May 22, 2018

Part 1 in improving Kenya’s ‘Ease of Doing Business’ Score: The Import Process

A container of parts of making Enda Itens.

Kenya is currently ranked 80th in the world in the World Bank’s ease of doing business rankings. One of my goals this year is to use my experience from Enda to assess areas where Kenya can improve its rankings, especially for local businesses.

SMEs globally are the backbone of economies. In the EU for example, they represent 99% of all businesses, created 85% of new jobs, and provided 66% of all private sector employment in Europe. If we are to solve unemployment and really rev our economic engine, we need to be obsessed with making SMEs thrive.

Below are suggestions, based on a recent experience of importing raw materials through the port at Mombasa, on how we can improve the import process to make it easier for SMEs.

1. Overall process simplification

The import process, by sea, involves interaction with three bodies:

Each has its own processes and it is the duty of your clearing and forwarding agent to assist you in complying with the requirements.

Two challenges with the current process are that 1) the overall process is not clear, especially on actions to take if there is a problem and 2) there is little transparency over the agent’s activities. Both challenges leave room for misinformation, delays and cost escalation due to unplanned demurrage costs. Further, high costs can be an avenue for perverse incentives for shortcuts and bribes, especially when the money involved is significantly higher than the agent’s fees. In that case, there is no guarantee that the agent has adequate incentives to ensure that the process is smooth.

I have had the experience of applying for scholarships and visas online (story for another day) and one of the few good lessons from that experience is process simplification. The required documents are outlined in advance, there is an introduction page that explains the process and there are pages/tabs for each process. Some tabs even change colour or show a tick mark once the specific process has been completed.

An online system, pretty much like the e-citizen system, can provide a simple solution. It should have an introduction page that shows the whole clearing process, estimated clearance time and the documents needed for each process. Other tabs can include:

A search page for selecting clearing and forwarding agents based on a variety of factors, including geographical proximity to the importers, performance rating and cost. The importance of ranking agents is discussed in the next point.
Pre-import process detailing what needs to be done before goods are transported and a list of government approved inspectors around the world, including contact information by country.
This saves SMEs from having to seek the inspector’s contact information in the country where the goods are being imported from, never mind possible language barriers. This page should also be very clear of the documents needed before the inspection — invoice, packing list and the import declaration form (IDF )— and the document to expect after the inspection — the Certificate of Conformity (CoC) for KEBS. The CoC should be a mandatory attachment before the next process can commence. Having copies of the documents online also improves transparency for both the agent and the importer.
Clearing process detailing the documentation required, including Bill of Lading, customs, and VAT receipts, etc. etc. etc.(there’s lots) which should also be mandatory attachments.

Of very significant importance in each of the above process is a clear procedure to be followed in the event of a mistake. For example: if the Bill of Lading does not match the IDF, remedial actions should be clearly outlined, including the required documentation.

This reduces the amount of time taken to find a solution and also removes any perverse incentives that may lead to short-cuts. It also provides an evidence-based system through which KEBS, KRA and KPA can have real-time data on efficiency and performance.

2. Clearing and forwarding agent selection and rating

Your overall import experience is almost entirely dependent on your agent. While referrals are the main way through which most people hire their agents, there is an opportunity to create a better system through which verified importers have an opportunity to select agents based on various factors such as agent’s geographical proximity and performance.

Further, after goods have been cleared, the importer should also have an opportunity to provide feedback on the agent’s overall performance. This boosts great agents who are committed to their work and improves the overall customer experience for SMEs. The KRA already has an elaborate process for issuing and renewing an agent’s license. The only critical addition to this process would be having on hand real customer data on the agent’s performance in order to assist in the decision-making process.

3. Changing mindsets

The number of people I was in contact with does not fall within what one can define as a proper representative sample. Still, I find it sad that nearly all of them believe that the system can’t be better. None believed that courts of law would be effective in seeking remedy for losses incurred due to technicalities or negligence by a clearing and forwarding agent.

In my opinion, economic development is an attitude as much as it is a process. Thinking that nothing can be done negatively affects the likelihood of finding a solution. It is also a means through which desperate importers can be duped into taking shortcuts because even where a solution exists, they will be made to believe that it doesn’t exist.

To change the system, we also need to change people’s mindsets, including insisting on a clear solution that can be used to enhance personal and system accountability.

This article is my part as an importer insisting we can do better.

All stakeholders must also recognize their unique role in building the economy rather than doing what is best for them at a certain point in time but harmful to the entire ecosystem over time.

The government of Kenya has instituted various measures to improve ease of doing business, from setting up of special economic zones to the designation of manufacturing as a key agenda item for the next 5 years. Macro-level policies are an important tool for getting there. Improving micro processes, such as the import experience of SMEs, also ensures that change and efficiency are achieved faster.