Forget Nairobi, here are the two best places to set up a business in Kenya

With its beautiful, imposing and absolutely breathtaking skyscrapers which houses many multinational and international companies, Nairobi City is considered by many as the most ideal investment destination in Kenya.

Nairobi City also plays host to several key government institutions like Parliament, Statehouse and even the Central Bank of Kenya etc. not to mention that it is located just a few kilometers away from two of Africa’s busiest airports, Wilson Airport, and Jomo Kenyatta International Airport, Nairobi without a doubt is the most connected county in the whole country.

A quality that has seen numerous companies set up their bases in the city.

However, despite playing host to key government institutions and a majority of the country’s tech hubs and tech communities, Nairobi is not the best place to start a company especially a Startup company.

According to a new study by the Institute of Economic Affairs (IEA), the best place to set up a business is not Nairobi but Mombasa and Eldoret.

In the IEA study, dubbed the Kenya Urban Areas Performance Index 2017, the city of Mombasa and Eldoret were ranked ahead of Nairobi in providing an enabling environment for doing business.

Mombasa County, which was ranked first when it comes to investment and trade, especially stood out because the County provides information to investors in Kenya’s two official languages, English and Kiswahili, effectively making it easier for Investors to make decisions.

The city also had the highest number of building permits issued at 0.83 per 1,000 people, and saw relatively high growth (10 per cent) in the number of business licences issued per person.

Out of six urban areas covered in the IEA report – Mombasa, Nairobi, Kisumu, Machakos, Eldoret and Nakuru, it takes the shortest time at 41 days to register property in Mombasa city.

Nakuru, Kisumu and Machakos didn’t do too well in the ranking over non-disclosure on the number of business permits issued.

However, the study found Nakuru to have the most tax-friendly environment of the six urban areas.

“It provides sufficient information on local taxes and levies like most of the other urban areas, but has the lowest parking fees at Sh100,” said IEA Programme Coordinator John Mutua.

The study also found out that Nakuru is cheapest place to obtain a single business permit for a general merchant shop at a cost of Sh4,000, against a mean cost of Sh5,367 while Mombasa with Sh7,000 fee for a general merchant’s shop is the most expensive.

The Kenya Urban Areas Performance Index 2017 ranking largely coincides with the findings of a 2016 World Bank study, where the Mombasa and Eldoret cities were once again found to have an impressive investment environment.

“Within Kenya, (starting a business) varies from 20 days in Mombasa and Uasin Gishu (Eldoret) to 27 days in Narok and Nyeri. Start-up costs range from 18.1 per cent of income per capita in Nyeri to 26.9 per cent in Mombasa” found the World Bank.

The 2016 World Bank report, which looked at things from the perspective of small and medium-sized firms, found that it was easier to start a business in Uasin Gishu (Eldoret), deal with construction permits in Kisumu, register a property in Nairobi and enforce a contract in Busia (Malaba).

It also found out that the process of obtaining a business permit is relatively inexpensive and takes just two days in Kiambu (Thika) and Uasin Gishu (Eldoret), making the two counties among the best to start a business in.

The study focused on whether a county economy had in place rules and processes that lead to good outcomes for entrepreneurs, in turn increasing economic activity.

The report finalised by stating that starting a company in Kenya requires seven procedures, takes 23 days and costs 22 per cent of the country’s income per capita on average.