificates of at least two directors or 2 common practice is for applicants to obtain the company seal in Nairobi. Applicants
shareholders or a director and the secretary are required), the local service tax, and order this seal after filing the incorporation deed and before returning to Narok.
the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration Once the company seal is ready, private providers will send the seal by courier. The
and a copy of the memorandum and articles of association. This procedure is done average cost of mailing the seal is KES 500.
in Narok.
* This procedure can be completed simultaneously with previous procedures
Procedure: 7. Register with the VAT office
Time: 1 day STARTING A BUSINESS
Cost: No cost
Nyeri
Comments: The application for a VAT certificate must be supported with an ap-
plication form, copies of the certificate of incorporation, the PIN certificate for the Standard company legal form: Private Corporation
company and two of its directors and memorandum and articles of association. The Paid-in-minimum capital requirement: none
VAT department is under the KRA. This procedure can be done at the KRA offices in Data as of: June 2009
Narok.
Procedure: 1. Obtain approval for the company name from the
Procedure: 8. Apply for a business permit Registrar of Companies
Time: 8 days Time: 2 days (time to obtain approval: 2 days + roundtrip: 6 hours)
Cost: KES 7,500 Cost: KES 800 (filing fee: KES 100 + transportation: KES 700)
Comments: The fee to apply for a business permit varies by type of business, Comments: The company name reservation lasts 30 days but can be renewed for
number of employees, and size of the company’s premises. The fee is payable to the a similar period. This procedure can only be done in Nairobi. Usually, the company's
Narok Municipal Council. The Municipal Council will issue a business permit. promoters will hire a Nyeri lawyer whose agent will travel to Nairobi to undertake
Fee schedule for business permit is the following: the necessary procedures. The common practice is that procedures one to five are
performed in Nairobi given that the applicant, or the company's agent, is already in
a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises town. The time to do this procedure is 2 days, once the applicant is in Nairobi. How-
50–300 square meters (fair location): KES 7,500 on average; ever, it takes 3 hours to travel from Nyeri to Nairobi and 3 hours to go back. Given
b. Mid-size business of 50 employees and premises 300 square meters: about KES
20,000 to KES 50,000 depending on the nature of the business.
46 DOING BUSINESS IN KENYA 2010

the proximity between these localities, travel time is not considered within this Procedure: 6. Register with the Tax Department for a PIN
procedure. The cost of this procedure is KES 100. The bus fare from Nyeri to Nairobi is Time: 1 day
KES 700 and is also considered within this procedure.
Cost: No cost
Given that the use of lawyers is not mandatory for company incorporation around all
the localities in Kenya, lawyer fees are not considered in the present report. Comments: Registration for a personal and a company identification number
(PIN) is required to register for the VAT (PIN certificates of at least two directors or 2
shareholders or a director and the secretary are required), the local service tax, and
Procedure: 2. Stamp the memorandum and articles and a
the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration
statement of the nominal capital and a copy of the memorandum and articles of association. This procedure is done
Time: 27 days in Nyeri.
Cost: KES 8,160 (1% of nominal capital + KES 2,005 stamp duty on memorandum
and articles of association) Procedure: 7. Register with the VAT office
Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over Time: 1 day
stamp duty collection from the Ministry of Lands and Housing. As an administrative Cost: No cost
requirement, the KRA now requires the personal identification numbers (PINs) of
Comments: The application for a VAT certificate must be supported with application
all parties on whose behalf duty-stamped documents are submitted. Documents
form, copies of the certificate of incorporation, the PIN certificate for the company
must be first assessed by the Stamp Duty Office before payment can be processed
and 2 of its directors and memorandum and articles of association. The VAT depart-
by the KRA-designated banks. The process was lengthened initially to about 2 weeks
ment is under the KRA. This procedure can be done at the KRA offices in Nyeri.
because the Stamp Duty Office waited to receive confirmation of bank payment
after clearance of funds. However, the time was reduced in 2008 as a result of better
communication between the Ministry of Lands and Housing and Kenya Revenue Procedure: 8. Apply for a business permit
Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction Time: 6 days
are also due. Cost: KES 6,000
This procedure is usually done in Nairobi since the applicant is already in town. Comments: The fee to apply for a business permit varies by type of business, num-
However, this procedure can also be undertaken in Nyeri since there are KRA offices ber of employees, and size of the company’s premises. The fee is payable to the Nyeri
in Nyeri. Municipal Council. The Municipal Council will issue a business permit.
Fee schedule for business permit is the following:
Procedure: 3. Pay stamp duty at bank a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises
Time: 1 day 50–300 square meters. (fair location): KES 6,000 on average;
Cost: KES 100 b. Mid-size business of 50 employees and premises 300 square meters: about KES
Comments: The cost relates to the banker's check which is the mode of payment of 20,000 to KES 50,000 depending on the nature of the business.
the stamp duty. The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem-
ber of 2006 and came into effect on May 1, 2007), amends the Local Government
Procedure: 4. Declaration of compliance (Form 208) is signed Act (Cap. 265) by reducing the number of business permits required for a distributor
before a Commissioner for Oaths of goods or provider of services to carry on its business activities. Applicants having
Time: 3 days obtained a business permit to operate from one local authority will not be required
to obtain another business permit in another local authority. In addition, business
Cost: KES 200
permit applicants will have an opportunity to elect whether to apply for a 1- or
Comments: According to the Companies Act (Cap. 486), an advocate engaged in 2-year permit. The 2006 law also eliminated the requirement to obtain a trading
the formation of the company or a director or company secretary named in the license in addition to the permit. For a first time business permit, the process takes,
Articles must sign Form 208, the declaration of compliance, which accompanies on average 6 days.
the registration documents to be submitted to the Registrar of Companies. The
common practice is for this procedure to be done by a private lawyer with the power Procedure: 9. Register with the National Social Security Fund
to commission documents immediately after procedures 2 and 3, since the person
(NSSF)
incorporating the company is already in town. The minimum cost provided by the
Advocates Remuneration Order is KES 200. However, advocates charge on average Time: 1 day
KES 400 to perform this procedure. Lawyer fees are not considered since the use of Cost: No cost
lawyers is not mandatory. Comments: The National Social Security Fund provides the employee with a lump-
sum retirement benefit. Historically, the rate of return paid by the state is consider-
Procedure: 5. File deed and details with the Registrar of ably less than that achieved by private schemes, but participation is mandatory. The
Companies at the Attorney General's Chamber in Nairobi (Sheria employer pays a standard contribution of about 1% of salary, subject to a maximum
House) of KES 400 per month. Half of the contribution is deductible from the employee’s
Time: 30 days salary. The precise amount of the contribution (where less than the maximum) is
determined by reference to salary bands. This procedure is commonly done is Nyeri.
Cost: KES 5,893
Comments: The applicant must file with the Registrar of Companies the incorpora- Procedure: 10. Register with the National Hospital Insurance
tion deed and the required documents and forms, which include: Fund (NHIF)
a. Stamped memorandum and articles of association; Time: 1 day
b. Statement of capital; Cost: No cost
c. Form 201, Particulars of directors and secretary; Comments: The employee contributes a fixed sum to the National Hospital Insur-
d. Form 203, Notice of proposed registered office; ance Fund (NHIF), which must be deducted by the employer from the employees’
e. Form 208, Declaration of compliance and the prescribed registration fees; salary. The maximum contribution is KES 320 per month. The contributions are used
f. Copy of the company name approval. to offset the costs of medical treatment, but they only cover a fraction of actual costs.
Hence, most companies provide employees with medical insurance. This procedure
Fee schedule for registration is the following: is done at the Nyeri NHIF office.
a. For the first KES 100,000 of nominal capital: KES 2,200;
b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120, Procedure: 11. Register for PAYE
subject to a maximum of KES 60,000; Time: 1 day
c. Filing fee for three forms: KES 600. Cost: No cost
The common practice is for the company's founder to hire a lawyer to undertake the Comments: This procedure is commonly done is Nyeri.
administrative incorporation procedures in Nairobi. Given that the use of lawyers
for such purposes is not mandatory in Nyeri, lawyer fees are not accounted on the
overall incorporation costs. On average, a lawyer will charge KES 30,000 for the entire
incorporation process.
LIST OF PROCE%63&4t STARTING A BUSINESS 47
Comments: According to the Companies Act (Cap. 486), an advocate engaged in
Procedure: 12. Make a company seal after a certificate of
the formation of the company or a director or company secretary named in the
incorporation has been issued Articles must sign Form 208, the declaration of compliance, which accompanies
Time: 6 days the registration documents to be submitted to the Registrar of Companies. The
Cost: KES 4,800 (company's seal: KES 4,000 + courier: KES 800) common practice is for this procedure to be done by a private lawyer with the power
Comments: Seals are made by private entities who require sight of a copy of the to commission documents immediately after procedures 2 and 3, since the person
certificate of incorporation. The average price of the company seal is KES 4,000. The incorporating the company is already in town. The minimum cost provided by the
common practice is for applicants to obtain the company seal in Nairobi. Applicants Advocates Remuneration Order is KES 200. However, advocates charge on average
order this seal after filing the incorporation deed and before returning to Nyeri. Once KES 400 to perform this procedure. Lawyer fees are not considered since the use of
the company seal is ready, private providers will send the seal by courier. The average lawyers is not mandatory.
cost of mailing the seal is KES 800.
Procedure: 5. File deed and details with the Registrar of
Companies at the Attorney General's Chamber in Nairobi (Sheria
* This procedure can be completed simultaneously with previous procedures
House)
Time: 14 days
STARTING A BUSINESS
Cost: KES 5,387
Thika Comments: The applicant must file with the Registrar of Companies the incorpora-
Standard company legal form: Private Corporation tion deed and the required documents and forms, which include:
Paid-in-minimum capital requirement: none a. Stamped memorandum and articles of association;
Data as of: June 2009 b. Statement of capital;
Procedure: 1. Obtain approval for the company name from the c. Form 201, Particulars of directors and secretary;
Registrar of Companies d. Form 203, Notice of proposed registered office;
Time: 2 days (time to obtain approval: 2 days + roundtrip: 1 hour) e. Form 208, Declaration of compliance and the prescribed registration fees;
Cost: KES 300 (filing fee: KES 100 + transportation: KES 200) f. Copy of the company name approval.
Comments: The company name reservation lasts 30 days but can be renewed for Fee schedule for registration is the following:
a similar period. This procedure can only be done in Nairobi. Usually, the company's a. For the first KES 100,000 of nominal capital: KES 2,200;
promoters will hire a Thika lawyer whose agent will travel to Nairobi to undertake b. For every KES 20,000 of nominal capital after the first KES 100,000: KES 120,
the necessary procedures. The common practice is that procedures one to five are subject to a maximum of KES 60,000;
performed in Nairobi given that the applicant, or the company's agent, is already c. Filing fee for three forms: KES 600.
in town. The time to do this procedure is 2 days, once the applicant is in Nairobi.
However, it takes 30 minutes to travel from Thika to Nairobi and 30 minutes to go The common practice is for the company's founder to hire a lawyer to undertake the
back. Given the proximity between these localities, travel time is not considered administrative incorporation procedures in Nairobi. Given that the use of lawyers
within this procedure. The cost of this procedure is KES 100. The bus fare from Thika for such purposes is not mandatory in Thika, lawyer fees are not accounted on the
to Nairobi is KES 200 and is also considered within this procedure. overall incorporation costs. On average, a lawyer will charge KES 15,000 for the entire
incorporation process.
Given that the use of lawyers is not mandatory for company incorporation around all
the localities in Kenya, lawyer fees are not considered in the present report.
Procedure: 6. Register with the Tax Department for a PIN
Procedure: 2. Stamp the memorandum and articles and a Time: 1 day
statement of the nominal capital Cost: No cost
Time: 14 days Comments: Registration for a personal and a company identification number
(PIN) is required to register for the VAT (PIN certificates of at least two directors or 2
Cost: KES 7,317 (1% of nominal capital + KES 2,005 stamp duty on memorandum
shareholders or a director and the secretary are required), the local service tax, and
and articles of association)
the pay-as-you-earn (PAYE) tax. The applicant must file the certificate of registration
Comments: Effective January 1, 2005, the Kenya Revenue Authority (KRA) took over and a copy of the memorandum and articles of association. This procedure is done
stamp duty collection from the Ministry of Lands and Housing. As an administrative in Thika.
requirement, the KRA now requires the personal identification numbers (PINs) of
all parties on whose behalf duty-stamped documents are submitted. Documents Procedure: 7. Register with the VAT office
must be first assessed by the Stamp Duty Office before payment can be processed
by the KRA-designated banks. The process was lengthened initially to about 2 weeks Time: 1 day
because the Stamp Duty Office waited to receive confirmation of bank payment Cost: No cost
after clearance of funds. However, the time was reduced in 2008 as a result of better Comments: The application for a VAT certificate must be supported with application
communication between the Ministry of Lands and Housing and Kenya Revenue form, copies of the certificate of incorporation, the PIN certificate for the company
Authority (KRA) to 5-10 days. Bank handling charges of KES 100 for each transaction and 2 of its directors and memorandum and articles of association. The VAT depart-
are also due. ment is under the KRA. This procedure can be done at the KRA offices in Thika.
This procedure is usually done in Nairobi since the applicant is already in town.
However, this procedure can also be undertaken in Thika since there are KRA offices Procedure: 8. Apply for a business permit
in Thika. Time: 6 days
Cost: KES 6,500
Procedure: 3. Pay stamp duty at bank
Comments: The fee to apply for a business permit varies by type of business, num-
Time: 1 day ber of employees, and size of the company’s premises. The fee is payable to the Thika
Cost: KES 100 Municipal Council. The Municipal Council will issue a business permit.
Comments: This procedure can be done either in Thika or in Nairobi. The common Fee schedule for business permit is the following:
practice is for applicants to stay in Nairobi since the applicant is already in the city to a. Medium trader, shop, or retail service from 5 to 20 employees and/or premises
perform the previous procedures. KES 100 relates to the cost of the banker’s check 50–300 square meters (fair location): KES 6,500 on average;
which is the mode of payment of the stamp duty.
b. Mid-size business of 50 employees and premises 300 square meters: about KES
20,000 to KES 50,000 depending on the nature of the business.
Procedure: 4. Declaration of compliance (Form 208) is signed
before a Commissioner for Oaths The Licensing Laws (Repeals and Amendments) Act , 2006 (was enacted in Decem-
ber of 2006 and came into effect on May 1, 2007), amends the Local Government
Time: 1 day Act (Cap. 265) by reducing the number of business permits required for a distributor
Cost: KES 200 of goods or provider of services to carry on its business activities. Applicants having
obtained a business permit to operate from one local authority will not be required
to obtain another business permit in another local authority. In addition, business
48 DOING BUSINESS IN KENYA 2010

