SA v Kenya: Ease of doing business and GDP

Kenya has a positive story to tell potential investors: In the past 5 years Kenya has risen 80 places in the World Bank’s Ease of Doing Business Index, from 136th to 56th. 80 places??!!! That is a large chunk of the table right there. I would liken it to Usain Bolt taking the baton in the final leg of the school relay, blitzing the field from last place.

This is a clear demonstration of the Kenyan government’s commitment to attract and retain local and foreign investments in the country. It is also just a statistic which is a simplification of a far more complex reality.

Regular visits to the country in this period have shown me what this change means in real life – populations have boomed, infrastructure projects are going up all over the place, demographics are changing (Chinese takeaway anyone?) and general busy-ness (as opposed to business) and traffic in hubs such as Nairobi and Mombasa have become anything from manic to unbearable.

Contrast this to South Africa’s fortunes on the index – slipping from 43rd to 84th in the last five years. These years have been blighted by massive corruption scandals, theft, crime, strong and irrational unions, and macro economic factors conspiring against the growth in SA. Labelling as junk status was inevitable. Check the below charts for GDP per capita growth over the years in the 2 countries:

SA GDP / Capita

And here is Kenya’s:

You can see from the charts that South Africa is still a far richer place. In practice this means that life here is closer to a western standard of living. It is far less chaotic and ‘Jua Kali’ as it is in Kenya. Roads are smooth, phones and power lines are (largely) unbroken. Shops have everything you could desire. You could argue strongly that life is easier here.

Probably the biggest factor working against ease of doing business here in SA is government policy and the legacy of apartheid. It still looms so heavily over every government decision. Contrast this to Kenya where independence and colonial legacy is becoming less and less of an issue. Power lies with the local elites. Tribal politics trumps racial issues.