The United States (US) has raised an alarm over the disruption and barriers in foreign trade and investments in Kenya due to corruption and extortion of bribes.
According to the 2024 National Trade Estimate report on Foreign Trade barriers, an assessment by the US Trade Representative, Katherine Tai, many companies have lost business because of corruption from top government officials.
Tai explained that US firms routinely report direct requests for bribes from all levels of the Kenyan Government.
“Corruption remains a substantial barrier to doing business in Kenya. U.S. firms continue to report challenges competing against foreign firms that are willing to ignore legal standards or engage in bribery and other forms of corruption.
“Corruption is widely reported to affect government procurements at the national and county levels,” indicated the report.
Further, the US Trade Representative stated that a backlog of cases and continued corruption undermined the judicial system’s credibility and effectiveness.
“While judicial reforms are moving forward, bribes, extortion, and political considerations continue to influence court cases. As such, foreign and local investors risk lengthy and costly legal procedures,” added the report.
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US Companies on Bribes in Tendering Process
At the same time, the report indicated that US firms were often not successful in acquiring tenders in Kenya because of corruption.
Tai stated that many of the tenders were awarded to companies that partnered with well-connected Kenyan firms or individuals, despite not qualifying.
“U.S. firms have had very limited success bidding on Kenyan Government tenders, and corruption remains a significant concern. Many of these tenders are challenged in the courts.
“Foreign firms, some without proven track records, have won government contracts when partnered with well-connected Kenyan firms or individuals.”
At the same time, US raised concerns over the connectivity of the Integrated Financial Management Information System (IFMIS), a platform where all tenders are required to be processed through.
On the other hand, the report noted that the companies were also left out of many tenders because the government required state ministries, departments, and agencies to procure at least 40 percent of their supplies locally, especially for items with value of less than Ksh 50 million, under the Buy Kenya Build Kenya initiative.
Otherwise, the state agency needed to prove that by issuing a report detailing evidence of an inability to procure locally.
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Other Business and Trade Barriers Included
Other barriers mentioned in the report include the law which prohibits foreigners from holding freehold land title anywhere in the country.
Tai stated that investors risk receiving fake title deeds or leasing a plot with multiple titles because the process for obtaining clear title of undeveloped land was opaque.
“The 2010 Kenyan Constitution prohibits foreigners from holding freehold land title anywhere in the country, permitting only leasehold titles of up to 99 years.
“The process for leasing developed land and property is clear and established, but the process for obtaining clear title of undeveloped land is opaque and unreliable. For undeveloped land, investors risk receiving fake title deeds or leasing a plot with multiple titles and unauthorized sales,” she indicated in the report.
In addition, the US companies in Kenya lamented that the Mining Act reserved acquisition of mineral rights for Kenyan companies and that the 2016 Private Security Regulation Act restricted foreign participation in the private security sector.
“Among other restrictions, the Mining Act reserves acquisition of mineral rights for Kenyan companies, requires 60 percent Kenyan ownership of both mineral dealerships and artisanal mining companies,
“And requires large scale mining operations to list a minimum of 20 percent of their shares on the Nairobi Securities Exchange within three years of commencing operations, while also offering 10 percent “free-carried interest to the Kenyan Government.