permit applicants will have an opportunity to elect whether to apply for a 1- or Finally, the building plans are endorsed by the full Council.
2-year permit. The 2006 law also eliminated the requirement to obtain a trading
license in addition to the permit. For a first time business permit, the process takes, Procedure 2. Obtain approval from the National Environment
on average 6 days. Management Authority (NEMA)
Time: 30 days
Procedure: 9. Register with the National Social Security Fund
Cost: KES 16,250
(NSSF)
Comments: Following the enactment of a new Environmental Management and
Time: 1 day
Co-ordination Act on February 27, 2009, companies now have to obtain approval of
Cost: No cost the project from the National Environment Management Authority. Projects of all
Comments: The National Social Security Fund provides the employee with a lump- risk categories are subject to approval and environmental impact assessment (EIA),
sum retirement benefit. Historically, the rate of return paid by the state is consider- including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES
ably less than that achieved by private schemes, but participation is mandatory. The 32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value.
employer pays a standard contribution of about 1% of salary, subject to a maximum The regulation regarding environmental impact assessment approval for Kenya has
of KES 400 per month. Half the contribution is deductible from the employee’s salary. been in place since 1999. However, in recent years NEMA has started enforcing the
The precise amount of the contribution (where less than the maximum) is deter- rules more vigorously. NEMA conducts periodic inspections during the construction.
mined by reference to salary bands. This procedure is commonly done is Thika. If new projects at the moment of inspection do not have an environmental impact
assessment they may order the project be closed and erected objects demolished.
Procedure: 10. Register with the National Hospital Insurance Therefore, construction companies are now obtaining the environmental approval
Fund (NHIF) before the building is completed. Nevertheless, the legislation is not clear on which
Time: 1 day categories of buildings this regulation would apply to.
Cost: No cost
Procedure 3. Notify the Eldoret Municipal Council of the
Comments: The employee contributes a fixed sum to the National Hospital Insur-
commencement of building work and receive a routine on-site
ance Fund (NHIF), which must be deducted by the employer from the employees’
salary. The maximum contribution is KES 320 per month. The contributions are used inspection
to offset the costs of medical treatment, but they only cover a fraction of actual costs. Time: 1 day
Hence, most companies provide employees with medical insurance. This procedure Cost: No cost
is done at the Thika NHIF office. Comments: Inspectors from the Eldoret Municipal Council are available during
business hours every day. There are several inspections required by the municipal
Procedure: 11. Register for PAYE by-laws. However, the common practice is that inspectors only come for routine
Time: 1 day checks during the construction phase. They stop by the construction site while the
Cost: No cost construction continues and check if everything is being built in accordance with the
architectural plans submitted initially. The cost for this inspection is included in the
Comments: This procedure is commonly done is Thika.
scrutiny fees paid in procedure 1.
Procedure: 12. Make a company seal after a certificate of
Procedure 4. Request an occupancy certificate and receive a final
incorporation has been issued
on-site inspection by the municipal authority
Time: 4 days
Time: 2 days
Cost: KES 4,250 (company's seal: KES 4,000 + courier: KES 250)
Cost: No cost
Comments: Seals are made by private entities who require sight of a copy of the
Comments: BuildCo informs the Municipal Council Engineer's Department that the
certificate of incorporation. The average price of the company seal is KES 4,000. The
warehouse is completed. The municipal engineer or other officers inspect the ware-
common practice is for applicants to obtain the company seal in Nairobi. Applicants
house and confirm whether the structure conforms to all the relevant building plans.
order this seal after filing the incorporation deed and before returning to Thika. Once
the company seal is ready, private providers will send the seal by courier. The average
cost of mailing the seal is KES 250. Procedure 5. Obtain an occupancy certificate from the municipal
authority
Time: 1 day
* This procedure can be completed simultaneously with previous procedures Cost: No cost
Comments: The inspection card (PPA1) is fully filled and an occupancy certificate is
LIST OF PROCEDURES issued by the Municipal Engineer's Department. The cost for the occupancy certifi-
Dealing with construction permits cate is paid in procedure 1.

Procedure 6. Apply for water and sewerage connection


Eldoret Time: 1 day
Cost: No cost
Procedures to build a warehouse
Comments: To apply for water and sewerage connection, BuildCo has to submit the
Warehouse value: US$ 404,783 = KES 32,500,000
following:
Data as of: June 2009
a. Application form;
Procedure 1. Request approval of the architectural plans from b. Identification card;
the Eldoret Municipal Council c. Personal identification number (PIN);
Time: 50 days d. Sketch map of the warehouse site.
Cost: KES 21,626 (KES 2,000 for the building occupancy certificate, KES 10,486 for At this stage no costs are absorbed since BuildCo has to wait for the Eldoret Water
scrutiny fees, KES 200 for submission forms, KES 3,640 for structural fees, KES 300 for and Sewerage Company (ELDOWAS) officers to visit the site and ascertain whether
the Physical Planning Act 1 form (PPA1), and KES 5,000 for public health fees) there is an existing water line near the building site and whether there will be suf-
Comments: BuildCo submits the approval request together with the building plans. ficient supply in the future.
The building plans are circulated for approval to the following departments:
a. The Physical Planning Department; Procedure 7. Pay water and sewerage installation costs and
b. The Municipal Engineer's Department;
obtain connection
c. The Public Health Department; Time: 3 days
d. The Finance Department; Cost: KES 3,660 (KES 1,250 for water, KES 810 for sewerage, KES 1,000 for meter
deposit, and KES 600 for supervision costs during meter installation)
e. The Municipal Planning Committee.
LIST OF PROCE%63&4t DEALING WITH CONSTRUCTION PERMITS 49

Comments: There are plans to adjust the tariffs upwards and a notice to introducing Procedure 3. Submit project plans and get approval from the
the new tariffs was gazetted on January 1, 2009. Public Health Department
Time: 3 days
Procedure 8*. Request electricity connection from the local
Cost: KES 3,000 (public health fee)
electricity provider
Comments: BuildCo submits the project plans for approval to the Public Health
Time: 1 day
Department (PHD). A PHD officer approves the plans and signs the applicable sec-
Cost: No cost tion of the PPA1 form.
Comments: According to the Kenya Power & Lighting Co. Ltd (KPLC), BuildCo needs
to fill an Enquiry for Supply of Electricity form and submit it to the KPLC local office Procedure 4. Submit project plans and signed PPA1 form to the
with the following documents: Municipal Council Engineer's Department and obtain approval
a. Copy of the national identity card of the person who is applying on BuildCo's Time: 7 days
behalf (non-Kenyans will be required to provide a copy of a valid passport);
Cost: KES 12,000
b. Copy of the lease agreement or a title deed of the premises to be supplied with
Comments: The municipal council engineer reviews the building plans and checks
electricity or a signed letter of tenancy from the responsible landlord with a copy
if all approvals have been obtained in the PPA1 form. Construction can commence
of his/her identify card;
only after the municipal council engineer has given approval of the plans.
c. Detailed route sketch of the premises (this should include roads and other
salient features). Corporate customers are required to also provide a copy of their Procedure 5. Obtain approval from the National Environment
personal identification number (PIN) certificate and certificate of incorporation.
Management Authority
Procedure 9*. Apply and pay for telephone connection Time: 30 days
Time: 1 day Cost: KES 16,250
Cost: KES 2,300 Comments: Following the enactment of a new Environmental Management and
Co-ordination Act on February 27, 2009, companies now have to obtain approval of
Comments: BuildCo applies for telephone connection at the local Telkom Kenya the project from the National Environment Management Authority. Projects of all
office where readily available forms can be immediately filled out and submitted. risk categories are subject to approval and environmental impact assessment (EIA),
To obtain a commercial connection, the applicant needs to submit, along with the including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES
application, the following: 32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value.
a. Proof of ownership of the business; The regulation regarding environmental impact assessment approval for Kenya has
b. Identification card. been in place since 1999. However, in recent years NEMA has started enforcing the
The same tariff and connection fee apply across the country. rules more vigorously. NEMA conducts periodic inspections during the construction.
If new projects at the moment of inspection do not have an environmental impact
Procedure 10*. Receive an on-site inspection by the local assessment they may order the project be closed and erected objects demolished.
electricity provider Therefore, construction companies are now obtaining the environmental approval
before the building is completed. Nevertheless, the legislation is not clear on which
Time: 1 day categories of buildings this regulation would apply to.
Cost: No cost
Comments: KPLC will conduct a survey on the construction site and send a letter to Procedure 6. Notify the Garissa Municipal Council of the
BuildCo quoting the amount of capital contribution and deposit to be paid. commencement of building work and receive a routine on-site
inspection
Procedure 11. Obtain electricity connection Time: 1 day
Time: 28 days Cost: No cost
Cost: KES 60,000 (inclusive of 16% VAT) Comments: There are several inspections required by the municipal by-laws. How-
Comments: For new connections, if the warehouse site is within six hundred meters ever, the common practice is that the inspectors only come for routine checks during
from the power transformer, it costs KES 36,980 to get a one-phase connection (in- the construction phase. They stop by the construction site while the construction
cludes VAT and account deposit). Beyond six hundred meters, the cost is determined continues and check if everything is being built in accordance with the architectural
by KPLC designers and surveyors. A three-phase connection cost varies with the user plans submitted initially.
requirements. The minimum cost for a three-phase connection is KES 60,000.
Procedure 7. Request an occupancy certificate and receive a final
* This procedure can be completed simultaneously with previous procedures on-site inspection by the municipal authority
Time: 2 days
DEALING WITH CONSTRUCTION PERMITS Cost: No cost
Garissa Comments: BuildCo informs the Garissa Municipal Council once construction is
completed.
Procedures to build a warehouse
Warehouse value: US$ 404,783 = KES 32,500,000 Procedure 8. Obtain an occupancy certificate
Data as of: June 2009
Time: 5 days
Procedure 1. Request approval of the architectural plans and get Cost: No cost
a Physical Planning Act 1 form (PPA1) from the Garissa Municipal Comments: An officer from the Municipal Engineer's Department issues an occu-
Council pancy certificate, after having inspected the building (procedure 7). The cost for the
Time: 1 day occupancy certificate is included in procedure 4.
Cost: KES 2,000 (PPA1 form)
Procedure 9. Apply for water and sewerage connection
Procedure 2. Submit project plans and get approval from the Time: 1 day
Physical Planning Department Cost: KES 2,000 (application fee)
Time: 3 days Comments: After submitting the application form to the Garissa Water and Sewer-
age Company (GAWASCO), a plumber comes onsite to assess the requirements and
Cost: No cost
costs of connection and advises BuildCo on the same. If BuildCo agrees on the cost,
Comments: BuildCo submits the project plans for approval to the Physical Planning then the information is forwarded to a technical manager of the GAWASCO for ap-
Department (PPD). A PPD officer approves the plans and signs the applicable section proval and issuance of the meter.
of the PPA1 form.
50 DOING BUSINESS IN KENYA 2010

Procedure 10*. Pay water and sewerage installation costs and Procedure 3. Submit project plans and get approval from the
obtain connection Public Health Department
Time: 5 days Time: 2 days
Cost: KES 5,000 Cost: KES 1,500
Comments: BuildCo submits a supply agreement form obtained from GAWASCO Comments: BuildCo submits the project plans for approval to the Public Health
detailing the property location, postal address and an attached receipt for water Department (PHD). A PHD officer approves the plans and signs the PPA1 form.
deposit.
Procedure 4. Submit project plans and signed PPA1 form to
Procedure 11*. Request electricity connection from the local the Municipal Council Engineer's Department and get project
electricity provider approval
Time: 1 day Time: 10 days
Cost: No cost Cost: KES 12,200
Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec- Comments: The municipal council engineer reviews the building plans, checks if all
tricity form and submit it to the KPLC local office with the following documents: approvals have been obtained in the PPA1 form and then issues the building permit.
a. Copy of the national identity card of the person who is applying on BuildCo's
behalf (non-Kenyans will be required to provide a copy of a valid passport); Procedure 5. Notify the Isiolo Municipal Council of the
b. Copy of the lease agreement or a title deed of the premises to be supplied with commencement of building work and receive a routine on-site
electricity or a signed letter of tenancy from the responsible landlord with a copy inspection
of his/her identify card; Time: 1 day
c. Detailed route sketch of the premises (this should include roads and other Cost: KES 2,000
salient features). Corporate customers are required to also provide a copy of their
Comments: There are several inspections required by the municipal by-laws. How-
personal identification number (PIN) certificate and certificate of incorporation.
ever, the common practice is that the inspectors only come for routine checks during
the construction phase. They stop by the construction site while the construction
Procedure 12*. Apply and pay for telephone connection continues and check if everything is being built in accordance with the architectural
Time: 3 days plans submitted initially.
Cost: KES 2,300
Comments: BuildCo applies for telephone connection at the local Telkom Kenya Procedure 6. Request an occupancy certificate and receive a final
office where readily available forms can be immediately filled out and submitted. on-site inspection by the municipal authority
To obtain a commercial connection, the applicant needs to submit, along with the Time: 3 days
application, the following: Cost: KES 2,000
a. Proof of ownership of the business; Comments: BuildCo informs the Isiolo Municipal Council once construction is
b. Identification card. completed. The Municipal Council sends inspectors to the construction site before
The same tariff and connection fee apply across the country. the occupancy certificate is issued.

