The Effects of Devolution On Informal Business

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The introduction of devolution into the governance structure of Kenya has helped in the decentralisation of power from the national government to county governments. Counties are now responsible for the direction in which they choose to go for they can now legislate their own laws through their county assemblies. Counties have come together to form economic regional blocs whose main aim is to bolster trade within the member counties by pooling their resources. However, most of the regional blocs are still at the inception stage. Just as is the case with many new institutions, there are a few challenges that come up during their formation and growth.

As a means to collect revenue to keep the counties operational, they have had to pass legislation that enables them to collect revenue. This has made each county to come up with its own rates. Businesses that operate between two or more counties, such as those that are in agribusiness, find it very expensive when it comes to paying cess fees. Most of these businesses have to transport their goods to markets that are not in their counties of origin. They are thus required to pay multiple cess fees for those goods across different counties. This replicative system of taxation is expensive for business.

Tribalism has become pronounced in the devolved governments. People who are not from communities that are indigenous to certain counties are finding it difficult to operate even small businesses. This comes out strongly when informal businesses apply for loans at various county offices and get turned away on the basis of their tribal affiliation. Those that come from the region are favoured to the ‘outsiders’. This factor has become so deeply rooted that it is going deeper into clannism. This is whereby people from the same tribe choose to align with members of their clan (sub tribe).

Further, there is favouritism when it comes to the allocation of spaces within which they can work. The Eldoret Market Association is one such organisation whose members have had to struggle with the Uasin Gishu County Government. There have been instances where the county government has issued market spaces to people that are not traders who in turn sell the spaces to the genuine market operators. The County government also tried moving them to an area that is outside the central business district which they declined due to access to customers. Another scenario is the raising of market rates without consultation. The County government intended to raise the market rates to a level that most traders would not have been able to afford. This made the Market Association to sue the County government. The issue is still pending in court.

Some of these issues can be dealt with in a way that is beneficial to both the informal businesses and the respective county governments. One way is by harmonising the rates that are charged by the individual counties. The regional blocs should ensure this so that traders will be required to pay once for transportation of goods across the counties in the region. Also, county governments should consult the traders whenever they plan to allocate working stations. They should also introduce strong accountability structures that ensure fairness in the allocation of funds that are meant for traders. This will minimise instances where loans are disbursed on the basis of favouritism.  Stronger efforts should be made to shun tribalism as this is a cancer that is negatively impacting the growth of business in the regions as it tends to drive away potential investment. 

Informal Economy Analyst 





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