Regulation is one of the primary methods by which government actions affect business. The state asserts control over economic sectors through laws.
Businesses, have to adjust their operations to comply. That increases the cost of production, which is passed down to the consumer by way of higher product prices.
Hence, regulation should be transparent and accountable, not just to be fair to businesses but also to protect consumers from arbitrary actions that may distort the supply and prices of goods and services.
Take the case of an agency that suddenly declares certain goods or services as sub-standards without even giving the affected entities a hearing. Besides creating unnecessary panic among consumers, it damages the reputation of brands that have invested heavily in pursuit of quality standards.
The Constitution enshrines public participation as one of the national values and principles of good governance. The Fair Administrative Action Act, of 2015 provides that a person has a right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair.
Those adversely affected by administrative decisions are entitled to prior and adequate notice of the nature and reasons for the action. The rules of natural justice require that nobody is condemned unheard.
Responsible regulation calls for fair treatment of those affected by the decision of a public agency and consultation between the regulator and the regulated. Luckily, Kenya has well-organised industry forums to address issues of mutual interest between the government and manufacturers.
Kenya Association of Manufacturers and Kenya Private Sector Alliance offer a good platform for engagements on issues like rules, standards, taxes, levies and other regulatory matters.
They articulate industry concerns and proposals for progressing public-private sector dialogue. But over-regulation of business at county and national levels is a major challenge, resulting in increased costs to businesses already burdened with multiple taxes and levies.
There should be clarity on regulations as uncertainty escalates business risks and discourages innovation. Ad hoc rules mess up manufacturers’ plans, causing loss of capital, revenue, profits and jobs.
Once a firm invests in a plant, the investment is irreversible and so becomes a sunk cost if it is shut. Officials tasked with decisions in the industry should consider the impact of their actions on investors.
Kenya’s manufacturing competitiveness is negatively impacted by excessive and burdensome regulation. Conflicting interests between agencies overseeing critical rules and standards need to be addressed to ensure harmonised coordination.
Punishing enterprises that rigorously comply with the rules pave the way for the proliferation of sub-standard and counterfeit products to thrive. Responsible regulation is the only way to ensure that locally manufactured goods are affordable and of high quality.
Mr Malde is the commercial director, Pwani Oil Products Limited. [email protected].