Procedure 13. Receive an on-site inspection by the local Procedure 7. Obtain an occupancy certificate
electricity provider Time: 10 days
Time: 1 day Cost: KES 2,000
Cost: No cost
Comments: KPLC will conduct a survey on the construction site and send a letter to Procedure 8. Apply for water and sewerage connection
BuildCo quoting the amount of capital contribution and deposit to be paid. Time: 2 days
Cost: No cost
Procedure 14. Obtain electricity connection
Time: 21 days Procedure 9*. Pay water and sewerage installation costs and
Cost: KES 54,000 (inclusive of 16% VAT) obtain connection
Comments: The minimum cost for a three-phase connection is KES 54,000. The cost Time: 5 days
includes connection fee, meter fee, and VAT. Cost: KES 7,000 (deposit fee of KES 5,000, sewerage processing fee of KES 1,500 and
water processing fee of KES 500)
* This procedure can be completed simultaneously with previous procedures Comments: BuildCo presents an approved PPA1 form. A representative from the
Isiolo Water and Sewerage Company visits and inspects the site to determine mate-
rial requirements and water pressure available. The process takes 5 days on average
DEALING WITH CONSTRUCTION PERMITS
because there are only specific days of the week on which the Isiolo Water and
Isiolo Sewerage Company crew can come for installation. The deposit fee is refundable in
Procedures to build a warehouse case BuildCo decides to discontinue the water and sewerage service.
Warehouse value: US$ 404,783 = KES 32,500,000
Procedure 10*. Request electricity connection from the local
Data as of: June 2009 electricity provider
Procedure 1. Request approval of architectural plans and get a Time: 1 day
Physical Planning Act 1 form (PPA1) from the Isiolo Municipal Cost: No cost
Council Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec-
Time: 1 day tricity form and submit it to the KPLC local office with the following documents:
Cost: No cost a. Copy of the national identity card of the person who is applying on BuildCo's
behalf (non-Kenyans will be required to provide a copy of a valid passport);
Procedure 2. Submit project plans and get approval from the b. Copy of the lease agreement or a title deed of the premises to be supplied with
Physical Planning Department electricity or a signed letter of tenancy from the responsible landlord with a copy
Time: 2 days of his/her identify card;
Cost: No cost c. Detailed route sketch of the premises (this should include roads and other
salient features). Corporate customers are required to also provide a copy of their
Comments: BuildCo submits the project plans for approval to the Physical Planning personal identification number (PIN) certificate and certificate of incorporation.
Department (PPD). A PPD officer approves the plans and signs the PPA1 form.
LIST OF PROCE%63&4t DEALING WITH CONSTRUCTION PERMITS 51

Procedure 11*. Apply and pay for telephone connection Procedure 3. Notify the Kilifi Municipal Council of the
Time: 14 days commencement of building work and receive a routine on-site
Cost: KES 2,300 inspection
Comments: BuildCo applies for telephone connection at the local Telkom Kenya Time: 2 days
office where readily available forms can be immediately filled out and submitted. Cost: No cost
To obtain a commercial connection, the applicant needs to submit, along with the
application, the following: Procedure 4. Request an occupancy certificate and receive a final
a. Proof of ownership of the business; on-site inspection by the municipal authority
b. Identification card. Time: 2 days
The same tariff and connection fee apply across the country. Cost: No cost
Comments: The company has to file an inspection request and an officer from the
Procedure 12. Receive an on-site inspection by the local Municipal Engineer's Department performs an on-site inspection the next day.
electricity provider
Time: 21 days Procedure 5. Obtain an occupancy certificate
Cost: No cost Time: 14 days
Comments: KPLC has no inspection office in Isiolo. In order to perform the inspec- Cost: No cost
tion, KPLC representatives have to come from Meru or Nyeri. This adds significantly Comments: If the warehouse is found to be in compliance with the inspection
to the time required to complete this procedure. requirements, an occupancy certificate is issued by the Kilifi Municipal Council.

Procedure 13. Obtain electricity connection Procedure 6. Apply for water and sewerage connection
Time: 60 days Time: 2 days
Cost: KES 54,000 (inclusive of 16% VAT) Cost: No cost
Comments: The connection fees to obtain electricity within the radius of the Comments: Along with the application form, BuildCo needs to submit the follow-
already existing power transformer in Isiolo are KES 54,000. To obtain electricity ing:
outside of the area covered by the transformer, the cost can go up to KES 1,400,000. a. Sketch map of the building site;
b. Copy of certificate of incorporation;
* This procedure can be completed simultaneously with previous procedures c. PIN number.

DEALING WITH CONSTRUCTION PERMITS Procedure 7*. Pay water and sewerage installation costs and
Kilifi obtain connection
Procedures to build a warehouse Time: 13 days
Warehouse value: US$ 404,783 = KES 32,500,000 Cost: KES 10,000
Data as of: June 2009
Procedure 8*. Request electricity connection from the local
Procedure 1. Request and get approval of the architectural plans electricity provider
from the Kilifi Municipal Council Time: 1 day
Time: 21 days Cost: No cost
Cost: KES 25,001 (KES 12,751 for the Kilifi Municipal Council, KES 5,000 for the Public Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec-
Health Department, KES 3,500 for the Physical Planning Department, and KES 3,750 tricity form and submit it to the KPLC local office with the following documents:
for the Land Department) a. Copy of the national identity card of the person who is applying on BuildCo's
Comments: The company submits the architectural and structural drawings and behalf (non-Kenyans will be required to provide a copy of a valid passport);
proof of ownership to the Kilifi Municipal Council. The Municipal Council circulates b. Copy of the lease agreement or a title deed of the premises to be supplied with
the documents to the following departments: electricity or a signed letter of tenancy from the responsible landlord with a copy
a. The District Public Health department; of his/her identify card;
b. The District Land Department; c. Detailed route sketch of the premises (this should include roads and other
c. The District Physical Planner; salient features). Corporate customers are required to also provide a copy of their
personal identification number (PIN) certificate and certificate of incorporation.
d. The District Public Works Department.
The fees paid to the Kilifi Municipal Council cover the cost for inspections and the Procedure 9*. Apply and pay for telephone connection
cost for the occupancy certificate.
Time: 3 days
Procedure 2. Obtain approval from National Environment Cost: KES 2,300
Management Authority Comments: BuildCo applies for telephone connection at the local Telkom Kenya
Time: 30 days office where readily available forms can be immediately filled out and submitted.
To obtain a commercial connection, the applicant needs to submit, along with the
Cost: KES 16,250 application, the following:
Comments: Following the enactment of a new Environmental Management and a. Proof of ownership of the business;
Co-ordination Act on February 27, 2009, companies now have to obtain approval of
the project from the National Environment Management Authority. Projects of all b. Identification card.
risk categories are subject to approval and environmental impact assessment (EIA), The same tariff and connection fee apply across the country.
including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES
32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value. Procedure 10. Receive an on-site inspection by the local
The regulation regarding environmental impact assessment approval for Kenya has electricity provider
been in place since 1999. However, in recent years NEMA has started enforcing the Time: 3 days
rules more vigorously. NEMA conducts periodic inspections during the construction. Cost: No cost
If new projects at the moment of inspection do not have an environmental impact
assessment they may order the project be closed and erected objects demolished. Procedure 11. Obtain electricity connection
Therefore, construction companies are now obtaining the environmental approval
before the building is completed. Nevertheless, the legislation is not clear on which Time: 17 days
categories of buildings this regulation would apply to. Cost: KES 121,000 (inclusive of 16% VAT)
52 DOING BUSINESS IN KENYA 2010

Comments: Connection is obtained only after the on-site inspector has indicated Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec-
that the building fulfills all requirements for electricity installation. The cost ranges tricity form and submit it to the KPLC local office with the following documents:
from KES 35,000 for a single-phase connection to KES 121,000 for a three-phase a. Copy of the national identity card of the person who is applying on BuildCo's
connection. behalf (non-Kenyans will be required to provide a copy of a valid passport);
b. Copy of the lease agreement or a title deed of the premises to be supplied with
* This procedure can be completed simultaneously with previous procedures electricity or a signed letter of tenancy from the responsible landlord with a copy
of his/her identify card;
DEALING WITH CONSTRUCTION PERMITS c. Detailed route sketch of the premises (this should include roads and other
salient features). Corporate customers are required to also provide a copy of their
Kisumu personal identification number (PIN) certificate and certificate of incorporation.
Procedures to build a warehouse
Warehouse value: US$ 404,783 = KES 32,500,000 Procedure 8*. Apply and pay for telephone connection
Data as of: June 2009 Time: 6 days
Cost: KES 2,300
Procedure 1. Request and get approval of the architectural plans
the Kisumu Municipal Council Comments: BuildCo applies for telephone connection at the local Telkom Kenya
office where readily available forms can be immediately filled out and submitted.
Time: 30 days To obtain a commercial connection, the applicant needs to submit, along with the
Cost: KES 76,668 (KES 39,925 architectural fee, KES 26,743 structural submission fee, application, the following:
KES 5,000 building inspection fee, and KES 5,000 Public Health Department fee) a. Proof of ownership of the business;
Comments: The building permit is sought and obtained from the Kisumu Municipal b. Identification card.
Council. BuildCo must submit, along with a site plan, the following:
The same tariff and connection fee apply across the country.
a. Proof of ownership of the plot;
b. Receipt evidencing the purchase of land; Procedure 9*. Receive an on-site inspection by the local
c. Physical Planning Act form (PPA1), which is then submitted to the Municipal Plan- electricity provider
ner's Department for approval. Time: 1 day
The Kisumu Municipal Council has a fully fledged Municipal planner's Department Cost: No cost
that includes the Physical Planning Department and the Public Health Department.
Comments: Connection is obtained only after the on-site inspector has indicated
Everything is done in house, including approval of signatures for the PPA1 form. The
that the building fulfills all requirements for electricity installation.
building approval is valid for a period of one year within which BuildCo must com-
mence the construction. The permit may be extended for the same period of time at
a nominal cost. Procedure 10. Obtain electricity connection
Time: 28 days
Procedure 2. Notify the Kisumu Municipal Council of the Cost: KES 54,000 (inclusive of 16% VAT)
commencement of building work and receive a routine on-site
inspection * This procedure can be completed simultaneously with previous procedures
Time: 1 day
Cost: No cost DEALING WITH CONSTRUCTION PERMITS
Comments: There are several inspections required by the municipal by-laws. How- Malaba
ever, the common practice is that the inspectors only come for routine checks during
the construction phase. They stop by the construction site while the construction Procedures to build a warehouse
continues and check if everything is being built in accordance with the architectural Warehouse value: US$ 404,783 = KES 32,500,000
plans initially submitted. Data as of: June 2009

Procedure 3. Request an occupancy certificate and receive a final Procedure 1. Request approval of the architectural plans from
on-site inspection by the municipal authority the Malaba Municipal Council
Time: 10 days Time: 14 days
Cost: No cost Cost: KES 6,400
Comments: BuildCo submits to the Malaba Municipal Council the following:
Procedure 4. Obtain an occupancy certificate a. Building plans;
Time: 7 days b. Title deed;
Cost: KES 2,000 c. Proof of land ownership.
Comments: Once the building has been inspected and found to be in compliance An officer from the Public Works Department will look at the plans and make recom-
with inspection requirements, an occupancy certificate is issued. mendations. If the plans are in order, the company will pay the required fees for the
permit. Afterwards, the plans are forwarded to the Municipal Planning Committee
Procedure 5. Apply for water and sewerage connection for formalization.
Time: 3 days
Cost: KES 2,500 Procedure 2. Obtain approval from National Environment
Management Authority
Procedure 6. Pay water and sewerage installation costs and Time: 30 days
obtain connection Cost: KES 16,250
Time: 20 days Comments: Following the enactment of a new Environmental Management and
Cost: KES 8,500 (KES 2,500 for meter and KES 6,000 for deposit) Co-ordination Act on February 27, 2009, companies now have to obtain approval of
Comments: The periurban areas of Kisumu do not have sewerage and water net- the project from the National Environment Management Authority. Projects of all
works. The developer has to build a septic tank. risk categories are subject to approval and environmental impact assessment (EIA),
including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES
32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value.
Procedure 7*. Request electricity connection from the local
electricity provider
Time: 1 day
Cost: No cost
LIST OF PROCE%63&4t DEALING WITH CONSTRUCTION PERMITS 53

The regulation regarding environmental impact assessment approval for Kenya has Cost: No cost
been in place since 1999. However, in recent years NEMA has started enforcing the Comments: The inspection is done by KPLC personnel sent from Kisumu.
rules more vigorously. NEMA conducts periodic inspections during the construction.
If new projects at the moment of inspection do not have an environmental impact Procedure 10*. Apply and pay for telephone connection
assessment they may order the project be closed and erected objects demolished.
Therefore, construction companies are now obtaining the environmental approval Time: 7 days
before the building is completed. Nevertheless, the legislation is not clear on which Cost: KES 2,300
categories of buildings this regulation would apply to. Comments: BuildCo applies for telephone connection at the local Telkom Kenya
office where readily available forms can be immediately filled out and submitted.
Procedure 3. Notify the Malaba Municipal Council of the To obtain a commercial connection, the applicant needs to submit, along with the
commencement of building work and receive a routine on-site application, the following:
inspection a. Proof of ownership of the business;
Time: 2 days b. Identification card.
Cost: No cost The same tariff and connection fee apply across the country.
Comments: There are several inspections required by the municipal by-laws. How-
ever, the common practice is that the inspectors only come for routine checks during Procedure 11. Obtain electricity connection
the construction phase. They stop by the construction site while the construction Time: 50 days
continues and check if everything is being built in accordance with the architectural Cost: KES 54,000 (inclusive of 16% VAT)
plans submitted initially. The inspector sent by the Malaba Municipal Council could
Comments: Malaba relies on KPLC personnel from neighboring towns of Kisumu,
check, among other things, the building boundaries, accessibility to the power line,
Busia and Bungoma town to do the electricity connection. This is the reason why
sewerage, water, and telephone line, cement mixture, reinforcements, roofing, and
the average time to obtain electricity connection is quite longer than in other towns
site consolidation.
across Kenya.
Procedure 4. Request an occupancy certificate and receive a final
on-site inspection by the municipal authority * This procedure can be completed simultaneously with previous procedures
Time: 1 day
Cost: No cost DEALING WITH CONSTRUCTION PERMITS

Comments: The Malaba Municipal Council conducts an inspection to ensure that Mombasa
the structure built complies with the building plans submitted and approved by the Procedures to build a warehouse
Municipal Council before issuing any occupancy certificate. Warehouse value: US$ 404,783 = KES 32,500,000
Data as of: June 2009
Procedure 5. Obtain an occupancy certificate
Time: 3 days Procedure 1. Request approval of the architectural plans and
Cost: KES 1,500 get the Physical Planning Act 1 form (PPA1) from the Mombasa
Comments: Once the building has been inspected, the occupancy certificate is Municipal Council
issued by the Public Health Department. Time: 60 days
Cost: KES 21,500
Procedure 6. Apply for water and sewerage connection
Comments: BuildCo is required to submit the following documents:
Time: 1 day
a. Copy of the title deed;
Cost: KES 1,500 (application fee)
b. Clearance certificate;
Procedure 7. Pay water and sewerage installation costs and c. Architectural drawings;
obtain connection d. Structural drawings.
Time: 7 days
Procedure 2*. Submit project plans and get approval from the
Cost: KES 2,000 (connection fee) Building Department
Comments: There are two water supply systems in Malaba, one provided by the
Time: 1 day
Municipal Council of Malaba and another provided by the Malaba Water and Sewer-
age Company. Cost: No cost
Comments: BuildCo has to send a representative to get approval signature on the
Procedure 8*. Request electricity connection from the local PPA1 form from the Building Department since the Mombasa Municipal Council
electricity provider lacks personnel to circulate the project plans to this department.
Time: 2 days
Procedure 3*. Submit project plans and get approval from the
Cost: KES 400 (transportation cost) Municipal Planning Department
Comments: There is no KPLC office in Malaba. Electricity connection requests can
Time: 1 day
be done either in Kisumu, Busia or in Bungoma town. The round-trip transportation
cost is KES 400. Cost: No cost
According to KPLC, BuildCo needs to fill an Enquiry for Supply of Electricity form and Comments: BuildCo has to send a representative to get approval signature on the
submit it to the KPLC local office with the following documents: PPA1 form from the Municipal Planning Department since Mombasa Municipal
Council lacks personnel to circulate the project plans to this department.
a. Copy of the national identity card of the person who is applying on BuildCo's
behalf (non-Kenyans will be required to provide a copy of a valid passport);
Procedure 4*. Submit project plans and get approval from the
b. Copy of the lease agreement or a title deed of the premises to be supplied with Valuation Department
electricity or a signed letter of tenancy from the responsible landlord with a copy
of his/her identify card; Time: 1 day
c. Detailed route sketch to the premises (this should include roads and other Cost: No cost
salient features). Corporate customers are required to also provide a copy of their Comments: BuildCo has to send a representative to get approval signature on the
personal identification number (PIN) certificate and certificate of incorporation. PPA1 form from the Valuation Department since the Mombasa Municipal Council
lacks personnel to circulate the project plans to this department.
Procedure 9*. Receive an on-site inspection by the local
electricity provider
Time: 7 days
54 DOING BUSINESS IN KENYA 2010

Procedure 5*. Submit project plans and get approval from the Comments: BuildCo applies for telephone connection at the local Telkom Kenya
Public Health Department office where readily available forms can be immediately filled out and submitted.
To obtain a commercial connection, the applicant needs to submit, along with the
Time: 3 days
application, the following:
Cost: No cost
a. Proof of ownership of the business;
Comments: BuildCo has to send a representative to get approval signature on the
b. Identification card.
PPA1 form from the Public Health Department since the Mombasa Municipal Council
lacks personnel to circulate the project plans to this department. The same tariff and connection fee apply across the country.

Procedure 6. Notify the Mombasa Municipal Council of the Procedure 13*. Receive an on-site inspection by the local
commencement of building work and receive a routine on-site electricity provider
inspection Time: 3 days
Time: 2 days Cost: No cost
Cost: No cost
Procedure 14. Obtain electricity connection
Comments: There are several inspections required by the municipal by-laws. How-
ever, the common practice is that the inspectors only come for routine checks during Time: 7 days
the construction phase. They stop by the construction site while the construction Cost: KES 49,940 (inclusive of 16% VAT)
continues and check if everything is being built in accordance with the architectural Comments: There are standard fees for a three-phase connection.
plans initially submitted. The inspector sent by the Municipal Council could check,
among other things, the building boundaries, accessibility to the power line, sewer-
age, water, and telephone line, cement mixture, reinforcements, roofing, and site * This procedure can be completed simultaneously with previous procedures
consolidation.
DEALING WITH CONSTRUCTION PERMITS
Procedure 7. Request an occupancy certificate and receive a final Nairobi
on-site inspection by the municipal authority
Procedures to build a warehouse
Time: 1 day
Warehouse value: US$ 404,783 = KES 32,500,000
Cost: No cost
Data as of: June 2009
Procedure 8. Obtain an occupancy certificate Procedure 1. Submit architectural plan for approval and obtain
Time: 2 days provisional building permit
Cost: KES 19,000 Time: 30 days
Comments: Once the construction is completed and inspected, BuildCo submits an Cost: KES 64,303
application for an occupancy certificate, which is issued the next day. The Mombasa Comments: BuildCo would approach the City Development Department, of the
Municipal Council conducts inspection to ensure that the structure built complies City Council of Nairobi (CCN) to get its architectural plans approved first. Before
with the building plans submitted and approved by the Council. submitting the application, BuildCo needs to make payment of relevant fees. Once
payment is made, BuildCo submits the receipt to the City Development Department.
Procedure 9. Apply for water and sewerage connection The application must contain the architectural drawings and plans, land title, and a
Time: 2 days copy of the main architect’s license. The application then gets forwarded to various
Cost: KES 1,000 departments: the Physical Planning Department, the Road Department, the Public
Health Department, the Fire Department, the Water Authority, and the Electricity
Comments: BuildCo needs to submit the following:
Authority. Each department takes at least one week to clear the respective section
a. Filled application form; of the plans, and grants separate permits for the plumbing, sewerage, and electrical
b. Title deed; activities that BuildCo will be involved in during the construction of the warehouse.
c. Certificate of registration; Thereafter, the application is forwarded for approval to the Technical Committee
d. PIN number. that convenes twice a week and issues the approvals. As a result of the approval of
architectural drawings, BuildCo will receive the building permit. Building permit is
granted only provisionally, until the structural segment is approved.
Procedure 10. Pay water and sewerage installation costs and
obtain connection After the provisional building permit is obtained, BuildCo needs to submit its struc-
tural project separately.
Time: 20 days
Since 2006, CCN has been reforming under the Rapid Results Initiative (RRI), trying to
Cost: KES 6,500 (fixed fee) reduce the number of days and eliminate bottlenecks. Since 2008 the architectural
project approval is done by the Technical Committee that convenes twice a week
Procedure 11*. Request electricity connection from the local and issues the approvals. Previously, the approving body was the City Council
electricity provider itself. However, due to its busy schedule and backlog, it was decided to transfer
Time: 1 day the responsibility from the City Council to the Technical Committee. Because of
Cost: No cost various reforms, now it takes on average 30 days to obtain this part of approval as
opposed to 50 days before. However, approval time varies because it depends on the
Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec- diligence of the architect.
tricity form and submit it to the KPLC local office with the following documents:
As of November 2008, occupancy certificate fee must be paid at this stage.
a. Copy of the national identity card of the person who is applying on BuildCo's
behalf (non-Kenyans will be required to provide a copy of a valid passport); According to the updated fee schedule of the City Council of Nairobi, as of October
31, 2009 in the Kenya Gazette, the following changes are introduced:
b. Copy of the lease agreement or a title deed of the premises to be supplied with
electricity or a signed letter of tenancy from the responsible landlord with a copy a. Design inspection fee for the first 930 square meters is KES 12,850;
of his/her identify card; b. For every 93 square meters above the original 930 square meters the design
c. Detailed route sketch of the premises (this should include roads and other inspection fee increases by KES 1,500;
salient features). Corporate customers are required to also provide a copy of their c. The total design inspection fee for BuildCo is KES 18,850 for 1300.6 square meters;
personal identification number (PIN) certificate and certificate of incorporation. d. construction sign board fee is KES 15,000;
e. Application fee is KES 2,000;
Procedure 12*. Apply and pay for telephone connection
f. Infrastructure development levy fee is 0.5% of the estimated development cost of
Time: 20 days the building, which comes down to KES 13,656.3;
Cost: KES 2,300
LIST OF PROCE%63&4t DEALING WITH CONSTRUCTION PERMITS 55
g. Occupancy fee for a warehouse of 930 square meters is KES 14,000 and for every Procedure 8*. Request electricity connection from local
additional 93 square meters an additional KES 200 (for BuildCo’s warehouse this
comes down to KES 14,796.9). electricity provider
Time: 1 day
Procedure 2. Submit and obtain structural plan approval and Cost: KES 2,000
final building permit Comments: This procedure involves making an application to the electricity
Time: 10 days provider attaching a copy of the certificate of incorporation, a clear map showing
Cost: KES 7,476 the physical location of the warehouse, and a site plan of where the meter board (if
using the meter system) will be installed.
Comments: Once the architectural plans and drawings are approved and comments
and changes are made, BuildCo has to incorporate them into the structural plans and The steps to follow to apply for electricity are:
re-submit the application to the CCN for approval. This is done as common practice a. Complete the Enquiry For Supply of Electricity form;
for submitting both plans together is impossible. One other reason why these two b. Attach a copy of PIN, certificate of incorporation of the company, title deed of the
steps happen separately is because the architectural drawings and plans are checked premises and a detailed sketch of the premises indicating roads and other salient
by the Structural Department at a stage when structural plans are approved. Con- features.
struction works begin only after this approval. Kenya Power & Lighting Company (KPLC) is the body responsible for transmission
Due to RRI program and internal processes of simplification in the CCN it takes now and distribution of electricity in Kenya and not KENGEN. KENGEN only generates the
10 days to obtain the structural approval compared to previous 25 days. electrical power and sells it to KPLC for transmission and distribution to consumers.
BuildCo must have the following items approved: project plans, architectural draw-
ings, location survey of property documents and others. Procedure 9*. Receive an on-site inspection by the local
electricity provider
Procedure 3. Obtain approval from the National Environment Time: 1 day
Management Authority Cost: No cost
Time: 30 days
Cost: KES 16,250 Procedure 10*. Obtain electricity connection
Comments: Following the enactment of a new Environmental Management and Time: 14 days
Co-ordination Act on February 27, 2009, companies now have to obtain approval of Cost: No cost
the project from the National Environment Management Authority. Projects of all
Comments: After the inspection, KPLC will send a quotation to BuildCo on the
risk categories are subject to approval and environmental impact assessment (EIA),
amount of capital contribution plus the deposit to be paid. The capital contribution
including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES
includes the cost of labor, materials and the transport involved. This quotation is
32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value.
valid for only 90 days. When the applicant pays the amount of the quotation, power
The regulation regarding environmental impact assessment approval for Kenya has connection will be effected.
been in place since 1999. However, in recent years NEMA has started enforcing the
rules more vigorously. NEMA conducts periodic inspections during the construction. Procedure 11*. Apply and pay for telephone connection
If new projects at the moment of inspection do not have an environmental impact
assessment they may order the project be closed and erected objects demolished. Time: 5 days
Therefore, construction companies are now obtaining the environmental approval Cost: KES 2,300
before the building is completed. Nevertheless, the legislation is not clear on which Comments: BuildCo applies for telephone connection at the local Telkom Kenya
categories of buildings this regulation would apply to. office where readily available forms can be immediately filled out and submitted.
To obtain a commercial connection, the applicant needs to submit, along with the
Procedure 4. Receive on-site inspection by the municipal application, the following:
authority after construction a. Proof of ownership of the business;
Time: 5 days b. Identification card.
Cost: KES 100 The same tariff and connection fee apply across the country.
Comments: BuildCo must inform the municipality that the building has been
completed in order to start the inspections. * This procedure can be completed simultaneously with previous procedures

Procedure 5. Obtain an occupancy certificate


DEALING WITH CONSTRUCTION PERMITS
Time: 14 days
Narok
Cost: No cost
Comments: Cost for this procedure is included in Procedure 1. Procedures to build a warehouse
Warehouse value: US$ 404,783 = KES 32,500,000
Procedure 6. Apply for water and sewerage connection Data as of: June 2009
Time: 1 day Procedure 1. Request approval of architectural plans and get a
Cost: KES 1,100 Physical Planning Act 1 form (PPA1) from the Narok Municipal
Council
Procedure 7. Pay water and sewerage installation costs and
Time: 30 days
obtain connection
Cost: KES 20,000 (KES 16,000 to the Municipal Council, KES 1,000 for the Physical
Time: 30 days
Planning Act 1 form (PPA1) , and KES 3,000 for the District Planning Office)
Cost: KES 6,000
Comments: The Narok Municipal Council will circulate the plans for approval to
Comments: The applicant is required to submit an "application for water and sewer- various departments that are either in the same premises or in the vicinity of the
age supply form" obtained from the Nairobi City Water and Sewerage Company. Municipal Council building.
Thereafter, the applicant is required to pay KES 1,100 for a survey and estimates
fees and attach the receipt of payment to the application form. The applicant is also Procedure 2. Submit project plans and get approval from the
required to attach the company's certificate of registration and its PIN number. The
District Public Health Office
Nairobi Water Company may approve the application after all these documents have
been submitted. After approval, applicant is required to pay KES 6,000. The applicant Time: 1 day
is responsible for payment of all water, meter rent, sewer, conservancy, and refuse Cost: KES 5,000
collection charges. The process usually takes a month.
56 DOING BUSINESS IN KENYA 2010

Procedure 3. Notify the Narok Municipal Council of the Procedure 11. Obtain electricity connection
commencement of building work and receive a routine on-site Time: 25 days
inspection Cost: KES 48,720 (inclusive of 16% VAT)
Time: 1 day Comments: KES 42,000 plus VAT is the schedule for a three-phase connection.
Cost: No cost
Comments: There are several inspections required by the municipal by-laws. How- * This procedure can be completed simultaneously with previous procedures
ever, the common practice is that the inspectors only come for routine checks during
the construction phase. They stop by the construction site while the construction
DEALING WITH CONSTRUCTION PERMITS
continues and check if everything is being built in accordance with the architectural
plans initially submitted. The inspector sent by the Municipal Council could check, Nyeri
among other things, the building boundaries, accessibility to the power line, sewer- Procedures to build a warehouse
age, water, and telephone line, cement mixture, reinforcements, roofing, and site
consolidation. Warehouse value: US$ 404,783 = KES 32,500,000
Data as of: June 2009
Procedure 4. Request an occupancy certificate and receive a final
Procedure 1. Request approval of the architectural plans from
on-site inspection by the municipal authority
the Nyeri Municipal Council
Time: 1 day
Time: 40 days
Cost: No cost
Cost: KES 12,000
Procedure 5. Obtain an occupancy certificate Comments: BuildCo submits the application for approval to Nyeri Municipal Council
and the Municipal Council then forwards the clearances to its various departments,
Time: 5 days which include:
Cost: KES 2,000 a. The Urban Planning Department;
Comments: The occupancy certificate is issued only after the inspector has deter- b. The Engineering Department;
mined that the building is in full compliance with the architectural plans submitted
initially. c. The Development Department.

Procedure 6. Apply for water and sewerage connection Procedure 2. Submit project plans and get approval from the
Public Health Department
Time: 1 day
Time: 2 days
Cost: KES 1,000
Cost: No cost
Procedure 7. Pay water and sewerage installation costs and
obtain connection Procedure 3. Notify the Nyeri Municipal Council of the
commencement of building work and receive a routine on-site
Time: 5 days
inspection
Cost: KES 5,000
Time: 2 days
Comments: The Narok Water and Sewerage Company is a subsidiary of the Rift
Valley Water and Sewerage Company and is co-owned by the Municipal Council of Cost: KES 100
Narok. It is required that all buildings provide a conservancy tank for sewerage and Comments: There are several inspections required by the municipal by-laws. How-
foul water disposal. ever, the common practice is that the inspectors only come for routine checks during
the construction phase. They stop by the construction site while the construction
Procedure 8*. Request electricity connection from the local continues and check if everything is being built in accordance with the architectural
electricity provider plans initially submitted. The inspector sent by the Municipal Council could check,
among other things, the building boundaries, accessibility to the power line, sewer-
Time: 1 day age, water, and telephone line, cement mixture, reinforcements, roofing, and site
Cost: No cost consolidation.
Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec-
tricity form and submit it to the KPLC local office with the following documents: Procedure 4. Request an occupancy certificate and receive a final
a. Copy of the national identity card of the person who is applying on BuildCo's on-site inspection by the municipal authority
behalf (non-Kenyans will be required to provide a copy of a valid passport); Time: 1 day
b. Copy of the lease agreement or a title deed of the premises to be supplied with Cost: KES 100
electricity or a signed letter of tenancy from the responsible landlord with a copy Comments: BuildCo informs the relevant departments at the Nyeri Municipal
of his/her identify card; Council that the warehouse is completed. The Council sends its officers to inspect
c. Detailed route sketch of the premises (this should include roads and other the building to find out if it conforms to the project plans, architectural plans and
salient features). Corporate customers are required to also provide a copy of their structural design that the company had submitted for approval.
personal identification number (PIN) certificate and certificate of incorporation.
Procedure 5. Obtain an occupancy certificate
Procedure 9*. Apply and pay for telephone connection Time: 1 day
Time: 3 days Cost: KES 500
Cost: KES 2,300 Comments: The occupancy certificate is issued only after the inspection is finished
Comments: BuildCo applies for telephone connection at the local Telkom Kenya and the inspectors determine that the necessary requirements are fulfilled.
office where readily available forms can be immediately filled out and submitted.
To obtain a commercial connection, the applicant needs to submit, along with the Procedure 6. Apply for water and sewerage connection
application, the following:
Time: 2 days
a. Proof of ownership of the business;
Cost: No cost
b. Identification card.
Comments: BuildCo is required to submit to the Nyeri Water and Sewerage Com-
The same tariff and connection fee apply across the country. pany the following:
a. Copy of the certificate of incorporation;
Procedure 10*. Receive an on-site inspection by the local
electricity provider b. Plot number;
c. PIN number.
Time: 1 day
Cost: No cost
LIST OF PROCE%63&4t DEALING WITH CONSTRUCTION PERMITS 57

Procedure 7. Pay water and sewerage installation costs and Comments: Following the enactment of a new Environmental Management and
obtain connection Co-ordination Act on February 27, 2009, companies now have to obtain approval of
the project from the National Environment Management Authority. Projects of all
Time: 7 days risk categories are subject to approval and environmental impact assessment (EIA),
Cost: KES 5,000 including BuildCo's warehouse. The cost is set at 0.05% of warehouse value (KES
Comments: BuildCo is required to pay the connection fee before installation begins. 32,500,000). Prior to February 11, 2009, the fee rate was 0.1% of warehouse value.
The regulation regarding environmental impact assessment approval for Kenya has
Procedure 8*. Request electricity connection from the local been in place since 1999. However, in recent years NEMA has started enforcing the
electricity provider rules more vigorously. NEMA conducts periodic inspections during the construction.
Time: 1 day If new projects at the moment of inspection do not have an environmental impact
assessment they may order the project be closed and erected objects demolished.
Cost: KES 3,500 (application fee) Therefore, construction companies are now obtaining the environmental approval
Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec- before the building is completed. Nevertheless, the legislation is not clear on which
tricity form and submit it to the KPLC local office with the following documents: categories of buildings this regulation would apply to.
a. Copy of the national identity card of the person who is applying on BuildCo's
behalf (non-Kenyans will be required to provide a copy of a valid passport); Procedure 3. Notify the Thika Municipal Council of the
b. Copy of the lease agreement or a title deed of the premises to be supplied with commencement of building work and receive a routine on-site
electricity or a signed letter of tenancy from the responsible landlord with a copy inspection
of his/her identify card; Time: 2 days
c. Detailed route sketch of the premises (this should include roads and other Cost: No cost
salient features). Corporate customers are required to also provide a copy of their
personal identification number (PIN) certificate and certificate of incorporation. Comments: There are several inspections required by the municipal by-laws. How-
ever, the common practice is that the inspectors only come for routine checks during
the construction phase. They stop by the construction site while the construction
Procedure 9*. Apply and pay for telephone connection continues and check if everything is being built in accordance with the architectural
Time: 3 days plans initially submitted. The cost for this inspection is paid when the request for
Cost: KES 2,300 approval of plans is made in procedure 1.
Comments: BuildCo applies for telephone connection at the local Telkom Kenya
office where readily available forms can be immediately filled out and submitted. Procedure 4. Request an occupancy certificate and receive a final
To obtain a commercial connection, the applicant needs to submit, along with the on-site inspection by the municipal authority
application, the following: Time: 4 days
a. Proof of ownership of the business; Cost: No cost
b. Identification card. Comments: The cost for the final on-site inspection is included in procedure 1.
The same tariff and connection fee apply across the country.
Procedure 5. Obtain an occupancy certificate
Procedure 10*. Receive an on-site inspection by the local Time: 7 days
electricity provider Cost: KES 10,000
Time: 28 days Comments: The occupancy certificate is issued once BuildCo has fulfilled all rel-
Cost: No cost evant requirements issued in the PPA1 Form, as determined by the final inspection.

Procedure 11. Obtain electricity connection Procedure 6. Apply for water and sewerage connection
Time: 21 days Time: 1 day
Cost: KES 58,000 (inclusive of 16% VAT) Cost: KES 200
Comments: KPLC sends their installation crew to the site so long as all dues have
been paid. Procedure 7. Pay water and sewerage installation costs and
obtain connection
* This procedure can be completed simultaneously with previous procedures Time: 13 days
Cost: KES 7,500
DEALING WITH CONSTRUCTION PERMITS Comments: The connection fee changed at the end of year 2008, from KES 6,000 to
KES 7,500.
Thika
Procedures to build a warehouse Procedure 8*. Request electricity connection from the local
Warehouse value: US$ 404,783 = KES 32,500,000 electricity provider
Data as of: June 2009 Time: 1 day
Procedure 1. Request approval of the architectural plans from Cost: KES 2,000 (application fee)
the Thika Municipal Council Comments: According to KPLC, BuildCo needs to fill an Enquiry for Supply of Elec-
tricity form and submit it to the KPLC local office with the following documents:
Time: 45 days
a. Copy of the national identity card of the person who is applying on BuildCo's
Cost: KES 10,000
behalf (non-Kenyans will be required to provide a copy of a valid passport);
Comments: There is a schedule of charges that depends on the size of the building
b. Copy of the lease agreement or a title deed of the premises to be supplied with
in square meters. The schedule of charges, published in the Daily Nation of Decem-
electricity or a signed letter of tenancy from the responsible landlord with a copy
ber 29, 2008, is as follows:
of his/her identify card;
a. For a building from 901 square meters to 1000 square meters – KES 7,000;
c. Detailed route sketch of the premises (this should include roads and other
b. For every 100 square meters above 1,000, the cost increases by KES 1,000. salient features). Corporate customers are required to also provide a copy of their
Since BuildCo's warehouse is 1,300 square meters the total cost is KES 10,000. The personal identification number (PIN) certificate and certificate of incorporation.
cost covers inspections and the occupancy certificate.

Procedure 2. Obtain approval from National Environment


Management Authority
Time: 30 days
Cost: KES 16,250
58 DOING BUSINESS IN KENYA 2010

Procedure 9*. Apply and pay for telephone connection Comments: While the draft transfer is being processed at the Lands Office, an
inspector visits the site to verify the development and state of the property. Due to
Time: 3 days
lack of transport, in practice, the inspector often has to be picked up in person and
Cost: KES 2,300 driven to the site. There are no prior appointments made and the actual inspection
Comments: BuildCo applies for telephone connection at the local Telkom Kenya may happen within one day or, in the worst case, one month.
office where readily available forms can be immediately filled out and submitted.
To obtain a commercial connection, the applicant needs to submit, along with the Procedure 6*. Obtain valuation of the property
application, the following: Time: 3 days
a. Proof of ownership of the business; Cost: KES 2,000
b. Identification card. Comments: An application must be submitted to the Lands Office of the district.
The same tariff and connection fee apply across the country. The valuer assesses the property and provides the estimate value or market rate on
the valuation form.
Procedure 10*. Receive an on-site inspection by the local
electricity provider Procedure 7. Pay stamp duty at a commercial bank
Time: 1 day Time: 4 days
Cost: No cost Cost: KES 200
Comments: The applicant has to submit a copy of the sales agreement. Once the
Procedure 11. Obtain electricity connection stamp duty is paid, a copy of the deposit slip has to be presented at the Lands Office.
Time: 21 days
Cost: KES 80,000 (inclusive of 16% VAT) Procedure 8. Lodge the completion documents with the Lands
Comments: KPLC sends their installation crew to the site as long as all dues have Office for registration of the transfer
been paid. Time: 4 days
Cost: KES 250
* This procedure can be completed simultaneously with previous procedures Comments: Completion documents are lodged at the Lands Office of Eldoret. The
applicant fills the application forms, pays the fees and lodges the documents for
registration of the transfer.
LIST OF PROCEDURES
* This procedure can be completed simultaneously with previous procedures
Registering property
REGISTERING PROPERTY

Eldoret Garissa
Property value: US$ 38,331 = KES 3,077,674 Property value: US$ 38,331 = KES 3,077,674
Data as of: June 2009 Data as of: June 2009

Procedure 1. Carry out search of title at the Lands Office Procedure 1. Carry out search of title at the Lands Office
Time: 3 days Time: 5 days (time to carry out search: 3 days + roundtrip: 2 days)
Cost: KES 250 Cost: KES 1,250 (search fee: KES 250 + transportation: KES 1,000)
Comments: In respect of searches on property registered under the Registered Comments: This procedure is carried out in Nairobi as these services are not
Land Act, a copy of the title document is required to be submitted at the time of ap- available in Garissa. The time to travel from Garissa to Nairobi is considered in this
plying for the search. Also, one cannot carry out a personal search but must instead procedure. In respect of searches on property registered under the Registered Land
apply for an official search. The applicant fills and submits the prescribed form and Act, a copy of the title document is required to be submitted at the time of applying
pays KES 250. for the search. Also, one cannot carry out a personal search but must instead apply
for an official search. The applicant fills and submits the prescribed form and pays
KES 250.
Procedure 2*. Obtain Rates Clearance Certificate
Time: 5 days Procedure 2*. Obtain Rates Clearance Certificate
Cost: KES 2,500 Time: 1 day
Comments: The applicant gets a demand notice, pays and waits for the document Cost: KES 250
from the Eldoret municipal clerk.
Comments: An application for the Rates Clearance Certificate is submitted along
with the latest payment receipt.
Procedure 3*. Obtain Land Rent Clearance Certificate
Time: 19 days Procedure 3*. Obtain Land Rent Clearance Certificate
Cost: KES 3,800 Time: 19 days
Cost: KES 2,500
Procedure 4. File the transfer instrument at the Lands Office for
assessment of stamp duty payable on the transfer Comments: An application for Land Rent Certificate along with the latest payment
receipt.
Time: 8 days
Cost: KES 123,107 (4% of the property value) Procedure 4. File the transfer instrument at the Lands Office for
Comments: This procedure is carried out at the Lands Office of Eldoret (Uasin Gishu assessment of stamp duty payable on the transfer
District). The draft transfer is prepared by the buyer’s lawyers and needs to be ap- Time: 10 days
proved by the seller’s counterpart.
Cost: KES 123,107 (4% of the property value)
Procedure 5*. Receive inspection by land officer Comments: The draft transfer is prepared by the buyer’s lawyers and needs to be
approved by the seller’s counterpart.
Time: 1 day
Cost: No cost
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Procedure 5*. Receive inspection by land officer Procedure 5*. Receive inspection by land officer
Time: 1 day Time: 1 day
Cost: No cost Cost: No cost
Comments: While the draft transfer is being processed at the Lands Office, an Comments: While the draft transfer is being processed at the Lands Office, an
inspector visits the site to verify the development and state of the property. Due to inspector visits the site to verify the development and state of the property. Due to
lack of transport, in practice, the inspector often has to be picked up in person and lack of transport, in practice, the inspector often has to be picked up in person and
driven to the site. There are no prior appointments made and the actual inspection driven to the site. There are no prior appointments made and the actual inspection
may happen within one day or, in the worst case, one month. may happen within one day or, in the worst case, one month. However, note that
this time is not limited and in some cases entrepreneurs may wait months for a
Procedure 6*. Obtain valuation of the property valuation.
Time: 30 days
Procedure 6*. Obtain valuation of the property
Cost: No cost
Time: 20 days (time to obtain valuation: 20 days + roundtrip: 2 hours)
Comments: The inspector visits the site to evaluate and verify the indicated
purchase price of the property in order to ensure accurate tax payment. If the as- Cost: KES 400 (transportation)
sessed value differs from the one indicated by the parties, an additional payment is Comments: There are no land valuers in Isiolo, thus the main registry has to request
requested. a valuer in Meru to do the valuation in Isiolo and then forward it to Nairobi.
Previously, such inspections were conducted on a random basis, but now every
transaction requires such an inspection. The issues involved are similar to the in- Procedure 7. Pay stamp duty at a commercial bank
spections by the land officer and, therefore, may happen within one day to over one Time: 4 days
month. The evaluation report itself is completed within a few days of the inspection. Cost: KES 200
Both inspections are required before the completion documents can be lodged with
the Lands Office. Comments: The original transfer is taken for assessment of the stamp duty payable
in the Lands Office. After the assessment has taken place, the payment can be done
at the designated banks (i.e. Kenya Commercial Bank or National Bank of Kenya).
Procedure 7. Pay stamp duty at a commercial bank
Time: 4 days Procedure 8. Lodge the completion documents with the Lands
Cost: KES 200 Office for registration of the transfer
Comments: The applicant obtains a banker's check after making the relevant pay- Time: 30 days
ment.
Cost: KES 250
Procedure 8. Lodge the completion documents with the Lands Comments: Completion documents are lodged at the Lands Office in Nairobi.
Office for registration of the transfer
Time: 30 days * This procedure can be completed simultaneously with previous procedures
Cost: KES 250
REGISTERING PROPERTY
Comments: The transfer form duly filled and the original title document are lodged
at the Lands Office by the buyer. Kilifi
Property value: US$ 38,331 = KES 3,077,674
* This procedure can be completed simultaneously with previous procedures Data as of: June 2009

REGISTERING PROPERTY
Procedure 1. Carry out search of title at the Lands Office
Time: 2 days
Isiolo
Cost: KES 750
Property value: US$ 38,331 = KES 3,077,674
Comments: After an application form is submitted along with a copy of PIN
Data as of: June 2009 number and certificate of incorporation, a search certificate is issued confirming the
registered owner of the property. For land registered under Cap 300, the search is
Procedure 1. Carry out search of title at the Lands Office
carried out at Kilifi Lands Office. For land registered under Cap 280, the search done
Time: 5 days (time to carry out search: 3 days + roundtrip: 2 days) at Mombasa Lands Office.
Cost: KES 2,250 (search fee: KES 250 + transportation: KES 2,000)
Comments: This procedure is carried out in Nairobi as these services are not avail- Procedure 2*. Obtain Rates Clearance Certificate
able in Isiolo. The time to travel from Isiolo to Nairobi is considered in this procedure. Time: 5 days
In respect of searches on property registered under the Registered Land Act, a copy Cost: KES 3,000
of the title document is required to be submitted at the time of applying for the
search. Also, one cannot carry out a personal search but must instead apply for an Comments: Rates Clearance Certificate is obtained at the Lands Office in Kilifi.
official search. The applicant fills and submits the prescribed form and pays KES 250.
Procedure 3*. Obtain Land Rent Clearance Certificate
Procedure 2*. Obtain Rates Clearance Certificate Time: 30 days
Time: 2 days Cost: No cost
Cost: KES 617,135 Comments: An application is submitted along with a copy of PIN number of the
applicant, receipts of payment for the rates payable, and receipt for payment of the
Procedure 3*. Obtain Land Rent Clearance Certificate Clearance Certificate.
Time: 19 days
Procedure 4. File the transfer instrument at the Lands Office for
Cost: KES 250 assessment of stamp duty payable on the transfer
Procedure 4. File the transfer instrument at the Lands Office for Time: 8 days
assessment of stamp duty payable on the transfer Cost: KES 123,107 (4% of the property value)
Time: 10 days Comments: The draft transfer is prepared by the buyer’s lawyers and needs to be
approved by the seller’s counterpart.
Cost: KES 123,107 (4% of the property value)
Comments: The draft transfer is prepared by the buyer’s lawyers and needs to be Procedure 5*. Receive inspection by land officer
approved by the seller’s counterpart.
Time: 30 days
Cost: No cost
60 DOING BUSINESS IN KENYA 2010

Comments: While the draft transfer is being processed at the Lands Office, an Procedure 4. File the transfer instrument at the Lands Office for
inspector visits the site to verify the development and state of the property. Due to assessment of stamp duty payable on the transfer
lack of transport, in practice, the inspector often has to be picked up in person and
Time: 1 day
driven to the site. There are no prior appointments made and the actual inspection
may happen within one day or, in the worst case, one month. However, note that Cost: KES 123,107 (4% of the property value)
this time is not limited and in some cases entrepreneurs may wait months for a Comments: The draft transfer is prepared by the buyer’s lawyers and needs to be
valuation. approved by the seller’s counterpart.

Procedure 6*. Obtain valuation of the property Procedure 5*. Receive inspection by land officer
Time: 30 days Time: 1 day
Cost: No cost Cost: No cost
Comments: The inspector visits the site to evaluate and verify the indicated Comments: While the draft transfer is being processed at the Lands Office, an
purchase price of the property in order to ensure accurate tax payment. If the as- inspector visits the site to verify the development and state of the property. Due to
sessed value differs from the one indicated by the parties, an additional payment is lack of transport, in practice, the inspector often has to be picked up in person and
requested. driven to the site. There are no prior appointments made and the actual inspection
Previously, such inspections were conducted on a random basis, but now every may happen within one day or, in the worst case, one month. However, note that
transaction requires such an inspection. The issues involved are similar to the in- this time is not limited and in some cases entrepreneurs may wait months for a
spections by the land officer and, therefore, may happen within one day to over one valuation.
month. The evaluation report itself is completed within a few days of the inspection.
Both inspections are required before the completion documents can be lodged with Procedure 6*. Obtain valuation of the property
the Lands Office. Time: 1 day
Cost: No cost
Procedure 7. Pay stamp duty at a commercial bank Comments: The inspector visits the site to evaluate and verify the indicated
Time: 7 days purchase price of the property in order to ensure accurate tax payment. If the as-
Cost: KES 200 sessed value differs from the one indicated by the parties, an additional payment is
requested.
Procedure 8. Lodge the completion documents with the Lands Previously, such inspections were conducted on a random basis, but now every
Office for registration of the transfer transaction requires such an inspection. The issues involved are similar to the in-
Time: 4 days spections by the land officer and, therefore, may happen within one day to over one
month. The evaluation report itself is completed within a few days of the inspection.
Cost: KES 375
Both inspections are required before the completion documents can be lodged with
Comments: The completion documents are lodged for registration at the Lands the Lands Office.
Office in Kilifi.
These documents include: Procedure 7. Pay stamp duty at a commercial bank
a. Original certificate of title; Time: 4 days
b. Rates Clearance Certificate; Cost: KES 200
c. Land Rent Clearance Certificate; Comments: The applicant has to visit the authorized bank and make the relevant
d. Consent to transfer; payment. Once the banker's check has been obtained, it is submitted to the Lands
e. Valuation for stamp duty form. Office.
If the land is registered under Cap 300, the certificate of the registered transfer is
obtained at the Kilifi Lands Office.
Procedure 8. Lodge the completion documents with Lands Office
for registration of the transfer
If the land is registered under Cap 280, the certificate of the registered transfer is
obtained at the Mombasa Lands Office. Time: 14 days
The Lands Office in Kilifi registers land in the districts of Kilifi, Kaloleni and Malindi. Cost: No cost
Comments: The applicant submits to the Lands Office the following documents:
* This procedure can be completed simultaneously with previous procedures a. Original certificate of title;
b. Rates Clearance Certificate;
REGISTERING PROPERTY c. Land Rent Clearance Certificate;
Kisumu d. Consent to transfer;
e. Valuation of property;
Property value: US$ 38,331 = KES 3,077,674
f. Application for registration of transfer.
Data as of: June 2009

Procedure 1. Carry out search of title at the Lands Office * This procedure can be completed simultaneously with previous procedures
Time: 1 day
Cost: KES 250 REGISTERING PROPERTY
Comments: After the form RL 26 is submitted, the Lands Office issues a certificate Malaba
confirming the registered owner of the land.
Property value: US$ 38,331 = KES 3,077,674
Procedure 2*. Obtain Rates Clearance Certificate Data as of: June 2009
Time: 3 days Procedure 1. Carry out search of title at the Lands Office
Cost: KES 3,000 Time: 5 days
Cost: KES 750
Procedure 3*. Obtain Land Rent Clearance Certificate
Comments: In order to collect the official search results, the applicant has to submit
Time: 7 days the application form and pay the prescribed fee to the Busia District Lands Office.
Cost: No cost
Comments: The Land Rent Clearance Certificate is obtained at the Municipal Procedure 2*. Obtain Rates Clearance Certificate
Council of Kisumu. Time: 2 days
Cost: KES 1,500
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Procedure 3*. Obtain Land Rent Clearance Certificate Procedure 3*. Obtain Land Rent Clearance Certificate
Time: 5 days Time: 8 days
Cost: KES 2,500 Cost: KES 250
Comments: The seller obtains the Clearance Certificate himself upon payment of Comments: The Land Rent Certificate is obtained at the Municipal Council.
clearance fees to the Municipal Council.
Procedure 4. File the transfer instrument at the Lands Office for
Procedure 4. File the transfer instrument at the Lands Office for assessment of stamp duty payable on the transfer
assessment of stamp duty payable on the transfer Time: 8 days
Time: 8 days Cost: KES 123,107 (4% of the property value)
Cost: KES 123,107 (4% of the property value) Comments: The draft transfer is submitted for approval and assessment at the
Comments: The draft transfer is prepared by the buyer’s lawyers and needs to be Lands Office. After the assessment has taken place, the stamp duty is paid at the
approved by the seller’s counterpart. designated banks (i.e. National Bank of Kenya and Cooperative Bank).

Procedure 5*. Receive inspection by lands officer Procedure 5*. Receive inspection by land officer
Time: 8 days Time: 1 day
Cost: No cost Cost: No cost
Comments: While the draft transfer is being processed at the Lands Office, an Comments: While the draft transfer is being processed at the Lands Office, an
inspector visits the site to verify the development and state of the property. Due to inspector visits the site to verify the development and state of the property. Due to
lack of transport, in practice, the inspector often has to be picked up in person and lack of transport, in practice, the inspector often has to be picked up in person and
driven to the site. There are no prior appointments made and the actual inspection driven to the site. There are no prior appointments made and the actual inspection
may happen within one day or, in the worst case, one month. However, note that may happen within one day or, in the worst case, one month. However, note that
this time is not limited and in some cases entrepreneurs may wait months for a this time is not limited and in some cases entrepreneurs may wait months for a
valuation. valuation.

Procedure 6*. Obtain valuation of the property Procedure 6*. Obtain valuation of the property
Time: 3 days Time: 7 days
Cost: No cost Cost: No cost
Comments: The government valuer assesses the value of the land using the Zonal Comments: The valuer visits the land to carry out the valuation in order to assess
Values available at the District Registry. When such operation is not possible, the the true value of the property and prepares a report.
valuer inspects the property physically.
Procedure 7. Pay stamp duty at a commercial bank
Procedure 7. Pay stamp duty at a commercial bank Time: 3 days
Time: 5 days Cost: KES 100
Cost: KES 200
Procedure 8. Lodge the completion documents with the Lands
Procedure 8. Lodge the completion documents with the Lands Office for registration of the transfer
Office for registration of the transfer Time: 1 day
Time: 8 days Cost: KES 250
Cost: KES 250 Comments: The applicant lodges all the documents including the transfer and
Comments: The applicant submits to the Lands Office the following documents: original title at the Lands Office in Mombasa.
a. Original certificate of title;
b. Rates Clearance Certificate; * This procedure can be completed simultaneously with previous procedures
c. Land Rent Clearance Certificate;
d. Consent to transfer; REGISTERING PROPERTY
e. Valuation of property; Nairobi
f. Application for registration of transfer. Property value: US$ 38,331 = KES 3,077,674
Data as of: June 2009
* This procedure can be completed simultaneously with previous procedures
Procedure 1. Carry out search of title at the Lands Office
REGISTERING PROPERTY Time: 3 days
Cost: KES 250
Mombasa
Comments: In respect of searches on property registered under the Registered
Property value: US$ 38,331 = KES 3,077,674 Land Act, a copy of the title document is required to be submitted at the time of ap-
Data as of: June 2009 plying for the search. Also, one cannot carry out a personal search but must instead
apply for an official search.
Procedure 1. Carry out search of title at the Lands Office
Time: 3 days Procedure 2*. Obtain Land Rent Clearance Certificate from the
Cost: KES 250 Commissioner of Lands
Comments: In order to collect the official search results, the applicant has to submit Time: 19 days
the application form and pay the prescribed fee at the Mombasa Lands Office. Cost: No cost
Comments: Seller's lawyer obtains the Land Rent Clearance Certificate from the
Procedure 2*. Obtain Rates Clearance Certificate Commissioner of Lands at no cost.
Time: 4 days
Cost: KES 3,450 Procedure 3*. Obtain Rates Clearance Certificate from the Nairobi
Comments: This Rates Clearance Certificate is obtained at the Lands Office of City Council
Mombasa. Time: 5 days
Cost: KES 5,000
62 DOING BUSINESS IN KENYA 2010

REGISTERING PROPERTY
Comments: Seller's lawyer obtain the Rates Clearance Certificate from the Nairobi
City Council. This certificate is important proof that there are no outstanding fees to Narok
be paid to the municipality. Lawyers are not required to be involved in the registra- Property value: US$ 38,331 = KES 3,077,674
tion process. Lawyers’ fees are calculated based on a fixed scale depending on the
Data as of: June 2009
value of the property.
Procedure 1. Carry out search of title at the Lands Office
Procedure 4. File the transfer instrument at the Lands Office for
Time: 1 day
assessment of stamp duty payable on the transfer
Cost: KES 100
Time: 8 days
Comments: Once the application and the receipt of payment are submitted, the ap-
Cost: KES 123,107 (4% of the property value) plicant obtains a search certificate signed and sealed by the District Land Registrar.
Comments: The draft transfer is prepared by the buyer’s lawyers and needs to be
approved by the seller’s counterpart. Procedure 2*. Obtain Rates Clearance Certificate
Time: 2 days
Procedure 5*. Pick up banker’s check to pay stamp duty
Cost: KES 1,000
Time: 2 days
Comments: The Rates Clearance Certificate is obtained at the County Council of
Cost: KES 600 Narok.
Comments: It is mandatory to pay the above-mentioned stamp duty with a
banker’s check. The payment is made through commercial banks and the approved Procedure 3*. Obtain Land Rent Clearance Certificate
banks include the Kenya Commercial Bank and The National Bank of Kenya. Payment
Time: 15 days
is made to the Commissioner of Domestic Taxes on behalf of the Commissioner of
Lands. Cost: KES 1,500
Comments: The Land Rent Clearance Certificate is obtained at the Regional Lands
Procedure 6. Receive inspection by land officer Office.
Time: 30 days
Procedure 4. File the transfer instrument at the Lands Office for
Cost: No cost
assessment of stamp duty payable on the transfer
Comments: Once the draft transfer has been filed at the Lands Office, an inspector
visits the site to assess the state of the property. Due to lack of transport, in practice, Time: 3 days
the inspector often has to be picked up in person and driven to the site. There are no Cost: KES 123,107 (4% of the property value)
prior appointments made and the actual inspection may happen within one day or, Comments: The draft transfer is prepared by the buyer’s lawyers and needs to be
in the worst case, one month. However, note that this time is not limited and in some approved by the seller’s counterpart.
cases entrepreneurs may wait months for a valuation.
Procedure 5*. Receive inspection by land officer
Procedure 7*. Obtain valuation of the property Time: 21 days
Time: 7 days Cost: No cost
Cost: No cost
Comments: The inspector visits the site to evaluate and verify the indicated Procedure 6*. Obtain valuation of the property
purchase price of the property in order to ensure accurate tax payment. If the as- Time: 3 days
sessed value differs from the one indicated by the parties, an additional payment is
Cost: No cost
requested.
Comments: The inspector visits the site to evaluate and verify the indicated
Previously, such inspections were conducted on a random basis, but now every
purchase price of the property in order to ensure accurate tax payment. If the as-
transaction requires such an inspection. The issues involved are similar to the
sessed value differs from the one indicated by the parties, an additional payment is
inspections by the land officer and, therefore, may happen within one day to up to
requested.
over one month. The evaluation report itself is completed within a few days of the
inspection. Both inspections are required before the completion documents can be Previously, such inspections were conducted on a random basis, but now every
lodged with the Lands Office. transaction requires such an inspection. The issues involved are similar to the in-
spections by the land officer and, therefore, may happen within one day to over one
Procedure 8. Lodge the completion documents with Lands Office month. The evaluation report itself is completed within a few days of the inspection.
Both inspections are required before the completion documents can be lodged with
for registration of the transfer
the Lands Office.
Time: 6 days
Cost: KES 250 Procedure 7. Pay stamp duty at a commercial bank
Comments: The completion documents are lodged for registration at the Lands Time: 4 days
Office. Cost: KES 200
The following documents are generally obtained from the seller’s lawyers:
a. Original certificate of title; Procedure 8. Lodge the completion documents with the Lands
b. Rates Clearance Certificate; Office for registration of the transfer
c. Land Rent Clearance Certificate; Time: 3 days
d. Consent to transfer. Cost: KES 625
The seller’s lawyers need to be informed of the registration and pay balance of the Comments: The applicant submits to the Lands Office the following documents:
purchase price. a. Original certificate of title;
The certificate of the registered transfer is collected at the Lands Office. b. Rates Clearance Certificate;
c. Land Rent Clearance Certificate;
* This procedure can be completed simultaneously with previous procedures d. Consent to transfer;
e. Valuation of property;
f. Application for registration of transfer.

* This procedure can be completed simultaneously with previous procedures


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REGISTERING PROPERTY REGISTERING PROPERTY

Nyeri Thika
Property value: US$ 38,331 = KES 3,077,674 Property value: US$ 38,331 = KES 3,077,674
Data as of: June 2009 Data as of: June 2009

Procedure 1. Carry out search of title at the Lands Office Procedure 1. Carry out search of title at the Lands Office
Time: 3 days Time: 2 days
Cost: KES 250 Cost: KES 105
Comments: Once the application and the receipt of payment are submitted, the Comments: The applicant fills and submits the prescribed form and pays KES 105.
applicant obtains a search certificate signed and sealed by the Nyeri District Lands
Office. Procedure 2*. Obtain Rates Clearance Certificate
Time: 7 days
Procedure 2*. Obtain Rates Clearance Certificate
Cost: KES 2,500
Time: 2 days (time to obtain rates: 1 day + roundtrip: 1 day)
Comments: The Rates Clearance Certificate is obtained at the Thika Municipal
Cost: KES 2,000 (transportation) Council.
Comments: The Rates Clearance Certificate has to be obtained in Nairobi.
Procedure 3*. Obtain Land Rent Clearance Certificate
Procedure 3*. Obtain Land Rent Clearance Certificate Time: 7 days
Time: 30 days Cost: No cost
Cost: KES 3,800
Comments: The Land Rent Clearance Certificate is obtained at the Nyeri Municipal Procedure 4. File the transfer instrument at the Lands Office for
Council. assessment of stamp duty payable on the transfer
Time: 14 days
Procedure 4. File the transfer instrument at the Lands Office for Cost: KES 123,107 (4% of the property value)
assessment of stamp duty payable on the transfer
Comments: The draft transfer is prepared by the buyer’s lawyers and needs to be
Time: 8 days approved by the seller’s counterpart.
Cost: KES 123,107 (4% of the property value)
Comments: The draft transfer is prepared by the buyer’s lawyers and needs to be Procedure 5*. Receive inspection by land officer
approved by the seller’s counterpart. Time: 1 day
Cost: No cost
Procedure 5*. Receive inspection by land officer
Comments: While the draft transfer is being processed at the Lands Office, an in-
Time: 1 day spector visits the site to verify the development and state of the property. Due to lack
Cost: No cost of transport, in practice, the inspector often has to be picked up in person and driven
Comments: While the draft transfer is being processed at the Lands Office, an to the site. There are no prior appointments made and the actual inspection may
inspector visits the site to verify the development and state of the property. Due to happen within one day or, in the worst case, one month. However, note that this time
lack of transport, in practice, the inspector often has to be picked up in person and is not limited and in some cases entrepreneurs may wait months for a valuation.
driven to the site. There are no prior appointments made and the actual inspection
may happen within one day or, in the worst case, one month. However, note that Procedure 6*. Obtain valuation of the property
this time is not limited and in some cases entrepreneurs may wait months for a Time: 30 days
valuation. Cost: No cost
Comments: The inspector visits the site to evaluate and verify the indicated
Procedure 6*. Obtain valuation of the property
purchase price of the property in order to ensure accurate tax payment. If the as-
Time: 7 days sessed value differs from the one indicated by the parties, an additional payment is
Cost: No cost requested.
Previously, such inspections were conducted on a random basis, but now every
Procedure 7. Pay stamp duty at a commercial bank transaction requires such an inspection. The issues involved are similar to the in-
Time: 4 days spections by the land officer and, therefore, may happen within one day to over one
Cost: KES 100 month. The evaluation report itself is completed within a few days of the inspection.
Both inspections are required before the completion documents can be lodged with
Comments: The applicant presents the duly filled in Stamp Duty Declaration as well the Lands Office.
as the assessment and payment form, usually in triplicate, to the designated bank
and pays the amounts indicated thereon. The bank stamps the form and issues a
Procedure 7. Pay stamp duty at a commercial bank
deposit slip. The applicant keeps one copy and leaves two copies at the bank. Within
the next 3 to 5 days, the bank submits one copy to the Lands Office. Time: 4 days
Cost: KES 200
Procedure 8. Lodge the completion documents with the Lands
Office for registration of the transfer Procedure 8. Lodge the completion documents with Lands Office
Time: 8 days for registration of the transfer
Cost: KES 375 Time: 15 days
Comments: The applicant submits to the Lands Office the following documents: Cost: No cost
a. Original certificate of title; Comments: The applicant submits to the Lands Office the following documents:
b. Rates Clearance Certificate; a. Original certificate of title;
c. Land Rent Clearance Certificate; b. Rates Clearance Certificate;
d. Consent to transfer; c. Land Rent Clearance Certificate;
e. Valuation of property; d. Consent to transfer;
f. Application for registration of transfer. e. Valuation of the property;
f. Application for the registration of the transfer.
* This procedure can be completed simultaneously with previous procedures
* This procedure can be completed simultaneously with previous procedures
64 DOING BUSINESS 2009

Acknowledgments
Doing Business in Kenya 2010 was pro- Special thanks to Permanent Secre-
duced by the Subnational Doing Business tary Sammy Kirui and Angeline Hongo
team led by Luis Aldo Sánchez-Ortega. from the Office of the Deputy Prime
The team comprised Diego Borrero, Ga- Minister and Ministry of Local Govern-
briela Enrigue, Trimor Mici, and Caro- ment, and Emmanuel Lubembe from
line Otonglo. The report was prepared the Office of the Prime Minister, for their
under the general direction of Mierta Ca- support and leadership on the project.
paul and in collaboration with the Kenya Doing Business in Kenya 2010 was made
Investment Climate Program team: Lars possible thanks to the support of Sarah
Grava in Washington, D.C.; Fred Zake, Ochieng and Soraiya Shariff from the
Contact details for local partners Ismail Chejmor, and Rosemary Makotsi Office of the Prime Minister; Josephine
are available on the subnational in the International Finance Corporation Kanyi, Denis Muganga, and Kennedy
Doing Business website at http:// Nairobi Office; Musabi Muteshi in the Nanga from Treasury; Micah Kilonzo
World Bank Nairobi Office; and the Busi- and Robinson Otundo from the Ministry
subnational.doingbusiness.org ness Operations and Regulatory Gover- of Local Government; Raphael Mwai and
nance team led by Peter Ladegaard. Romana Kimende from the Private Sector
Claudia Contreras, Zenaida Hernan- Development Strategy Secretariat; David
dez-Uriz, Iva Ilieva Hamel, Rebecca Ong, Mugambi from KenInvest; Moses Njenga
Jamile Ramadan, and Alessio Zanelli from the Kenya Institute of Public Policy
provided assistance at various stages of Research and Analysis; and Doris Olu-
the project. Lars Grava, Melissa Johns, tende and Njonjo Itotia from the Kenya
Musabi Muteshi, and Ana María Oviedo Private Sector Alliance.
reviewed the full text. Peer-review com- More than one hundred and fifteen
ments were received from Teymour Abdel business consultants, lawyers, property
Aziz, Penelope Fidas, Manuel García- experts, architects, engineers, utility pro-
Huitrón, Aida Kimemia, Aikaterini Leris, viders, and public officials and magis-
Jana Malinska, Andrei Mikhnev, Mad- trates contributed to Doing Business in
alina Papahagi, and Brice Richard. Valu- Kenya 2010. Data collection from the pri-
able assistance was received from the vate experts was coordinated by Benja-
Doing Business team, especially Svetlana min Musau, Morris Kimuli, Felix Kioko,
Bagaudinova, Karim Belayachi, Frederic and Josephat Maweu from the law firm B
Bustelo, Karen Sarah Cuttaree, Marie De- M Musau & Co., Advocates.
lion, Alejandro Espinosa-Wang, Sabine The team wants to extend its spe-
Hertveldt, Oliver Lorenz, Dana Omran, cial gratitude to all the national and
Yara Salem, and Umar Shavurov. local government officials and magis-
The report website (http://www. trates who participated in the project and
doingbusiness.org/Kenya) was devel- who made valuable comments during
oped by Graeme Littler, Felipe Iturralde, the consultation and data-review period.
Hashim Zia, and Preeti Endlaw. The re- Their names are listed on the following
port was edited by Grace Morsberger pages.
and designed by G. Quinn Information
Design.
ACKNOWLEDGMENTS 65

P R I VAT E P ROF E S SI ONA L S P U B L I C OF F I C IA L S

Allocas Associates Kilifi Water and Sewerage E L D OR E T I SI OL O K I SU M U


Alex Kasewe Co.
Joseph Kenga Allan Mabuka Abdulrahman Guyo Boaz Nathan Olao
B M Musau & Co. Treasurer, Municipal Engineer, Municipal Chief Magistrate, Kenya
Advocates Kisumu Water and Council of Eldoret Council of Isiolo Judiciary
Benjamin Musau Sewerage Co. E.K. Tonui Chrispin Otieno Charles Kagema
Felix Kioko James Wesa Enforcement Officer, Resident Magistrate, District Physical Planner,
Justus Mutia National Social Security Kenya Judiciary Ministry of Lands
Morris Kimuli Madzayo Mrima & Fund (NSSF)
Company Guyo Buke Churchill Otieno
Nicholas Malonza Francis Nalika Licensing Officer, Property Engineer, Kenya
Stephen Musau Mbaluka & Co. Advocates Municipal Council of Municipal Council of Revenue Authority
Joshua Mutinda Eldoret Isiolo
Ben Ochieng & Co. Duncan Ogango
Advocates James Ochieng Owade Victor Ndereba Legal Clerk, Municipal
Mombasa Water and Municipal Engineer, Physical Planner, Council of Kisumu
Benedict Okore Ochieng Sewerage Co. Municipal Council of Municipal Council of
Dennis Sibiya Eldoret Isiolo Everlyne Otieno
C K Nzili & Co. Advocates Deputy Planner, Municipal
Chritopher Nzili Kyania Muteithia Nderitu & Co. Jones Lutta
KILIFI Council of Kisumu
Advocates Municipal Council of
Caroline B Omolo & Co. Eldoret Leggy Kimaiga
Rosemary Nderitu Harrison Musumiah Revenue Officer,
Advocates
Joseph M. Nalyanya Land Registrar, County Municipal Council of
Caroline Omolo Ragot Ndung’u Mwaura & Co. Council of Kilifi
Assistant Commissioner, Kisumu
Advocates Kenya Revenue Authority
Chabeda & Co. Advocates Henry I. Mitsanze Lynette Musani
Maureen Litunda Revenue Officer
Philip K M Chabeda Karen Kandie Revenue Officer,
Inspector, National County Council of Kilifi Municipal Council of
Nyokabi Waiganjo & Co.
Eldoret Water and Advocates Hospital Insurance Fund Jacinta T. Ismail Kisumu
Sewerage Co. (ELDOWAS) (NHIF) Treasurer, County Council
Magdalene Nyokabi Waiganjo Patrick Adolwa
Ruben Tuwei Robert J. Simiyu of Kilifi Rural Service Delivery
Odongo Awino & Co. Ministry of Lands James Musee Nduna Advisor, Municipal
GA Ndeda & Co. Advocates Advocates Council of Kisumu
James Simpson Macharia Stanislas Ondimu Senior Resident
Gideon Odongo Owino Town Clerk, Municipal Magistrate, Kenya Patrick Mahulo
Gichure & Co. Advocates Council of Eldoret Judiciary Municipal Council of
Olel, Onyango, Inguatiah Kisumu
Joseph Mwangi & Co. Advocates Stephen Riechi Julius Kiplimo
Charles Onyango Chief Magistrate, Kenya Public Works Officer, Patrick Nyamita
Ipapu P. Jackah & Co. Judiciary County Council of Kilifi Director of Housing,
Advocates Omondi Waweru & Co. Municipal Council of
Kenneth C. Kazungu
Ipapu Philip Jackah Advocates GARISSA Public Works Officer, Kisumu
Samuel Okal Edward Wabwoto County Council of Kilifi Peter Kayila
Abdi Gedi
J M Maritim & Co.
Joan Korir Mary Muthoni Mwangi Revenue Officer,
Public Works Officer, Municipal Council of
Advocates Rioba Oboto & Co. Municipal Council of Senior Administrative
Officer, County Council Kisumu
Juliet Maritim Advocates Garissa
Samson Ngetich of Kilifi Richard Sang
David Rioba Omboto Abdullahi Hakar
Mutua Treasurer, Municipal
Surveyor, Municipal Council of Kisumu
Jokan-tec construction Sichangi & Co. Advocates Council of Garissa District Land Officer,
Co. County Council of Kilifi
Hannah Wamuyu Charles Ndambo
Joseph Ndolo
Town Clerk, Municipal Simon Leboo Ole Morintat
Telkom Kenya County Clerk, County
Kenya Power & Lighting Council of Garissa
Co. (KPLC) Elizabeth Rono Council of Kilifi
Adan Maalim Mohamud Santur
Christopher Omwenga Treasurer, Municipal
Emannuel Safari Council of Garissa
Peter Imboyoka
Tom S. M. Thuku
Evans Amunga
Accountant, Municipal
Kamau Simon Council of Garissa
Njiraini Mary
66 DOING BUSINESS 2010

P U B L IC OF F IC IA L S

M A L A BA Michael Kizito Oduor NA I ROB I THIKA


Senior Resident
Crescent Saja Adewa Magistrate, Kenya David Montent Antony Kimani Kaniaru
Municipal Council of Judiciary City Council of Nairobi Principal Magistrate,
Malaba Kenya Judiciary
Mwangi Karimi Mwangi John K Barreh
Francis Kyambia Senior Resident City Council of Nairobi David Njenga
Resident Magistrate, Magistrate, Kenya Deputy Treasurer,
Kenya Judiciary Judiciary Nixon Othieno Municipal Council of
City Council of Nairobi Thika
Julius K. Ng’arng’ar Renson Ingonga
Senior Resident Registrar, Ministry of NA ROK Duncan G. Mwaniki
Magistrate, Kenya Lands Branch Manager, National
Judiciary Johnson Palmeris Ntete Social Security Fund
Richard Kirui (NSSF)
Administrative Officer,
Margaret Wambani Kenya Judiciary County Council of Narok
Senior Resident Elias Mwaniki
Magistrate Rose Munupe Walter Chanua Accountant, Municipal
Surveyor, Municipal Accountant, County Council of Thika
Kenya Judiciary Council of Mombasa Council of Narok James Ndugu
Pamela Achieng’ Samson Kazungu Municipal Planner,
Resident Magistrate, Revenue Officer, NYERI Municipal Council of
Kenya Judiciary Municipal Council of Thika
Mombasa Charles Mugambi
Samuel Oseko Ombui Computer Programmer, Mainai Mohhamed
Treasurer, Municipal Tito Gesora Municipal Council of Nyeri Municipal Council of
Council of Malaba Senior Resident Thika
Magistrate, Kenya Geoffrey W. Mungai
Susan Shitubi Deputy Municipal
Judiciary Wamai Johnson
Principal Magistrate, Treasurer, Municipal Officer, National Hospital
Kenya Judiciary Tubman Otieno Council of Nyeri Insurance Fund (NHIF)
Town Clerk, Municipal
M OM BAS A Council of Mombasa Rehema M. Salim
Revenue Officer,
Catherine Mwangi Victor Otieno Olonde Municipal Council of Nyeri
Chief Magistrate, Kenya Valuer, Ministry of Lands
Judiciary Wilfred Kihara
Fred Kaplaigiya Building Inspector,
Branch Manager, National Municipal Council of
Social Security Fund Mombasa
(NSSF)
H.B. Yator
Resident Magistrate,
Kenya Judiciary
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